We aren't even a decade into the new millennium, and we're already in the second bear market this century that's wiped out nearly half of all shareholder value. Let's compare and contrast the last two bear markets: the current one and the bear of 2000 to 2002.

Before the previous bear market, the bull tore through the 1990s, with stocks—driven by the Internet age—soaring to historic heights. Valuations of recent startups rocketed to the stratosphere—as high as $40 billion—although the underlying companies had little revenue and no profits.

Those who questioned the obscene valuations were told they were stuck in the old economy. Apparently, in the New Economy, positive cash flow didn't much matter. The rest is history.

After the downturn, the bull took back the market from 2003 to 2007. During that period, the U.S. stock market nearly doubled while international stock markets nearly tripled.

Credit Crunch

This late, lamented bull market was driven by easy credit. NINJA people (no income, no job, no assets) were the low-hanging fruit among borrowers, and anyone who questioned the logic of making extending them loans, or buying "insured derivatives" based on those loans, was told not to worry. After all, real estate would always go up.

Yet neither the value of the houses nor the insurance companies could hold back the flood of foreclosures that followed the fall of real estate values. The ink was barely dry on the Lehman Brothers' 2007 annual report-which showed a record profit of $4.2 billion and noted the company's "vigilance on risk"-before the company was filing for bankruptcy.

This time, though, rather than upstarts, long-established icons like Lehman, Wachovia, AIG, Merrill Lynch, Washington Mutual and Bear Stearns were the casualties. Thankfully, not all of them became extinct, primarily because they were bailed out either by other firms or by taxpayers. Nonetheless, this bear market has caused the stock market to lose nearly half of its global value.

Common Traits

At first blush, it may seem that these two bears have little in common. After all, the first bear was caused by the tech bubble while the second was caused by the credit crisis. Actually, they have several common characteristics:

• Irrational exuberance. As with the 1990s market, the 2000s bull was clearly sustained by irrationality. It now seems absurd that we once believed cash flow really didn't matter. But isn't it equally absurd to lend someone $500,000 to buy a house with no money down, and no demonstrated ability to repay the loan?
• Investor behavior. It may be impossible to predict the short-term behavior of the stock market, but it's actually quite easy to predict the behavior of investors. During both bulls, money poured into stock market mutual funds as people suddenly felt they had a high tolerance for risk.

  And of course, those areas doing the best got the greatest amounts of investment. Investors flocked to tech companies in the 90s and to international markets between 2003 and 2007. During both bears, however, investors have withdrawn their money in droves. It seems that in every market cycle, investors systematically buy high and sell low.

• The illusion that "this time, it's different." During both bull markets, gurus were advancing new paradigms as to why things were different. And during both bears, it has been critical to get out of the stock market because it was experiencing a unique, never-before-seen dynamic. It was prudent to get out until the market stabilized. Sound familiar? Somehow, the market was (and is) supposed to signal when it's time to get back in.

Different Animals?

While these two bears have points in common, there are also some distinct differences:

• Speed. The first bear took nearly three years to destroy about half the stock market's value. The current bear has managed to accomplish this in just over a year. I call this the "shock-and-awe" factor.
• Breadth. In the last bear market, there were certain assets that held up nicely. Alternative asset classes like REITs, precious metals and mining did quite well. Styles like small cap and value outperformed large cap and growth. And certain sectors like energy and, yes, financial services, held their ground. This bear, however, is a whole new animal. What has worked in the last bear didn't necessarily work during this one.