David Dreman, a well-known contrarian stock picker and chairman of Dreman Value Management, doesn't want to sugarcoat the economic climate (in fact, he thinks we're in a depression, although not like the Great Depression.)
Still, in the latest issue of Forbes, he writes that even if stocks drop another 15 percent to 20 percent, "they are likely to at least double from their current levels over the next five years. Trying to catch the market bottom is a loser's game."
Dreman doesn't hold the popular belief that investors should gravitate toward defensive stocks. Here's what he recommends now (bold is mine):
"First, a diversified portfolio of large-cap value stocks will do well over time, particularly with prices at their lowest levels in decades and the likelihood of the highest rates of inflation since World War II. Governments around the world are printing money. Stocks have done well in preserving and even increasing purchasing power during inflationary times. Even if stocks drop another 15% to 20%, they are likely to at least double from their current levels over the next five years. Trying to catch the market bottom is a loser's game.
Second, real estate will offer enormous opportunities over the next five years. No, I haven't been smoking funny stuff. The rebound will benefit both houses and commercial properties. The crisis isn't over, but Treasury and Federal Reserve programs will eventually kick in, and inflation will drive up prices. I recommend exchange-traded funds because they give you cheap, easy access to a diversified portfolio of stocks in some down-and-out industries with good potential."