NEW YORK (CNN/Money) - Twenty years ago today, nobody cared about the stock market.

On Aug. 12, 1982, the economy was mired in its worst recession of the post-War period. Interest rates were sky-high and the Dow Jones Industrial Average was 26 percent below the peak it reached nearly 10 years earlier. Joe Granville, the market guru of the day, was telling investors to "sell everything."

SIDE BAR       A round trip to 1997 Does the Fed think stocks are cheap? Where the bargains are Earnings quality Bracing for an earnings hit

And...a powerful bull market, spanning nearly 18 years in length, was just beginning.

By the time it was over in early 2000, the Dow had advanced nearly 11,000 points, going from 776 to a peak 11,723. The S&P 500 index had gained 1,391 percent.

At the time, a huge shift was occurring. The Federal Reserve had finally snuffed a decade of inflation. On Aug. 13, the Fed dropped rates by a half point for the third time in six weeks. On Aug. 18, for the first time ever, more than 100 million shares traded on the New York Stock Exchange. In November, the Dow hit its first new high since January 1973. By Aug. 12, 1983, it had tacked on 52 percent.

The bull got buried two years ago, but rumors of its revival, notes Banc of America Securities strategist Tom McManus, "are almost as prevalent as Elvis sightings." So will you know if a new bull market has arrived, or if you're just getting duped by another impersonator? Looking back to 1982 should help.

Even as stocks surged, few initially believed in the bull market. According to the Investment Company Institute, just $1.2 billion flowed into equity mutual funds in 1982.

During the next 20 years, public interest in the market increased markedly, but much of the money that went into stocks came to the party belatedly. More than half of the $1.44 trillion that has flowed into stocks since the bull market began came after 1997. The peak year for equity fund inflows was 2000, when $259.6 billion flowed into equity funds -- the end of the bull market and a terrible time to invest.

Even now, two years after the bull died, investors are hoping the good old days will come back soon, according to Merrill Lynch strategist Rich Bernstein. Though things may seem bad now, pessimism is still nowhere near 1982 levels, according to Bernstein.

"Twenty years ago nobody believed in equities," he said. "Today everybody still believes in equities."

The plunge in the market over the past two years makes stocks look like a less spectacular long-term investment, however. The S&P 500 had an average return of 10.8 percent per year since Aug. 12 1982. The benchmark for bonds, Lehman Brothers' U.S. Aggregate Index, returned an average of 10.3 percent per year. The S&P 500 is down fractionally from where it was five years ago. The bond index is up 45 percent.

None of this means that stocks haven't significantly outperformed bonds in the long run -- the average annual return on stocks over the last 75 years is 10.7 percent, according to Ibbotson Research, while Treasury bonds have returned around half that. But the periods when stocks have done really well, says Bernstein, happen when people start doubting stocks will outperform.

In August 1982, recalls Raymond James strategist Jeff Saut, that's what people had come to think. The Dow was at a level it had first hit over 18 years earlier, in January 1964. He thinks that before the next bull market comes, investors may have to suffer through a similar experience.

"Before this is over with I think people are going to get so upset that they'll end up giving up just like they always have," he said. "The best we can hope for is a sideways market."

Valuation may be a bright spot, however. True, at 16 the S&P 500's price-to-earnings ratio based on expected earnings is rich compared to where it was -- 6 -- in 1982. But interest rates were much higher, then: The yield on the 10-year Treasury was 16.7 percent. One reason that investors were so much more gung-ho on money-markets over stocks is that the returns they offered were so high. The Fed model, a popular valuation tool that uses earnings and Treasury yields to determine an appropriate level for stocks shows the S&P 500 as 31 percent undervalued now. In August of 1982 the model pegged stocks at just 14 percent undervalued.

The problem? Bernstein thinks that the quality of the earnings companies report nowadays is lousy, and that using expected earnings to value stocks in any case is dangerous. Analysts have been known to be too bullish.

Should you listen to Bernstein? Maybe, but first consider what he was doing with his money in the early years of the bull market.

"Of course I put it in money market funds," he said. "I was dumb, just like everybody else."