On Jan. 6, with the market up more than 20% from its November lows, I urged readers to raise cash. Stocks have since lost 19%.

Is this the bottom? Don t bet too heavily on it. The S&P 500 index sits at 14 times trailing earnings. That s if we ignore companies giant write-downs for soured assets and such, and count only money made and lost from operations. (Otherwise, the price/earnings ratio is 29.) Turns out, 14 was the average P/E for stocks over 126 years ended 1998. Since then, they ve averaged 21 times earnings. So we re back to normal, but there s nothing to say we can t drop well below it for a while. During four separate, multiyear stretches since 1872, stock P/Es averaged single digits.

Ah, but there s still an earnings recovery expected this year a rise of 21% over last year, judging by Wall Street analysts recent estimates. Don t bet heavily on that, either. In the forthcoming issue of SmartMoney Magazine (available mid-March) I detail how supposedly extraordinary shifts in a long list of financial measures are actually rather ordinary reversions to the mean. Stocks have come back. Houses, which I warned readers about in April 2007, have a good deal further to go. The personal savings rate, which has doubled in the past year, is still half its long-term average. As for companies operating earnings, while they might have dropped 34% in a year, they ve returned to, not moved away from, their long-term average share of the nation s economy.

I m not sure stock analysts my age who ve seen little but profligate times during their adult lives can be counted on now to forecast just how far consumer spending could shrink, and for how long. On Thursday, in a round-up of five big-name stocks that have lost 90% in recent years, I noted that while car sales might be at a 26-year low, the more telling statistic is that America has more cars than drivers.

I m convinced the most reliable indicator of stock valuations right now is one that too many investors, myself included, have treated as an aside over the past two decades. Dividend yields have averaged 4.9% for 200 years, and contributed far more to total returns than rising share prices. For 10 years ended 2007, the S&P 500 yielded just 1.6%. It s back to 3.2%. That s counting a 13% contraction expected this year in dollars spent on dividends, especially among teetering banks.

I still firmly believe in the power of businesses, and their shares, to outperform all other investment classes over long time periods. History suggests they do, but so does logic. Companies exist only to the extent they can turn loans (bonds), plants (real estate) and raw materials (commodities) into something more valuable. But stocks can also go well lower than you might think in the short term. Don t count on the Dow seeing 5,000, but invest as though it s possible. That means keeping your next year s worth of living expenses out of the market altogether. It also means judiciously shifting long-term savings to stocks that seem sure to survive, and which already have those single-digit P/Es and fat, safe dividend yields.

Much as I love Apple (AAPL) gadgets, its shares do nothing for me at 17 times earnings with no dividend, nor Netflix (NFLX) zero-yield shares at 23 times earnings. Give me instead unloved Merck (MRK) at less than nine times earnings, and paying 5.3%. Or maybe Boeing (BA), at seven times earnings, and with a 4.4% yield. There s Genuine Parts (GPC) to keep those aging cars running, and Heinz (HNZ) to slather home-cooked meals with sauce. Both pay over 5%. The market might not have bottomed, but plenty of its choice members are cheap enough.