He ran Fidelity's Magellan Fund for thirteen years (1977-1990). In that period, Magellan was up over 2700%.

"The market itself is very volatile. In the 95 years so far, we've had 53 declines in the market of 10 percent or more......That's once every two years. Of the 53, 15 of the 53 have been 25% or more. That's a bear market.

So 15 in 95 years--about once every six years you're going to have a big decline. Now no one seems to know when there are gonna happen. At least if they know about 'em, they're not telling anybody about 'em. I don't remember anybody predicting the market right more than once, and they predict a lot. So they're gonna happen. If you're in the market, you have to know there's going to be declines. And they're going to cap and every couple of years you're going to get a 10 percent correction. That's a euphemism for losing a lot of money rapidly. That's what a "correction" is called. And a bear market is 20-25-30 percent decline. They're gonna happen. When they're gonna start, no one knows. If you're not ready for that, you shouldn't be in the stock market.

I mean stomach is the key organ here. It's not the brain. Do you have the stomach for these kind of declines? And what's your timing like? Is your horizon one year? Is your horizon ten years or 20 years? If you've been lucky enough to save up lots of money and you're about to send one kid to college and your child's starting a year from now, you decide to invest in stocks directly or with a mutual fund with a one-year horizon or a two-year horizon, that's silly. That's just like betting on red or black at the casino. What the market's going to do in one or two years, you don't know. "

He is the author of "House of Morgan" a National Book Award winner. He also wrote "The Warburgs," winner of the Eccels Award for best business book.

"Sooner or later we have a sustained bear market. We have not repealed the business cycle. It's unlikely that financial history has turned a corner and that we're in a brand-new world where we will never see manias, panics and crashes again. They've been too much a part of the financial landscape for too many centuries.

And one of the reasons that I worry about the institutionalized complacency in market is that once that complacency is shattered, it will turn to the most unreasoning kind of fear, which is panic. And the panic becomes proportionate to the complacency.

And I think that there are so many people who lived through the 1987 Crash, who now think they know the worst that the stock market has to offer, who are really not psychologically prepared for a market that would go down 30-40 percent over a period of a year or two.

I don't know that we will ever have again this sort of situation we had between the 1929 and 1932, because earlier in the century the little people would enter the stock market in a very sporadic and opportunistic way. They would run in late in rallies when there was a certain amount of euphoria. They would then get burned. They would then run out of the market again.

We now have a breadth and depth of involvement of the small investor that is unprecedented when you have 50 million people buying stocks and mutual funds. That's a tremendous base for the stock market. Also even if we had a very violent crash, we'd have a situation now where a lot of stock investment through 401K plans and other retirement plans that are actually written into employment contracts. They're part of collective bargaining agreements. No matter how frightened or disillusioned people became, these systems would continue to go on. And so it's an institutionalized involvement of individuals.

....... One other thing....what would happen if we had a sustained bear market after a lot of the Baby Boomers had retired, they were all past 59, they were beginning to draw from these different retirement plans that were invested in the stock market, and yet suddenly their stocks were under water, on paper their investments were down 30-40-50 percent. What would they do?

They would face two options, to my mind, fraught with peril. They could either decide that they would tighten their belts and ride out the storm and reduce their discretionary spending, which would tremendously intensify and prolong any recession. Or they could say, "Well, we have to cash in the stocks because we need the money to live on," in which case they would suffer a permanent, perhaps quite devastating, decrease in their retirement funds. We really haven't had very much experience with people funding their retirement out of the stock market, and we don't know, frankly, how it would work under every scenario. And, frankly, I don't see that there are a lot of people who are studying that are even speculating about it."

She is the author of "Fidelity's World."

"People have been trained over most of their adult saving life, if you look at people now nearing their 50s, to believe that while markets may have a few scary roller-coaster days, by and large, they go up. They don't always. Japan has had a terrible bear market extending five or six years. The U.S. had a terrible bear market all through the '70s. But that's been forgotten. There's a certain amnesia that cloaks the -- the failure of our myths, and in this case one of the great myths is that you can have safety and high return. We haven't wrestled with the idea that high returns require taking higher risks. And that's the big flaw in our psychology.

