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By Mike Renshaw (TMF Rimpy)

Although Rick and I see different things when we look into our crystal balls, there are some things we agree about. We both agree that, regardless of what the market does this year, there are some undervalued stocks out there. Rick can name 100 stocks that he thinks are undervalued, and I could name 100 that I think are overvalued. We could carry out this exercise at any time, whether the market as a whole is overvalued or undervalued. However, I think that 2001 will be another rough year for the majority of stocks, but you might be lucky enough to own those stocks that will fare better than most.

Another point that Rick and I agree on is that the sound your portfolio heard in 2000 was the sound of a bubble bursting. That's a very important point. If this was your run-of-the-mill bear market, then I might be persuaded by Rick's point that the S&P 500 has gone down in two consecutive years only one other time since World War II.

However, we are witnessing the end of a speculative bubble of historical proportions in terms of the amount of money at stake and the number of participants involved. You have to go back to before World War II, back to the 1920s, to find a time comparable to this one.

We have seen what a bursting bubble can do the stock market, but we have yet to see the ramifications it will have on the economy. If the economy sinks with the stock market, this could quickly turn into a negative feedback cycle that will take many years to break out of.

Rick thinks that people will continue to invest in stocks because there is no alternative investment as good as stocks. However, this assumes that investors are always rational and levelheaded. Investors bought companies with no hope of making a profit because they were going up 400% per year. The only thing that mattered was the returns, not the fundamentals. I have a hard time believing that these same investors are going to resist selling stocks when they are going down, in spite of any study that shows how stocks outperform other investment choices in the long run.

I hope that Rick also considered the psychology of bear markets. Do you remember how, during the mania, people thought that stocks would never stop going up? Replace "up" with "down" and you have a bear market. Do you remember when you couldn't believe how expensive some stocks became? Now replace "expensive" with "cheap." When we go from hearing about stocks at every cocktail party to the point where one won't use such foul language in polite company, then we'll have reached a bottom.

We're not at a bottom. Not yet. We're closer than we were before, no doubt about it, but it might take a few more trips to the porcelain throne before we get there. I warned you to not get so drunk, but I'll still hold your hair out of your face if you have to puke a few more of those stocks up. You'll feel better eventually, it's just going to take some time.

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