I’d like to tell you we’ve hit bottom, and that’s always possible, but remember that the Dow was at 6,500 or so when Alan Greenspan first floated that phrase ‘irrational exuberance’ in 1996, I think it was. Today, we’re shocked at the prospect of its retreating below 10,000.

In those intervening five years or so we’ve all worked hard and grown the country and its assets some, so what might have seemed irrational in 1996 with the Dow at 6500 (and the NASDAQ around 1250) may not now be so irrational at all. We may have grown into those valuations.

But that would still mean the Dow’s slipping another 3,500 points and the NASDAQ dropping another 40% or so.

I am not predicting these things, vouching for much accuracy, nor forgetting the fact that Greenspan’s remark was based on the Japanese experience, not explicitly presented as Greenspan’s opinion of U.S. stocks at the time.

So this is all very vague, and we may not need to see the markets fall that far, let alone farther. Indeed, yesterday may someday be looked back on as the all-time low for this century!

But I doubt it.

Sure, AIG, a terrific company that I own, is down from 104 to 78. But it’s still selling at 34 times trailing earnings – and its brilliant, tough-as-nails CEO is 74 or 75 – will his successor be able to justify a multiple like that? Maybe, maybe not.

So the first thing to say is that there’s a possibility that it will take many years before we get a great stock market again. (Or it may not – I don’t claim to know.)

The second thing to say is that, happily, you escaped a lot of the misery, because you had dumb little stocks like CN, which sells for about half its cash, and which actually went up a penny yesterday. (I’m not recommending anyone buy it here. But neither would I sell $7 of cash, which is roughly what the company holds, for $3.50, which is roughly what the stock is selling for.) Or A&P preferred G, suggested here in early January at $12 – it was up a nickel yesterday, to $19.70. (Again, don’t buy it here just because it got a lot more expensive.)

You were too smart to own Amazon or Priceline or any of that – let alone on margin – because you saw that the relative values were just nuts. Likewise Juniper or Cisco. ‘The truth is,’ you read here last October, ‘Juniper may one day be valued more highly not just than GM, Apple, Amazon, and the New York Times Company, combined, as now, but more highly than all those plus (are you ready?) Federal Express, Ford, AT&T, Kodak, Yahoo, and the entire U.S. airline industry. Why not? Cisco already is.’

This is not to say some of these aren’t fine companies. There may come a price at which Cisco and Juniper and Yahoo and Amazon are a steal. Maybe we’re already there. You could start to nibble. But they were wildly overpriced — and I’m not sure they’re screaming bargains even today. That’s important, because markets often go to extremes. If we’re headed for the gloomy extreme, we may have a way to go.

One Internet company I don’t own that one day I might, because it stands out from the others, is eBay. Down 75% from its high, eBay still sells at 200 times earnings and sports an $8.5 billion market cap. Too rich for my blood. But eBay is a monopoly of sorts – because everyone wants to sell or buy where everyone else is selling or buying – and monopolies have a unique advantage.

If you’re in the market, don’t rush to sell now, just because stocks have fallen so much. But neither should you assume that a few months from now the Dow is going to be back at 13,000 or the NASDAQ, anywhere near 5000. My guess is that we have a long row to hoe.


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