Analysts using a comparison between the 10-year U.S. government bond yield and a U.S. average equity earnings yield (average per share earnings divided by average per share price) are now often pointing to the latter, at roughly twice the former, as evidence that this is an excellent time to be investing in stocks.

Others suggest that, with the most expensive phase of the Iraq war winding down, extra government spending, signs of at least modestly increased consumer purchasing, the lowest interest and mortgage rates in about forty years, a Federal Reserve intent on assuring stimulus to the economy, and falling gold and oil prices, a return to significant industrial growth and surging share prices is assured before year's end.

He adds that the extent, complexity, and interdependence of derivatives now likely exceed the highly leveraged margin buying excesses immediately before the Great Depression, and represent a "time bomb" threatening America's financial health as much as significant potential acts of terrorism.

In a recent issue of "Scientific American," the April, 2003, issue ("Defining Poverty," by Rodger Doyle, p. 31), it is pointed out that our nation's official poverty threshold (currently about 12%) criteria are outdated. Likely for political and bureaucratic reasons, an updating of the threshold factors has not been done since the early 1960s.

The magazine suggests that accurate criteria, taking into account working mothers' child care costs, higher Social Security and other taxes levied on the working poor, cost of living differences in various parts of the country, savings needed to cover short-term emergencies, actual liquid wealth (cash and other liquid assets less debts), and other factors, would show a much more bleak picture of our country's capacity for robust growth and readily bouncing back from recession, with 40-45% of households either now in poverty or significantly at risk of being unable to get along without charitable or welfare assistance.

Economists report that the average U.S. consumer's debt vs. annual income level has never been higher.

And then there's SARS (severe acute respiratory syndrome), already a tremendous damper on commerce and tourism in Asia. It seems likely we have not yet seen the worst effects of this disease.

Nor is the current stock earnings yield to government bond yield ratio all it's cracked up to be. Earnings projections turn out to be routinely inflated. Buffett indicates that aggregate earnings increases cannot for long be sustained above the growth level of the gross domestic product. Yet forecast earnings average about 150% or more of GDP growth.

Of course, if for safety you have been keeping almost all your liquid holdings in reserves or short-term bonds, even the adjusted stocks vs. bond yield ratio would suggest an increased exposure to equities' growth potential (and risk) is now appropriate. Even Berkshire Hathaway has tens of billions of dollars invested in stocks, from prior purchases.

But given that U.S. stock securities now appear to have relatively low upside vs. downside prospects and that Buffett and others see our markets as still needing to offset the binge of "extravagant exuberance" in the 1990s, a return to dramatic and prolonged bullish behavior soon seems unlikely. We have a better chance of experiencing a trading range, above and below a mean, than a new, extended run-up of stock prices year after year.

Thus, if one begins with a total liquid portfolio of $400,000, $200,000 each in short-term bond mutual fund shares and equities, and the latter go up to $215,000 ($5000 above the $10,000 [5%] target threshold), $5000 in equity shares would be sold and the net proceeds invested in short-term bond fund shares.

The same would apply in reverse for bonds, if they have gone up relative to one's stock holdings.

This is a fairly simple, low-risk way to enjoy a portfolio that retains some growth potential but protection against loss of principal for either asset class viewed separately.

One probably should not hope for superlative returns with this approach. But now may not be the best time to bet the farm on another bull market either.

Please note that, we understand, the foreign asset dividends are subject to a 10% tax, paid for investors automatically by their brokerages.

A good sector selection of these European canines follows:

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)