.....Most people think of the Crash of 1987 as about the worst thing that can happen to the modern stock market, but in fact it really wasn't, not by a long shot. It was a quick, sharp correction, a down draft. The most serious problems it posed were to the mechanical, machinery of the stock market, just coping with the volume of trades, keeping investors informed.

The worse case scenario for the stock market is something like the 1970s, just a long, grinding bear market that edges up and slides back down, two steps forward, three steps back for years and years and years. That's what happened in the '70s. It's what Japan has been living through for the past half-dozen years. It can happen here. There is no immunization of the American stock market that keeps up from ever having a long, dull, grinding bear market. It could happen again. "

Cramer manages a hedge fund and is a financial columnist for magazines such as New York and Smart Money.

"I don't think the market is so dangerous. In 1990 we had a full-scale bear market in the financial stocks. You had Citicorp, Chase, Chemical Bank losing 70-80 percent of their value. That was a sector that was decimated. In 1990-4 you had foreign country funds decimated. In each case there were speculators betting that Chase had the stock going down, didn't realize the dimension of real estate problems. There were speculators saying that the foreign stocks had the stock going down. They were all wrong. Those classes of assets were dangerous at the time and they became great bargains. What I'm saying is that there are stocks right now that if you're shrewd enough, you will be able to buy them at the opening today and I you'll make money in a year from now.

frontline: But don't you have to be a professional to be that shrewd?

Cramer: I think that there are changes that have occurred in technology .... people can have the same level of information that I have.....the danger that we have right now are people who get the same information as I do and, therefore, think they'll reach the same conclusions that haven't traded as long, don't have bear claws up and down their backs like I do. I mean I've lost tremendous amounts of money in various markets and I think that's something that makes you better at my job, not worse.

I think a lot of the people who are in now haven't lost tremendous amounts of money yet, don't want to, but will. But they won't lose 'em if they're in companies that are real."

Fleckenstein is President of Fleckenstein Capital Management in Seattle and is skeptical about the heights of the current bull market

"I believe a bear market is inevitable at some point, simply because in Nature, in life, in everything, there are cycles. There's no such thing as the elevator that only goes up, which is what the stock market is in people's minds' now. The consequence of it going up in changing people's behavior and pushing prices to where they are and all this is almost inevitably you have a bust. Similarly, when you have a bust, you set up the next boom. So these cycles occur for reasons. You sow the seeds of the next problem. I think it is inconceivable......we will have a monstrous set-back in the stock market. I don't know whether it's gonna come from 6000 on the Dow, 8000 or 10,000."

He is on the staff of Money Magazine and often is asked to appear as a personal finance expert on radio and tv programs.

"........if we get a bear market, it's probably not going to be the kind of bear market we had before, which was very quick, sudden, and it's over. It's probably going to be a longer term bear market like in 1973 and '74. It lasted a long time and stocks were down 50 and 60 percent. That is much more difficult for people to deal with in a certain way than a sharp crash kind of situation and it's over with before they even have a chance to do anything about it.

So we'll have to see if people hang in there through a long-term bear market, which is a little bit harder to deal with. But I think in the long run they will do that as long, again, as alternatives are not very attractive.

...People do have high expectations and you can see it in the kind of cash flows into mutual funds. The money is going where it's been hottest -- technology funds. They see these records, 50-60 percent in the last year or so, and they want to jump in.

....There's a fund recently....I think in the last year it was up about 90 percent. They just opened an emerging growth, an even more aggressive fund for one day and brought in a hundred-million dollars in one day and closed that fund. A lot of people would have wanted to get into it, they couldn't even get into it. They didn't even know it was happening. That's the kind of money that's chasing the hot action right now.

