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DOUBTERS STILL SAYING MARKET RISKY

The bulls may have won every round in the stock market lately, but the skeptics still aren't throwing in the towel.

No matter how impressive the market's steady advance to new highs may look, the doubters say, time-honored measures of value still suggest a large measure of caution.They acknowledge that the bull market has seemed impervious over the past year or longer to scary statistics such as record-low dividend yields and record-high ratios of stock prices to book value.

But they warn that it might be a big mistake to conclude from the recent behavior of stock prices that all traditional standards have somehow been rendered invalid.

"Although value ratios offer little help in timing markets, they do provide a clear measure of risk," declares Barton Biggs, a prominent investment strategist at the firm of Morgan Stanley & Co. "The U.S. stock market today is very risky."

At the market's recent record highs, the aggregate dividend yield of both the Dow Jones average of 30 industrial stocks and Standard & Poor's 500-stock composite index has fallen to just a bit over 2 percent.

Going by the record of past market cycles, many analysts consider anything around 2.5 percent or less to be a danger signal.

But some have dismissed these concerns lately, arguing that boards of directors at many companies are simply less inclined to emphasize dividends than they used to be.

For one thing, buybacks of stock have gained a lot in popularity as an alternative way to put company earnings to use and to avoid some of the tax obligations that dividend payments can present.

After it has been taxed as corporate earnings, money paid out as dividends is subject to taxation again as individual income when shareholders receive it.

A different debate focuses on the ratio of stock prices to book value or the theoretical liquidating value of the underlying companies.

"The S&P 500 and DJIA both trade near four times their companies' book value, the highest price-book ratios in history," says Norman Fosback, editor of the advisory letter Market Logic, based in Deerfield Beach, Fla.

At the bottom of the 1981-82 bear market, Fosback recalls, stocks traded at about parity with their book value.

Some optimists argue that the big expansion in this ratio lately isn't as worrisome as it appears because the very nature of the economy is changing, putting a much bigger premium on the value of intangibles such as information rather than tangible assets such as factories and equipment.

Still, says Fosback, "today's price-to-book-value ratio is greater even than that which occurred at the top in 1929," when the stock market crashed.

"This is not to suggest that we are necessarily due for a '29 repeat - merely that in the current exuberant market environment, investors have been willing to throw value out the window and pay what will probably prove to be historically excessive prices for stocks."