The Market Is Pass�

I couldn't help it! I looked! I recently wrote that I wouldn't look at the stock market or the stocks I own for the month of August, but I did. I did, I did, I did! I wish I hadn't.

Now that I have looked, I have to say, somebody, somewhere, throw us a bone! U.S. News & World Report, it's time for a cover that screams something like, "Bear Market Is Here to Stay." Then we'll know that we're finally near the end of this long and grueling slide. The Nasdaq lost 40% last year. It's down another 24% this year, making for its very worst back-to-back years in history.

No, we're not experiencing a Dust Bowl in the Midwest, men aren't standing in long lines for soup, and I haven't noticed an explosion in the apple-vending business, but we are experiencing a historically significant stock market decline. And it's kind of exciting, isn't it? Once you get past the fact that you're losing gobs and gobs of money, you can revel in the knowledge that you're witnessing something so significant that people will reference it long after we're all floating around in heaven.

Cold comfort? Damn right it is. I want this slide to STOP!

Thankfully, we could be getting close. We might be nearing the height of pessimism, which could signal an end to the slide. It works that way. It worked that way on the way up.

The gloriously easy days
I remember a half-dozen times in 1999 and early 2000 when I overheard people talking so positively about the stock market, and particularly the Nasdaq and technology stocks, that I pondered, then and there, selling some of my stock. It was all too good to last. The signs were everywhere: Revenue-less IPOs jumped to ten-billion-dollar valuations. Overnight multimillionaires were minted when people hardly did more than put up a website. People in their 20s were planning to retire by 30. The word "Mania" was as good as painted over our heads in the sky, but most of us didn't want to see it, or simply decided to ignore it.

We were having too much fun. Life is sometimes dull for stretches. When a great party comes along, you don't go asking when the lights will go out and everyone will be sent home. You enjoy the party. People were enjoying it, and more people kept joining in.

Flashback: February 2000. Right near the peak of the stock market. I'm at an elementary school in suburban Virginia to see a play performed by children. Behind me, what do I hear but three mothers suddenly say this to one another: "Did you see the Nasdaq today?" "Yes, up another 110 points." "Right." "We just bought more Cisco (Nasdaq: CSCO)." "Excellent. We're trying to decide what to buy next." And on the talk went.

Now, it's great that people are interested in the stock market. They should be. It's the best place to put your long-term savings. Over history, nothing legit has beaten it. But the easiness of the money being made a few years ago, and everyone being so plugged into it, with busy mothers knowing how much the stock market had risen each day, told me that something wasn't quite right.

Flashback: December 1999. A cab ride in Chicago. We all have stories that involve cab drivers. I love cabbies. What interesting stories they must hear, and what interesting stories they tell. But this cabbie wasn't talking to me. He was on his cell phone, talking to someone about stocks. He mentioned the usual suspects: Sun Microsystems (Nasdaq: SUNW), Cisco, EMC (NYSE: EMC). Yes, he said, he was covering his tuition with stock trades. I sat in the back seat and pondered this. Then he made another call and started placing stock orders while wheeling down the highway. Orders placed, he put the phone down and focused on the road, looking carefree.

Again, it's great that he was investing, or at least interested in the stock market. He should be, for the long term. But I got an uneasy feeling that when "investing" was that easy, it wasn't going to last. I told myself that I should re-evaluate my stocks and see if there were any that I was uncomfortable with. I did. There weren't. We wrote repeatedly in this column that investors should do the same because -- we warned even as we celebrated -- the record-breaking rise would not last.

The new "stocks are dead" mentality
Now we're beginning to see the public take the opposite attitude toward the stock market. Everybody is talking about avoiding stocks, especially those on the Nasdaq. To hear people speak, it sounds as if technology is dead. The stock market is pass�. Whatever you do, I've heard various people say, don't buy tech stocks. They say this with a shake of the head and a chuckle. We went from one extreme to the other, and so quickly.

To me, each time that I hear someone speak negatively about the stock market -- someone saying to avoid some of the best companies in the world -- it means that we're one step closer to the end of the steep decline, and one step closer to a turnaround. One day many of today's stock prices given to leading companies will appear cheap. These are the prices set in dark moments of doubt. It's funny: You might have watched Cisco soar from $16 to $100 the past few years, and said to yourself, "I wish I'd bought it at $16!" But now that it's down at $16, nobody wants to buy it. That's human psychology at work. It can work against you.

A closing word of caution: Negative talk about the stock market is as loud as I've ever heard it, which is a great contrarian sign. However, one thing that could trump this contrarian sign is if we actually enter a recession. The economy could get worse before it gets better, in which case all the negative talk in the world wouldn't matter. The stock market would keep sliding anyway.

An economic downswing could be long and deep, and our negative mood today could just be a precursor to even worse things to come. Our best defense: Only buy companies that we understand and believe in for the long haul, and only focus on companies, not the stock market as a whole. We do this, and the Breaker Port will keep its wits about it. (If you feel in need of learning how to invest more systematically, consider a Motley Fool Crash Course, such as, "When to Buy, When to Sell.")

Ever notice how some relationships end on really high notes? That's another contrarian happening. Jeff Fischer's stock holdings are shown online. He doesn't own the companies mentioned. The Motley Fool has a groovy disclosure policy.