Forget the Maris Derby and Pay Attention to Lynch vs. Bogle

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Could there be a more difficult match to handicap? No, not the

Sosa

versus

McGwire

race. Nor the obscure battles between the top contenders at the

U.S. Open

.

No, I am talking about the

Bogle-versus-Lynch

struggle-to-the-death contest that will soon play out in the investment field. What an amazing time that both

John Bogle

, the father of the Index fund, and

Peter Lynch

, the dean of the stock pickers, will both be out espousing their doctrines simultaneously. Rarely will two titans with so much rigor and such empirical evidence on each side both be on display.

Lynch's parry, coming from a road show for

Fidelity

, is extremely well-timed, as the notion of the stock picker as king has never been in such repute. Bogle's, stemming from a book soon to be published that glorifies the Index fund over the stock picker, is much needed, too, as never has the

S&P 500

been more out of whack with the rest of the mark.

Why is this match so important? Because if we are to work our way out of the den of this bear, we must have the small caps rally. We must change the shape of that advance-decline line chart. We cannot do that if Bogle's method, blind indexing, continues to prevail. As long as it does, stock pickers won't get the cash. In the Bogle world, index funds, and their ilk, including giant funds like Magellan, will keep getting the money and putting it to work in the indexing fashion. How ironic that the fund that Lynch built is now the biggest enemy of the doctrine that Lynch's espouses? We need Lynch to win this duel if we are ever going to get back to a semblance of a bull market.

Lynch is already giving signs that the value in the market, as it was in 1990, is in the small caps. (See the Sunday

New York Times

story where he contrasts 1990 with today.) Bogle's view, as seen on the brief snippet of

Real Money

, my aborted

ABC

show, was that all of this high-fee stock picking is a joke because nobody beats the indices anymore. Brainless investing beats brained investing everyday.

The reason why I like this battle so much is that Bogle is right over the last five years but Lynch is right over the last ten! How fitting!!! Neither is a charlatan. Both of these gentleman -- and they certainly are that to a T -- are right. That's a rarity in this age when neither opponent in any field of endeavor seems worthy of any support.

If Lynch is going to be right about the future, you must watch the performance of the

Friedman Billings S&L

fund and the

John Hancock Regional Bank Fund

run by Jim Schmidt. These are the stock pickers that are left standing with good records that have declined so much in 1998. They are the ones who should blast out first if the stock picker's world comes back to life, courtesy of a Fed rate cut.

But if Bogle is right we are stuck in the high valuation plays, the

Ciscos

(CSCO) - Get Report

, the

Microsofts

(MSFT) - Get Report

, the true winners of this era of indexing, as incremental dollars must flow to the biggest by virtue of self-fulfilling nature of index funds.

I am hedging my bets, as always, long Schmidt's stuff and long the stuff that wins in Bogle's world. That's just me, trying to win both ways. When the contest gets closer, I will drop one of the two and go with the other, as is my luxury. By the time the rest of the press catches on to this match, it will be won, so stay tuned. It holds the key to the bull versus bear saga that will be playing out these next six months.

James J. Cramer is manager of a hedge fund and co-chairman of TheStreet.com. At time of publication his fund was long Microsoft and Cisco. Also, he holds long positions in many S&L's that would likely benefit from inflows into the FBR S&L fund and the John Hancock Regional Bank fund. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending a letter to TheStreet.com at

letters@thestreet.com.