As we all know, it’s pretty tough to roam around a cave inhabited by bears and escape without being mauled. Wall Street veteran Michael Metz sees a similar danger in today’s stock market.

Unlike many of his peers, you’ll never see Mr. Metz equivocate when it comes to forecasting the market. Sometimes he’s bearish, sometimes bullish. But rarely have I seen him so down.

Mincing no words, Mr. Metz, the chief investment strategist of Oppenheimer & Company, tells me, “I’d have very high cash reserves, maybe 25% to 30%. That’s well above the 10% to 15% cash reserves recommended by many investment advisers and brokerage firms.” Why so high? “Because this market is going down, possibly 10% by year-end,” Mr. Metz said. “I think we’ve already seen the highs for the next year or so. If investors want to buy anything, I’d only do it on a decline of 5% or so, and not just on a daily dip.”

Taking strong issue with a predominantly bullish Wall Street fraternity, which includes market guru Elaine Garzarelli, whose positive outlook for stocks was the basis of one of my recent columns, Mr. Metz contends “there’s nothing terribly attractive out there, and if you don’t buy a stock over the next 12 to 18 months, you’re not going to miss anything.”

Here’s a rundown of why he believes the market is in hot water:

* The monetary environment has become increasingly inhospitable, with the Fed sure to raise rates considerably more. This means the Federal Funds rate, now 2.75%, should climb to 4% by year-end.

* Inflation, emerging as a growing problem, should rise steadily for the balance of the year, winding up a half to 1% higher than it is now. “I don’t know what the numbers will be, but the key here,” Mr. Metz said, “is that the direction is up.”

* Foreigners’ appetite for dollar instruments is waning, clearly suggesting higher long-term rates (ten-year bonds) of about 5.5% by the end of the year.

* The economy is peaking, Mr. Metz believes, which means the same thing for earnings. “We’ll be lucky to see small single-digit earnings gains in the second quarter,” he said.

* The financial system is under increasing stress, with Mr. Metz pointing to well-publicized problems at such prominent companies as Fannie Mae, Citigroup, AIG, and General Motors. “These are not symptoms of a healthy system,” he said.

Given his many concerns, Mr. Metz tells me: “I doubt we can walk away unscathed.”

So, aside from fattening cash reserves, how would he play the market?

For starters, he thinks the play in energy continues despite the huge gains in the sector and predicts ChevronTexaco’s recently announced $18 billion acquisition of Unocal is just the beginning of a takeover blitz in the energy field. “The direction of energy prices is still up,” he said, noting that it’s an inevitable scenario, with demand rising rapidly and supply not rising so rapidly. He also points to a possible political upheaval in the Middle East.

His top picks are three North American exploration plays, notably Anadarko Petroleum, Apache Corporation, and Burlington Resources.

Pharmaceutical companies, as a longer-term play, are also favored. The chief enticements: attractive prices, growth, though slower growth, and strong balance sheets. His favorite investment is an exchange-traded fund, a composite of 21 leading drug companies, such as Merck, Eli Lilly, and Pfizer, that trades under the symbol PPH.

Mr. Metz also favors foreign markets, such as Japan, which he regards as “a great restructuring play.” Likewise, he’s partial to emerging markets with assured growth for the next decade, namely China, India, Korea, and Brazil.

Although he rates gold as a bore, he nonetheless feels it’s in a long-term bull market. As a plus for the precious metal, he sees Asian banks diversifying their reserves by increasing their gold holdings. To participate, he thinks Newmont Mining is as good a play as any.

By the same token, Mr. Metz said he would avoid the technology sector, which he characterizes as “an unattractive, highly cyclical, overcapacity industry.” He’s also down on retailing, noting that personal income, in real terms, is not rising, job formation is disappointing, and consumer demand is slowing down.

Financial stocks, notably banks, brokers, insurance, and mortgage lenders, also get the thumbs-down. Mr. Metz looks for margins to narrow because of rising short-term rates, and he expects many financial institutions will have credit quality problems.

Our grizzly also tells me he would shun residential real estate, which he feels reflects enormous speculation as seen by consumers buying second homes, not to use, but to flip at hopefully a big, fat profit.