(December 20) – “What goes up, must … go up even more,” writes Bridget O’Brian in today’s Wall Street Journal.

“Throughout the 1990s, that was the lesson newcomers to the stock market learned, as stocks defied gravity for most of the decade.

Now, newcomers are learning another lesson, but this one is harsh: Stocks can go down, too. Fast and far.”

“It’s called a bear market — the first ever for many investors — in the Nasdaq Composite Index anyway, which is down 50.25% from its peak, though the Dow Jones Industrial Average decline of 9.7% from its record means it is well short of a 20% drop that signifies a bear market.”

“This has shocked investors who became accustomed to the unprecedented double-digit percentage gains the past five years. Overall, the Dow Jones Industrial Average rose 318% and the Nasdaq Composite Index soared 795% in the 1990s.”

“Rookie stockbrokers, many still in grammar school during the last bear market of 1990, made mountains of money for their admiring clients. First-time mutual-fund managers racked up performance numbers that would have shamed Peter Lynch of Fidelity Magellan fame. Greenhorn individual investors, who not long ago didn’t know a stock from a bond, watched their portfolios swell.”

“Some believed — no, knew — that it was their stock-picking prowess that produced such astounding profits. They obviously hadn’t heard, or had ignored, the old Wall Street adage: ‘Don’t confuse brains with a bull market.’ “

“Now, many who felt so confident for so long are feeling a lot more humble today. ‘I thought I was a genius and anybody who wasn’t doing this was an idiot. I went around giving everybody advice. Now, I feel guilty,’ says James Garfinkel, who has watched as his portfolio has plunged by more than half in just nine months.”