23 comments | Tuesday, April 7, 2009
Leuthold Says Stocks Will Surge, Depression Avoided
By Betty Liu and Lynn Thomasson
March 4 (Bloomberg) — Steve Leuthold , whose Grizzly Short Fund returned 74 percent last year betting against U.S. stocks, said now is the time to buy equities because investors are too fearful about the economy.
“These comparisons people make with the Great Depression are totally out of touch with reality, and pretty stupid,” he told Bloomberg Television in an interview today. “We’ve been in much worse, much more panicked and more scary situations in the U.S.”
The economy isn’t as bad as it was in 1974, when stocks began rebounding, said Leuthold, who oversees $3.2 billion at Leuthold Weeden Capital Management in Minneapolis. He predicted the Standard & Poor’s 500 Index will surge to at least 1,000 in 2009, representing a gain of 44 percent from yesterday’s 12-year low of 696.33.
The index rose 2.2 percent to 711.96 at 11:46 a.m. in New York on speculation China will add to a 4 trillion yuan ($585 billion) spending plan and U.S. lawmakers will reach agreement on a plan to stem mortgage defaults.
Because a rally is likely, Leuthold said investors shouldn’t buy his Grizzly Short Fund. It has returned 26 percent in 2009. Short seller Bill Fleckenstein , who warned of the housing bubble in 2005, closed his 13-year-old bear market fund last year because valuations made it “too dangerous” to bet on more losses, he said in a interview last month.
China, Korea, Taiwan
The Leuthold Core Investment Fund, which bets on stock gains, is most concentrated in biotechnology companies, automotive retailers and education providers , Leuthold said. Investors should also buy equities in China, Koreaand Taiwan because their economies are growing faster and the Asian banking system hasn’t been battered by subprime loans as badly as U.S. financial institutions, Leuthold said.
The Chinese economy may grow 7.7 percent this year, compared with a 2 percent contraction in the U.S., according to the median economist estimates in a Bloomberg survey. North American financial firms have reported $811.2 billion in credit losses and writedowns tied to mortgage defaults, 27 times more than banks in Asia, according to Bloomberg data collected since the housing slump began in 2007.
“We’re going global,” he said. “Global investing is the way of the future.”
To contact the reporters on this story: Betty Liu in New York at bliu17@bloomberg.net;Lynn Thomasson in New York at lthomasson@bloomberg.net
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