After 50% Drop, Are Stocks Cheap?

Investors are riddled with anxiety over one simple question. Are stocks cheap?

Of course the answer isn’t nearly as simple as the question. If the economy turns around fairly quickly (let’s say summertime) then they probably are cheap.

But if we’re at the dawn of a new era, then maybe not.

It’s a sticky issue and one Fast Money Sr. Producer John Melloy wrote about earlier Monday in his blog, “Behind The Money.” Melloy says “one could make a case that stocks are not even fairly valued – but in fact overvalued!”

He notes that “Goldman's David Kostin slashed his earnings estimates for the S&P 500 , predicting a 33 percent drop in 2008 and a five percent decline in 2009.” Also, profits at non-financial companies in the index could face the same decline experienced by financial firms.

In a separate note to clients, Citigroup said much the same thing. They cut their 2008 target for the S&P 500 to 850 points from 1,200 points. The 2009 target was cut to 1,000 points from 1,300 points.

Traders, what do you think?

There are both cheap names and expensive names that appear cheap, cautions, Karen Finerman. You have to take a close look at the balance sheet. If you see sales going down, no matter how cheap the stock is – you’re seeing a terrible thing.

Also be careful of companies if you look at their balance sheets and see the cost of equity is going up, adds Tim Seymour.

Abbott Labs, General Mills and Burlington Northern are all worth a look, adds Joe Terranova. They all have a strong balance sheet with good fundamental stories behind them. And they held up well in this decline.

I’ve traded Burlington Northern twice this year, counters Jeff Macke, with a stop at $80. But I'd be careful because it didn’t perform well Monday when almost the entire market did.

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Trader disclosure: On Nov.24, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (UUP), (WMT), (MSFT); Macke Is Short (TM); Seymour Owns (AAPL), (BAC), (ETFC), (F), (MER); Seygem Asset Management Owns (VIP); Finerman's Firm Owns (DNA) Calls; Finerman's Firm Owns (DSX), (MSFT), (XLF); Finerman's Firm Is Short (USO), (GNK), (EGLE), (BBT), (COF), (IYR), (IJR), (MDY), (SPY), (IWM), (RTH); Terranova Owns (DIS)

Charles Schwab Is A Sponsor Of "Fast Money"

Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)

Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.; Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (CLB), (DLR), (EPR), (EXR), (MAC), (SLB), (SKT), (UA), (IGE), (DBC), (DBV); Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights; Virtus Investment Partners Owns More Than 1% Of Shares Of Essex Property Trust Inc.; Virtus Investment Partners Owns More Than 1% Of Shares Of Corporate Office Properties Trust SBI MD

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