John Mahoney: “When the media said the party would go on forever, it was time to sell.  But this recent headline in USA Today – Stocks Drop, No Bottom in Sight – makes me think it's about time to get back in.”

F It may be.  But first you have to be sure stocks have gone well below their intrinsic value before we would be at or near a classic bottom.  Are most companies selling for unreasonably low prices relative to their assets and earning potential?  Some would question this. 

You'll know it's the bottom – or at least a good time to buy even if stocks drop further before bouncing back – if you can say with the same sense of wonder that you said it at the top: “Can you believe these prices?  They bear no relation to value!  They are INSANE!” 

Or if you can say, as I concluded many of my pieces in the 1974-1982 period . . . “If the world doesn't end – and it usually doesn't – this has got to be a great time to buy stocks.  (And if it does end, what difference does it make?)” 

In large part because interest rates were high, many companies were selling at under 10 times earnings.  I hope interest rates never go up again, but I'm not sure we can assume that they won't.

Maybe this bear market will end before prices seem insanely low.  I hope so!  But usually, bear markets go to extremes of undervaluation just as bull markets go to extremes of overvaluation.

We’re getting there.  We may still have a way to go.