Thursday, September 14, 2006

You Don't See This Everyday

Bloomberg reports a Federated Investors mutual fund manager is predicting a big decline in the market. And he's doing something about it.

Steven Lehman, whose $3 billion Federated Market Opportunity Fund has beaten more than 90 percent of its peers during the past five years, is more bearish than any time since stock markets peaked in 2000.

The 49-year-old manager more than doubled the fund's cash holdings in the past year to 36 percent and put 34.5 percent in bonds. He has another 5 percent in options that rise in value when equity prices fall. Lehman has just 12 percent of the Federated fund's assets in stocks, the least since the fund opened six years ago. The rest is in preferred shares and convertible bonds.

``I've positioned the portfolio for what I think will be a very difficult bottom here in the U.S. market and I'm waiting,'' Lehman said in an interview from his office in Pittsburgh. Falling home prices and weaker consumer spending will slow economic growth and hamper gains in corporate earnings, he said.

No commentary required. Be interesting to watch this fund and see what happens.


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