Bargains abound in battered market

• No new trades.

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Perception, it has been said, is reality. The market action of late would tend to support that contention.

Monday was interesting as the negative numbers from the futures market grew as the day wore on. I followed the action well into the night, and as I finally crawled into bed in the wee hours of Tuesday morning, I wondered:

• would I wake up to a repeat of Black Monday, Oct. 19, 1987;

• or would sufficient selling have taken place overseas overnight to put a bottom in?

Fed chief Bernanke and co. obviously didn't want to gamble and took matters into their hands by riding to the rescue with an inter-meeting rate cut. Whether the low of Wednesday turns out to be the bottom remains to be seen, but the pervasive perception of negativity for the moment appears to be broken.

That the financials staged a screaming rally should be a surprise to no one; they were so oversold it was ridiculous. Now we will wait and see if the Fed can buy the banks and brokers enough time to sufficiently repair their balance sheets and their reputations with investors.

The Fed's cut and yesterday's rally notwithstanding, strong crosscurrents remain in both the economy and the markets. Thursday morning's report that first-time jobless claims were significantly below estimates suggests that the employment environment may be stronger than previously believed.

Earnings will most likely be a mixed bag, but with the majority of the bad news, so far, on the financials out in the open, it will be interesting to see which direction Mr. Perception will take as the remainder of the market reports.

Shocking bargains abound

While the above may make for interesting water-cooler chatter, at the end of the day it is mere speculation. What we do know for a fact, however, is that real value has been created for the first time in a very long time. As my friend and mentor Geraldine Weiss told me recently, "Benjamin Graham would be dancing if he could see some of the book values and dividend yields that exist today."

A quick perusal of our "Select Blue Chip" universe at IQ Trends suggests that Geraldine is definitely on to something. There are some shockingly low price-to-earnings (P/E) multiples, stocks trading at and below book values, and dividend yields that make a value manager delirious.

As in the previous rounds of Strategy Lab, I will continue to adhere to our Lucky 13 model of choosing a diversified collection of high-quality companies that are at historically repetitive levels of low price and high-yield.

Given the current opportunities that exist in some sectors, however, I may find it difficult to resist the temptation to swing for the fences.