"I'm scared to death of the market."
That's not what you'd expect to hear from a guy who has made a living researching and investing in the market since the 1960s. But that's exactly the kind of candor I've come to expect from Steve Leuthold, Minnesota's resident stock market historian and contrarian investor.
I recently sat down with Leuthold in his corner office overlooking the Minneapolis riverfront at the firm that bears his name -- Leuthold Weeden Capital Management. Leuthold, 74, recently scaled back his duties, stepping down as chief investment officer, although he'll continue to write and manage some portfolios, including money for his family foundation.
We talked about how he got into the business, how he avoided the tech bubble in 2000 but lost half his individual clients in the process, and how 2011 wasn't a good year to be a potato farmer -- one of Leuthold's longstanding hobbies. But I sought out Leuthold to ask him a single question: With 50 years of stock market history and experience behind him, what should my readers think about this market?
This is when Leuthold admitted he was afraid, but buying stocks nevertheless.
"I've been scared to death of the market before and it's been the time to buy," he said, pointing out that the hundreds of data points the Leuthold investment team use to make buy-and-sell decisions have turned positive. Their core portfolio is now half invested in stocks -- up from 30 percent earlier this year.
"You do have pretty good valuations here, and we do think the economy is OK. We're not expecting a double dip -- we're probably going to see 2.5 to 3 percent GDP growth next year." He also expects a "Band-Aid" solution in Europe to address the uncertainty coming from Greece, Italy and Spain.
But several alarming issues loom: gridlock in Washington, the U.S. deficit and concerns about the long-term value of the U.S. dollar, to name three on the top of Leuthold's mind.