A reader, Hank Dowd, recently sent me an e-mail requesting that I revisit someone I interviewed two years ago, the so-called Grim Reaper. Mr. Dowd wrote of this super bear: “He was very bearish, he scared the hell out of me and I sold everything. Unfortunately, I went out too early because the market went higher shortly after that, but in the end I saved a lot of dough.”

Now Mr. Dowd is contemplating putting about $90,000 back into the market “because of the Fed easing, and my belief that a possible recession is already in most stock prices.” But before he goes ahead, he wants to check in with this “gloomy Gus and ask him what he thinks now.”

Okay! The Grim Reaper, as some Wall Streeters call him, is veteran investment adviser Martin Weiss. If you’re looking for some encouragement, forget it, because “American stocks are in a new bear market … and anyone who believes otherwise must be living on another planet,” Mr. Weiss contends.

Mr. Weiss, the editor of Safe Money Report, a monthly investment newsletter in Jupiter, Fla., is chock-full of gloom and doom, and his thinking would scare the dickens out of anybody. Before getting to that, though, it’s worth noting that he has made a string of impressive calls in recent years, including forecasts of a housing market crash, a sharply slowing American economy, a hefty drop in stock prices, a run-up in oil and gold, a collapse in bond insurers, and a surge in such foreign markets as China and Brazil.

So why is Mr. Weiss so bearish? Because, he says, “there is irrefutable proof of a credit crunch, overwhelming evidence of a severe recession, and solid [bearish] confirmation from the market itself as the major indexes recently bust through their lowest lows of 2007.”

On top of this, housing is getting progressively worse, what with the median price of homes falling at the fastest rate in modern times. Further, mortgage delinquencies are surging to their highest level in more than two decades, foreclosures have nearly doubled, and construction spending is experiencing its deepest plunge since 1981.

Citing other dangers, Mr. Weiss points out that derivatives — which he describes as the global Vesuvius of debts and bets — are beginning to erupt, with the market for the fastest-growing type of derivative, credit default swaps, in shambles. (Such swaps are basically credit derivatives, equivalent to an insurance contract that protects the buyer against specific risks.)

Other warning signs: the likelihood of major banks and brokerages writing down more than another $100 billion of bad assets, the biggest one-month rise in unemployment since the terrorist attacks of September 11, 2001, the first monthly net loss in jobs in four years, and the worst earnings forecasts since the 2000–02 bear market.

What about the Fed’s aggressive rate cutting? Too little, too late for the economy, Mr. Weiss says, noting that for every dollar of benefit banks can derive from lower borrowing costs, they are losing $5, $10, or even $20 on loans, derivatives, and other assets that are going bad.

“The Fed’s rate cuts,” Mr. Weiss says, “won’t stop the massive loan losses already in the pipeline. Nor can they stop home values from falling, homeowners from foreclosing, builders from defaulting on construction loans, business and consumer loans from going bad, or more red ink from flowing to banks.”

He also believes the Fed’s rate cuts, along with the government’s $168 billion economic stimulus package, designed to jump-start the economy, are likely to create more inflation, sink the greenback, and give gold another shot in the arm.

In its current issue, Safe Money Report offers two bear market portfolios, one for conservative investors, the other for speculators.

For all investors, Mr. Weiss favors StreetTRACKS Gold Trust (GLD), the most widely held exchange-traded fund that tracks gold bullion, and urges the sale of all high-yield bonds and bond funds, citing the risks of huge downgrades and price declines.

For profit-oriented speculators, Mr. Weiss favors several inverse exchange-traded funds, which are designed to rise amid falling prices. One is the Short Dow 30 Proshares (DOG), designed to rise 10% in value with each 10% decline in the Dow Jones Industrial Average index. Another ETF is the UltraShort Technology ProShares (REW), geared to climb 20% in value with each 10% drop in the Dow Jones U.S. Technology Index. A third ETF is the Ultra-Short Real Estate ProShares (SRS), designed to rise 20% for each 10% decline in the Dow Jones U.S. Real Estate Index.

For conservative investors, his “step-by-step guide to safety” calls for a heavy buildup of cash reserves, or more specifically, stock portfolios with a hefty 48% kept in cash.

For such investors, he favors 13-week Treasury bills, the iShares Lehman 1-3 Year Treasury Bond Fund (SHY), which focuses on securities with one- to three-year maturities, and CurrencyShares Australian Dollar Trust (FXA), an ETF that invests in Australian dollars, which appreciate when the American dollar falls. A stable utility stock, Progress Energy, which sports a sizable yield of close to 5.5%, is also suggested.

dandordan@aol.com