SUMMER'S HERE

at last, and so thoughts naturally run to sun, sand and the apocalypse.

John Ashcroft clearly feels the hot breath of Armageddon on his neck. The attorney general got all sweaty under the klieg lights back in May citing unspecified "disturbing intelligence" that led him to expect a "large-scale" al Qaeda attack on U.S. soil in the coming months. Wall Street seemed to write off the whole thing as an exercise in election-year alarmism.

There were good reasons not to run for the root cellar. Homeland Security Secretary Tom Ridge had been on TV the same day, minimizing the immediacy of the new alert. The national threat level didn't rise from watchful yellow to the extra-super-double-vigilant orange.

Ridge eventually returned to the reservation, co-signing a terse statement with Ashcroft reiterating the threat of an al Qaeda attack. But the damage was done. The attorney general, who seems equally determined to catch terrorists and stamp out online head shops, came off as a doomsday preacher. And it didn't help to have implied that al Qaeda might strike soon because it's rooting for John Kerry all the way.

And so here we are in July, and the attack still hasn't come, and the attorney general who cried terrorism hasn't been heard from much lately. The stock market never did take his warning seriously, drifting higher for much of the past month. It's been preoccupied with inflation, the election, Iraq and the Fed, but most certainly not the next 9/11. And that could prove to be an expensive mistake. But don't take it from me.

"No one knows the probability of a nuclear detonation in a major metropolis this year (or even multiple detonations, given that a terrorist organization able to construct one bomb might not stop there). Nor can anyone, with assurance, assess the probability in this year, or another, of deadly biological or chemical agents being introduced simultaneously (say, through ventilation systems) into multiple office buildings and manufacturing plants.... Here's what we do know: The probability of such mind-boggling disasters, though likely very low at present, is not zero. The probabilities are increasing, in an irregular and immeasurable manner, as knowledge and materials become available to those who wish us ill. Fear may recede with time, but the danger won't the war against terrorism can never be won. The best the nation can achieve is a long succession of stalemates. There can be no checkmate against hydra-headed foes."

That was Warren Buffett writing in early 2002, after Berkshire Hathaway's insurance subsidiaries absorbed $2 billion in losses on 9/11 claims.

But while no one knows the exact probabilities, we know a few things Buffett didn't back then; such as the fact that Pakistan for years ran a clearance sale peddling atomic know-how to the highest bidder and the lowest. Successful shoppers apparently included one maniacal playboy in North Korea, fundamentalist clerics from Iran and another, aging and slightly less maniacal playboy from Libya that we know of. These are the people we're counting on not to sell al Qaeda the nuke it seeks, at a time when the U.S. is generating record levels of ill will, and not just among Muslims. In the long run, I don't like those odds.

Nor, frankly, do I like them in the short run. It would be one thing if stocks were headed somewhere. But they're not, drifting aimlessly in a tight range. This year has seen three extended rallies, each culminating in a lower high. Until the S&P 500 clears February's top at 1158, its gains will remain suspect.

So why invest in a stock market going nowhere fast as it tries to gauge inflation, election and occupation risks, while doing its best to ignore the biggest threat out there. Donald Luskin has recently written in this neighborhood about a terrorist attack as a buying opportunity, concluding by quoting Baron Rothschild to the effect that, "The time to buy stocks is when there is blood on the streets." But to do that, you've got to hold cash when wine is filling the gutters. And cash is all I've held in my retirement account since early May.

Our senses betray us sometimes. In the months immediately following 9/11, every airplane swooping over my Brooklyn home en route to LaGuardia appeared to be a potential guided missile. Now, I'm far enough removed in place and time from Ground Zero that airplanes streaking overhead are back to being plain old airplanes again.

But of course the fact that there's been no major attack going on three years should make us feel less safe, not more. Given the long-range preparations required for murderous extravaganzas like 9/11, it's likely that al Qaeda is taking its time, and just as likely that it won't take forever.

The movement is diffuse enough to overcome the heavy losses it has suffered. Experts note that its core of Egyptian radicals loyal to Ayman al Zawahiri remains intact, and hidden.

As terrorists, they're on top of their game, pushing the operational envelope with simultaneous bombings of two U.S. embassies in Africa, a suicidal speedboat attack on a warship and, of course, 9/11. I'm betting they'll come up with something more creative than merely blowing up a shopping mall next time.

Of course, I could be wrong. Ashcroft could prove to be a total boob unable to distinguish between reality and the stuff of nightmares. The election might come and go without an attack; stocks could take off and never look back.

I certainly hope so, because no matter what they say, we're far less prepared for a terrorist strike now than we were three years ago. First responders might have some shiny new radios, which might even work in an emergency under certain narrowly defined conditions. But that's not what I mean.

I'm more interested in the federal budget deficit, which amounted to 0.3% of the gross domestic product in 2001, but is 5.6% of the GDP this year. The federal-funds rate stood at 3.5% on 9/11, but is down to 1.25% these days.

So our fiscal and monetary indicators are still out of whack, reflecting frantic attempts to stimulate the economy after 9/11. That doesn't leave policymakers much cushion to work with in the event of another attack. Interest rates can't go much lower, and neither can taxes. Foreign investors holding surplus dollars will make sure of that, by sending the money elsewhere if need be. And that's an outcome we can no longer afford as the biggest debtor nation in world history.

Terrorism will be a big threat for years to come, and one I don't expect to dodge in a money-market fund indefinitely. But I'll feel much better about my investments if I can secure an attractive entry price, one that reflects whatever it is that al Qaeda has been up to all these years. If Ashcroft is right, we'll know soon enough.