HOW I LEARNED TO HATE THE DOW

By Daniel Kadlec

I wish I could just enjoy it. This newly reignited bull market in stocks is minting millionaires from Wall Street to Silicon Valley. Normal folks, who have found it tough to get a decent raise in the stingy 1990s, are benefiting too by using mutual funds to build nest eggs that they hope will fund their kids' college educations and their own retirement. It's all very exciting and, like a pot of Mom's ham bone and string beans, a nourishing meal for anyone with enough courage to sit at the table.

Mom, of course, would never have dreamed of pulling the plate away before you'd had enough. But the stock market is rarely so gracious. That's worth noting as the Dow Jones industrial average flirts with a record 6000. What the market serves up one day it can steal back the next, and we are long overdue for an encounter with this sometime crook's larcenous side. Some thought a meeting was in store last summer. But after a brief lull, this unprecedented bull market was off and charging again. It's now been six years since the broader market gauge, the Standard & Poor's 500, fell as much as 10%--twice as long as ever before.

But forget that for the moment. Forget too arguments about ridiculously high valuations that have often been trotted out during the past few years. You may even disregard certain classic signs that the market has nowhere to go but down: last spring's record $1.45 million price tag for a seat on the New York Stock Exchange, or mounting margin debt in brokerage accounts, or a raft of fast-selling new investment books--including at least three about wizard Warren Buffet.

What's hard to shake off, though, is the way this anecdotal evidence keeps piling up. It all sparks concern that the market may have become too popular for its own good. Consider these recent developments:

--In the ultimate market bet, Jerre Stead, chief executive officer of Ingram Micro, asked for and got a pay package that contains no salary--just options on 3.6 million Ingram shares. He is part of a budding movement of executives and directors who prefer the promise of the market to hard cash.

--Jon Fossel, chairman of the $57 billion Oppenheimer Funds company, said just last week that he plans to parlay his prominence in the fund world into a stint as a TV talk-show host. Mutual-fund execs as celebrities is a clear sign of the market's sky-high profile.

--Brokerage stocks are jumping--not because business is good but because big banks have been eyeing the firms as takeover targets to get a bigger slice of the market action.

--Money keeps pouring into stock funds--an estimated $16 billion last month--an emblem of the public's love affair with the market.

There's lots more, from barbershops tuned into CNBC and cabbies gabbing about mutual funds to a record number of investment clubs and the rise to guru status of two advisers who wear clown hats and go by the name Motley Fool. If it's not a mania, it's certainly close. "I'm nervous," concedes Fossel. "We're finally getting to the point where everyone thinks the market can only go onward and upward."

But few want to hear such warnings just now. The Dow briefly crossed the 6000 threshold in morning trading on two consecutive days last week. Enthusiasm gushes from nearly every corner of Wall Street. "The economic fundamentals have never been more bullish," says Ed Yardeni, chief economist at Deutsche Morgan Grenfell, who predicts Dow 10000 by year 2000.

Even Wall Street's most prominent pessimist, Byron Wien, the chief U.S. market strategist at Morgan Stanley, has stopped growling like a bear. Wien had been predicting a 1,000-point drop in the Dow since last spring. But last week he began calling for a 10% advance in stock prices over the next six months. "Flexibility is essential," Wien says. "When things are going against me, I don't want to be stubborn."

Can so many people really be wrong? You bet. The point of maximum faith is when things start to sour. There's still reason to believe that we're not there yet. The nirvana-like combination of steady profits and low inflation that has driven the bull market remains in force. And true long-term investors needn't worry much anyway, because the market and the economy always right themselves eventually.

But a market bust can destroy the faith and finances of latecomers, whose numbers have been growing exponentially. Vast sums of money inevitably disappear from the portfolios of people who can least afford it. And once stung, they bail out when they should hold on and wait for an upturn. This overdue day of reckoning draws nearer every time a cabbie rattles off the performance stats of his mutual funds or a barber tunes the TV to a financial channel. That's why a healthy fear of market fads can be the beginning of wisdom.

Daniel Kadlec is TIME's Wall Street and investing columnist. Readers can reach him online at kadlec@time.com