AS THE MARKET FLIES HIGHER, GOOD BUYS ARE BECOMING HARDER AND HARDER TO FIND.

Market activity is almost beginning to resemble the jumpy behavior typical of internet stocks in late 99, when they were at their most frothy. Despite that, we still see values in the market. Its still possible to make money, but stay informed. Rather than jumping in aimlessly, our readers have the insight to watch for opportunities. Most people, however, have only just begun to realize that the market is headed upward. They missed most of last years astounding gains, and theyre looking to catch the wave, albeit a bit late. They may be disappointed. Many technology stocks, in particular, are already far ahead of their realistic worth. Other name companies, like Wal-Mart, have never come down to reasonable levels. If new investors jump in without discernment, theyll be buying into a market thats already somewhat overvalued. If they simply buy tech-heavy index funds or big-name stock portfolios, they will be giving those same leaders another boost in their already hefty P/E ratios. Also, look for further inflation among those name stocks. The gamblers among us might want to play them for the rise, but we feel that better, safer opportunities exist readers know to look outside the mainstream for their investment ideas.

Among those lesser-known equities, one must certainly consider foreign stocks. Investing only in America is not enough in any market and is at a time when the U.S. dollar is at its weakest more dangerous now. Finally, the rest of the investment community has begun to realize that the dollar has been set up for a fall. The weakening dollar has been the story for the past year, alongside the news of a strengthening market. These seemingly contradictory results demonstrate just how strong the markets 2003 rise really was. To power through the strong downward pressure from a weak dollar, the upward push needed to be doubly strong.

The debate rages over the cause of last years market rally. Is it an overdue recovery from a distorted drop? Or is it an emotional upswing in the midst of a continuing bear market? Resist the urge to jump into one camp or the other! We cannot know for certain which is true until we know more about the underlying economic recovery. If the recovery is real, the market rise is justified and is likely to persist. If the recovery is a phantom, based on Keynesian over-spending, coupled with stimulation-based tax cuts, then the market rise will be short-lived. My guess is that it is a mixed bag. While there is likely some potential for real recovery, the greater impetus has probably been the spending spree in Washington. Eventually, the piper must be paid, and the economy will weaken accordingly. Still, it is possible that the recovery may be fully legitimate. We cant really know for certain until after the fact.

With this ambiguous assessment, how can we make intelligent investment decisions? The answer is surprisingly simple, and yet unexpected. If we see a strong recovery, the spillover will affect all free economies worldwide, and will have the greatest impact where stocks have been beaten down the most and growth potential is highest. That would be the emerging markets. On the other hand, if the recovery is weak, and the dollar continues to plunge, wed want to be invested overseas: particularly in those countries with the least dependence on the U.S. and those which are most undervalued. Again, this leads us toward certain emerging markets.

A savvy investor will be looking toward opportunities in unexpected places, regardless of ones outlook. This explains our growing emphasis on World Investing. Among other opportunities, weve been browsing discounted Country Funds recently. Some attractively valued funds at the present include the New Ireland Fund (IRL), and the Swiss Helvetia Fund (SWZ) among the more developed world, and Brazil Fund (BZF), Latin American Discovery Fund (LDF), and Korea Fund (KF) among the faster growing economies. Were also looking for individual stocks in some of these economies, many of which have found their way into our stock analysis pages.

The other key to finding success is avoiding moribund bureaucratic nations. A country which limits firms ability to remain flexible in this changing world dooms them to slow or even negative growth. For this reason, we tend to avoid some heavily regulated European economies such as France and Germany. We also remain skeptical of growth trends in still-communist China and Vietnam.

Since the same structure limits true innovation and prevents the winnowing of the inefficient, we find it difficult to believe that the industries will escape more severe growing pains than those in Japan and Korea in earlier years, even while there is great opportunity. Instead, we prefer the opportunities among nations with a proven dedication to freedom. Ireland and Switzerland fit the bill clearly, as do Australia and New Zealand, Netherlands, Austria, Portugal, and the Scandinavian states. We also see opportunity in sections of Eastern Europe, largely due to opportunities from convergence with the European Community. Estonia is particularly well-run, but provides few investment opportunities. Hungary, Poland, and the Czech Republic are popular investment zones in the region. In the developing world, picking winners is much more difficult. Some smaller nations like Barbados and Malta offer good governance but few investment alternatives. Colombia has a reasonable government, but it has proven incapable of dealing with drug smugglers and revolutionary insurgencies. Brazil has been making surprising strides in a positive direction, despite the election of a socialist leader. India has a dominant position, and improving institutional structures.

Investing in emerging economies is fraught with uncertainty. But opportunities more than compensate for risk. This kind of investing is not for the faint of heart. For the more conservative, we recommend sticking with safer economies like Ireland, Switzerland, and Australia, with smaller holdings in some of the safer developing nations. Still, we feel keeping all ones holdings in U.S. securities may be less than ideal. If the dollar continues to depreciate, the U.S. may not remain the strongest market.

Thats not to say that the U.S. market is unattractive. We are still finding great opportunities there, but they are becoming fewer, and as more people pour their moneys in, and the prices rise, their number will continue to decrease. Keep an eye out for variety in your selections.