Foreign investors decided months ago that U.S. bonds weren't a good deal, and now they seem to be swearing off American stocks as well.

"They were very bullish up until a month ago on the U.S. {stock} market," Thomas Luker, an equity trader for Nikko Securities Co., said of Japanese investors. "They were looking for a higher stock market."

That was when the Dow Jones industrial average was flirting with the 3000 level. Since then, a series of downbeat economic reports and the crisis in the Middle East have pushed the U.S. stock market sharply lower and have, apparently, changed foreigners' attitudes toward American stocks.

"Now," Luker said, "it's back to reality."

Luker and others with connections to overseas investors said foreigners aren't selling heavily, but they aren't buying either.

"The typical Japanese investor says, 'Why should I take any risk in Japanese or American stocks when I am getting 8 percent on a very safe certificate of deposit in Tokyo?' " said Donald Krueger, head of research at Sanyo Securities, a Japanese brokerage firm.

There has always been a dispute about how much American stock is owned by the Japanese and other foreigners. In fact, experts said that with the advent of stock index futures contracts -- which are often held for very short periods of time -- it became virtually impossible to chart the movement of money into and out of the U.S. equities market.

The Securities Industry Association, a U.S. trade group, said the Japanese sold $700 million more stock in the first quarter of 1990 than they bought. This was different from past years. "They've generally been net purchasers of U.S. equities," said David Strongin, director of international financing for the association. But Strongin said he doesn't have statistics yet for the second quarter, and his first-quarter numbers don't include Japanese involvement in stock index futures.

The amount of money being invested by foreigners in U.S. bonds is a little easier to follow. The Japanese alone put $185 million more into U.S. bonds in May than they took out.

But there was an outflow of $99 million of Japanese money in June. And, while the figures aren't yet available, experts believe Japanese money continued to flow out of the American bond market in July and August.

"Clearly, there has been some {net} selling of U.S. Treasury securities by Japanese investors," said William Brachfeld, executive vice president for fixed income investments at Daiwa Securities, another Japanese firm. Experts said that the lack of interest on the part of the Japanese in recent Treasury auctions is the most overt sign of how disinterested the Japanese have become.

Investors from other foreign countries are probably reacting to the same factors as the Japanese, the experts believe. The falling U.S. dollar has made investing in America treacherous enough. But add to that the volatile stock and bond markets here, and foreigners have a justifiable reason to stay at home, experts said.

U.S. stocks are down 3.5 percent in price so far this year -- hardly the type of performance that would entice foreigners into the market.

Stocks in West Germany are down about the same amount. So West Germans, experts said, are better off investing in their own stock market, if they want equities at all. There is no currency risk.

It has been a while since investing in U.S. bonds was worthwhile for foreigners. The 10-year government bond in Japan was recently yielding about 7.40 precent, while that same bond in Germany was paying 8.62 percent.

The 8.66 percent being paid on the U.S. 10-year bond isn't nearly enough of a premium to lure foreign investors. And if the Federal Reserve should try to unilaterally cut interest rates, U.S. bonds could become the ugly duckling of the international market.

"Japanese investment in this country has been very small," said Daiwa's Brachfeld.

As the economy slows, investment advisers will start seeking out industries that will prosper -- not just survive -- during the slump.

So, which industry does well when the economy bombs and the unemployment rate goes up? According to the University of Illinois, higher joblessness is a boon to the mental health industry.

Julian Rappaport, a psychology professor at the university, said he finds a clear statistical relationship between rising unemployment and the demand for mental health services in Illinois state hospitals.

"The demand for mental health treatment seemed to come in waves," said Rappaport. "For some individuals, the crisis comes quickly after losing a job. For others, the process appears to be more insidious, as economic stresses slowly mount, leading to a rise of admissions several months later."

John Crudele is a columnist for the New York Post.