Now probably you'll do well long term in a fund like that, but if there's a bear market or the market gets hit, for whatever reason, short term, I'm worried that people could want to bail out of it. They shouldn't, but they might be people with these high expectations that get dashed and they freak out the moment something goes wrong. "

He is the Senior Editor of Worth Magazine and author of "The Worth Guide to Electronic Investing."

"I was talking to Hugh Johnson, who's the market analyst for First Albany......What Johnson talked about and what interests me is that investors always fight the last war. It's like the French before World War II. You build the Maginot line to defend against World War I and the Germans then sweep around your flank. I think investors who have been in this market for any length of time think that 1987 is a typical bear market and it's really not. It went down in a very few days. People basically had no chance to get out. So they really didn't have a chance to do the wrong thing. I think people are behaving as if that's what they how to really worry about so that basically you have a kind of history that reinforces the buy-and-hold mentalitythat worked in 1987.

If what we're talking about, however, is a bear market like '73-74 where you had this grinding decline over months, with the market constantly looking like it was going to rally,the bear trap, as it's called, so that people had a chance to go, "Well, gee, it's down 20 percent, but it's come up in the last few days. I'll put more money into it---it went up just enough for them to get more money sucked in and then went down again. That kind of market absolutely no one is prepared for. There really isn't anybody on the individual investor level who's been through that experience. It's too long ago.

And the last is just a question of what does a 10-1/2% return, on average, really mean to an investor. You don't care about "on average." You care about what the returns have been during the period you're in the market. If the market is going to yield 10-1/2% on average for all the years until the year when you need to get out, -- the 10-1/2 % becomes irrelevant. If you then suffer through a 30% correction, crash, bear market---whatever you want to call it-- the 10-1/2% is a nice statistical abstraction. It doesn't really mean very much for people trying to retire."

Grant is founder and editor of "Grant's Interest Rate Observer" and author of "The Trouble With Prosperity ." He 's a well-known Grinch about Wall Street today.

"To have been bearish in the face of this titanic rise in stock price is a little bit like, you know, being bearish on a hurricane. You're going to stand out there and decry the force of Nature, but it's hard to make much headway against it. It has been a truly humbling experience.....the market continues to fly in the face of every single received rule, evaluation and prudential investing that I know.

......it's a truism, though, that when the market turns down, the worthy as well as the unworthy get taken out... Similarly in the rise, many unworthy stocks get carried along with the up side, but it is not true that the great solid blue chips are exempt what happens to the rest of the list during a sell-off. In the bottom of the last really powerful bear market we had in 1974, you could buy Boeing for less than the value of the cash on its balance sheet, if memory serves.

.......It is impossible to exaggerate the degree of revulsion that the public feels towards common stocks at the end of a powerful, epochal bull market. That is the term of art, by the way. It's called revulsion. It's not bearishness. People just can't stand the sight or the sound of it because there's been so much money lost.....so much energy expended. There's been so much hope destroyed. And that is called an opportunity. This is where great fortunes are made. So....there is a lot to be said for a bear market. It clears away the debris of a preceding boom. It puts paid to a lot of mistakes and it gives people a chance to buy great companies cheap.

frontline: If stocks have become overvalued and people know it, why do people buy them?

Grant: Well, overvaluation never stops a bull market, nor does undervaluation stop a bear market. In other words, at the bottom of this market, and no doubt one day we'll have a bottom. And at that bottom, people refuse to consider buying a stock that is really being given away. That's the definition of a major bottom of the stock market. Similarly, at the top, people pay no heed to what, objectively, is unprecedented or at least extreme levels of overvaluation. Why? Because they know it'll go higher. At the bottom, they know it will go lower. These truths are absolutely the only certain thing in finance. Everything else about finance is variable and contingent. The only permanent truth in finance is that people will get bullish at the top and get bearish at the bottom.

.... Peter Lynch's great idea is that stock price appreciate over time, but there is no one single settled truth in finance except for the fact that people will over-do it. They will get too bullish and then too bearish. ..It is simply not true that stock prices always follow earnings. If it were as easy as that, everyone would be even richer that Peter Lynch has implicitly promised they can become."

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