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We all need a friend in the box business.

Mine happens to be John Tatum, whose collection of companies includes a fully-automated corrugated cardboard assembly line that operates like something out of Willie Wonka and the Chocolate Factory.

A slurry of recycled paper at one end comes out as fresh new cardboard about 100 yards away. John says that cardboard box sales are slowing down, and that's a forward indicator of future economic conditions.

People who aren't shipping product stop buying boxes. Box orders are the canary in the mineshaft ... the finger in the wind.

So why is everybody so bullish on the market when there are at least some signs that the economy is cooling down maybe way down?

Ken Fisher, whose ads are everywhere, offers a convincing case for why stocks are headed for continuing all-time highs. He points out that they are cheap by historical standards because earnings have been increasing faster than stock prices.

The counter argument here is that P/E ratios are now averaging 19 as opposed to the historical norm of 16 for the S&P 500.

We're now in the fourth year of a bull market. Fortunately, the true believers in long-term market gains include economists independent of the brokerage industry. The clarion call of "this time it's different" is based upon the emergence of a world economy and what appears to be its unlimited appetite for growth.

But when it comes to the pundits, Alan Greenspan, in a speech in Japan last month, said that he expects a slowdown in our economy. In his newsletter, Bob Brinker talks about his expectation of a "correction" of at least 10 percent (but not 20 percent) and the fact that this will provide a nice buying opportunity.

Then, the Wall Street Journal points out that short-selling is at an all-time historical high. Right now, 3.1 percent of all outstanding stock on the NYSE is borrowed and then sold with the hope that it will go down in price with the borrowed shares returned after being bought at a cheaper price.

The short seller pockets the difference between what he or she received after selling the high-priced borrowed shares and the reduced price they will be spending later to buy replacement shares at pay-back time -- assuming the market goes down. Short selling at Nasdaq also hit an all-time high in May. Some reasonably smart people running those hedge funds are convinced that stocks will be heading south.

Here at home, we may have to come to terms with a struggling economy, but it may not impact our investment portfolios to any great degree. If this sounds a little antithetical, an economist with a sense of humor once pointed out that the stock market has predicted "nine of the last five recessions. "In other words, the economy and the stock market don't always operate in lock step.

With a dollar declining in value, large U.S. companies with substantial overseas sales and facilities will sell more, retain value and increase profits.

The average S&P 500 company derives one third of its revenue from overseas sales. This helps to explain why money is pouring into large-company, value-oriented mutual funds. At the same time, a number of independent asset allocation advisory firms are recommending that one-third to one-half of everyone's portfolio should be in foreign and emerging markets funds.

Over the past several months, $600 billion in assets has moved in that direction within the mutual fund industry. In the same period, only a net gain of $30 billion was experienced by domestic funds. Our money is fleeing the country.

The market rises "on a wall of worry." If you are confused and/or worried about these conflicting signals, you're normal. The antidote is stay diversified with money spread out over several different investment types.

With large company value funds, you're already one-third invested overseas automatically, and you can look forward to receiving dividends. This is definitely not the time to flee the market, but with as much uncertainty as there is today, bumping up the bond fund portion with some GNMA funds wouldn't be a bad move for someone who is closing in on retirement.

As to the forward-indicating box business, our economy doesn't yet feel like a house of cardboard. Everyone I do business with is making good money and hiring more people, but we shouldn't be surprised if it all falls off a cliff in, say, 2008.

If the economy slows down, our incomes might suffer, but a collection of diversified investments could continue to hold up. Should this be the case, today's wise move would be to cut back on some discretionary expenses, clean up some debt and bump up those retirement plan contributions.

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