When you're on top of the world, the only direction is down.

What put the U.S. stock market on top of the world was earnings growth so strong that it acted like a mainline shot of steroids to stock prices. Between 1992 and 1997, earnings for Standard & Poor's 500-stock index grew by an annualized 12.5 percent vs. the norm of 6 percent to 7 percent.No wonder American investors felt like Jack hanging over the bow of the Titanic, shouting, "I'm king of the world!" We were cocky even though Asian economies and markets had submerged.

Then, in August, the bottom fell out of the Russian ruble as it became clear that Russia was the first country to fail at both communism and capitalism. But Russia buys a tiny fraction of U.S. exports. The real problem is Asia's economic anchor, Japan, which has sunk deeper into recession.

Looking forward, the keys to resuming the bull market are accelerating earnings and the stanching of our big trading partners' wounds. If our trading partners can learn to stay afloat and earnings stabilize by the end of the year, look for markets to set new highs by early 1999.

But if key players such as Japan can't get their act together, if the global recession deepens and if deflation takes hold, reserve yourself a seat in the nearest lifeboat.