The most recent rally is ephemeral at best and the economy is likely to take another sharp downturn before really picking up steam, according to Federated Investors fund manager Steve Lehman, Investor's Business Daily reports.

Lehman runs the $2.4 billion Federated Market Opportunity Fund and he certainly doesn't see opportunity in domestic stocks. In less than two years, he has reduced domestic equities from 45% to 20% of the fund's holdings.

"I have grave concerns about financial leverage, the lack of liquidity in the banking system, the lack of savings," Lehman said. "We're skating on thin ice."

The bearish manager is not allowed to short, but instead buys put options. Indeed, he has purchased puts on the S&P 500 Index, believing that investors are still overly optimistic about the market. He has studied past bubbles, which took years to completely unwind.

The lasting bottom did not come around until October 2002 or March 2003, Lehman said, and the economy has far from recovered from that low.

"The last stage of the collapse is revulsion or contempt for the asset class," Lehman said. "Investors walk away for years and they don't look back," but this has not yet happened.

Another key factor is the fact that price-to-earnings and price-to-book ratios remain relatively high, too high for a major bottom, Lehman contended.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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