Dow-tful

Last week's stock market antics were just no fun at all.

Not the 554-point decline on Monday.

Not even the 333-point hop back on Tuesday.

After seven years as a poster child for the good times, Wall Street seemed to signal a change of heart: Maybe some near-term uncertainty; maybe something more damaging.

What happened was this. At its record high last August, 8256, the Dow Jones Industrial Average was priced for perfection. Stock prices anticipated the best of all worlds - strong economy, weak inflation, jet-powered profit growth.

Then Asian markets imploded. Wall Street saw perfect stock prices in an imperfect world and took a perfect U-turn. But that's not the troublesome part. The beauty of a free market is its ability to adjust for both change and stability.

What's troubling is the way the little guy stepped in. Individual investors, apparently unfazed by a week-long 800-point loss on the Dow, bought more stock, helping drive that record run-up on Tuesday.

But here's the glitch. Stock markets go down. Bears markets lumber out of the woods and take charge.

Maybe this is one of those times. Maybe not. We won't really know until we're well into it. But if a bear market - one that loses about 20 percent - were upon us, its beginnings might look a lot like this.

Monday's tumble, for example, took the Dow about 13 percent below its August high. That's the first retreat of more than 10 percent in seven years.

And since reaching that record high, the Dow has tried, and failed, to grasp those heights again. A giddy rally two weeks ago turned into the rout that gained speed last Monday.

And the small investor has been well trained to finance the professional investor's exit. "Buy on the dips" goes the chant. Downturns are temporary.

And that's been true for 15 years, even through the crash of October 1987. Maybe this is one of those times.

But, really, stock markets sometimes go down for long periods. The market went down for five years starting in 1977.

And the big event in 1929 was not the Great Crash so much as the start of a market decline that lasted four years.

No one's saying this stock market mirrors 1929 or 1977. The differences are legion. But those years marked the beginning of a long decline in stock prices.

We hear a lot about the New Economy, and it continues to take experts by surprise. Maybe it's so new and so good that it's got the bears caged for good.

But if not, and if you only believe in "buying on the dips," you'll be buying when the pros are selling, as the Dow declines then rallies in a downward spiral.

Successful investing is hard work. It takes constant study - digging out good stocks, promising sectors, and timely purchases. There's more to it than "buy on the dips" or even buy-and-hold.

Which is why mutual funds make so much sense for the rest of us. They put the talents of highly successful investors within reach. But even they require intelligent attention.

As I said, this may be a pause on the way to another record for the Dow. The economy continues to look remarkable (see story, left). Last April, and then in the previous summer, the market pulled back and plenty of experts proclaimed the bear's arrival. They were wrong.

The point here is that this is not the time for investors to be fearful, or greedy. It's the time to be intelligent.

The dust hasn't settled. The smoke hasn't cleared. The jury is still out. Get the picture?

Huge swaths in some of Asia's most important economies have been devalued by a third. Imports in Thailand are roughly 40 percent more expensive now, which means Thai people won't buy as many General Electric refrigerators or Intel computer chips. Many face a trip from comfortable middle-class lifestyles to wondering how they will pay for food and gasoline. That bodes poorly for the blue-chip companies that have led the charge down Wall Street.

The most reasonable forecasts indicate that Dow needs some time to work things out. Historically, when the market takes a sharp fall, it often rallies, as it did Tuesday, before heading lower, as it may well do this week.