Salomon’s Big Bear Can’t Survive Merger David Shulman, Who Has Predicted Market’s Demise For Years, Takes A Last Shot At The Bulls

David Shulman is going down swinging.

The chief equity strategist at Salomon Brothers Inc. lost his job in the merger of his firm with Smith Barney Inc. after years in which he was incorrectly pessimistic about the U.S. stock market.

In his final report for Salomon, which landed on most clients’ desks today, Shulman was unrepentant.

“This is our last weekly strategy note for Salomon Brothers,” Shulman wrote. “Our stance remains the same: bearish.”

The problems facing the U.S. market are many, he said. Stocks are overvalued. Asia’s economies are weakening. The U.S. Congress refused to give the administration “fast track” authority to allow an easier time in reaching trade agreements. Profit growth is slowing. Iraq remains a threat in the Middle East.

Shulman said the Dow Jones Industrial Average could fall to 6600-7000, while the Standard & Poor’s 500 Index could drop to 770-815. He didn’t say when.

Today the Dow industrials surged 189.98 points, or 2.4 percent, to close at 8013.11 - its first close above 8000 since Oct. 22, before the 30-stock average’s 7.2 percent plunge on Oct. 27. The S&P 500 gained 2 percent to close at 974.77.

“As we have noted since early September, the Asian economies are much worse than what most observers now believe,” he wrote.

While global companies see their profits cut by weak economies abroad, U.S. companies will suffer from rising wages, he said. “A profit squeeze will be self-evident,” he wrote.

Smith Barney parent Travelers Group Inc. completed its $9.3 billion acquisition of Salomon Inc. on Friday.

The top Smith Barney strategist, A. Marshall Acuff, holds that slot in the merged firm. John Manley, another Smith Barney strategist, works under him.

Keith Mullins, who tracked emerging growth stocks for Smith Barney, will hold the same post with the merged firm.

Shulman said his departure was old news, and he wouldn’t talk about his future. “Marshall Acuff was named chief strategist. That was done a month ago,” said Shulman, who was still in his Salomon office today. “I have no comment.”

Shulman attracted attention for his bearish outlook throughout much of the bull market. He recommends that investors put 40 percent of their assets in stocks, the second-lowest among 17 equity strategists tracked by Bloomberg News.

Only Michael Metz of CIBC Oppenheimer & Co. is more conservative, at 25 percent. Merrill Lynch & Co.’s Charles Clough also recommends a 40 percent weighting in stocks.

“It’s always hazardous to be a bear in Wall Street, generally, unless you really have a universal following,” said William Freund, head of the Center for the Study of Equity Markets at Pace University. “Otherwise the brokerage firms generally prefer an upbeat assessment.”

Shulman is not without his admirers, though. He was one of a handful of analysts invited to meet with senior Federal Reserve officials, including Chairman Alan Greenspan, on Dec. 3 last year to share their thoughts on stock and bond markets.

Greenspan sent world markets tumbling two days later with his musings about whether “irrational exuberance” had inflated stock and bond prices.