Michael Metz is pissed.

At the beginning of 1996,

Oppenheimer & Co.'s

well-known chief investment strategist said the Dow Jones Industrial Average would skid and slither all the way down to 4800 by year-end. The Nasdaq Composite Index, he added for good measure, would drop to about 1005.

That all may still occur. But for now, the Dow rides above 6000, and the Nasdaq above 1200. Only a sharp 20% drop will preserve the Metz call.

But Metz, an intense, dark-eyed man who looks like a philosopher and talks like a sailor, won't budge. Instead, he's carping in a Dole-like manner about the irrational nature of individual investors who keep putting money into the market as the Street eggs them ever onward.

"When everybody's talking about the market anecdotally, and everyone's making money in it, it's time to be very, very careful,'' Metz says. "The foundations of the bull market are eroding. The market is extremely overvalued ... people have unreasonable expectations about the return offered by common stocks.''

Investors should heed hints of rising inflation, Metz avers. In the same breath, Metz airily dismisses the wimpish gains in the Consumer Price Index as not a true measure of the coming inflationary storm.

Another twist in Metz' knickers: Heavy foreign purchases of U.S. government debt, which he believes leaves the United States overly dependent on foreign goodwill. Moreover, Metz thinks the amazingly low interest rates in Japan have provided an unhealthy supply of "free money." If rates rise in Japan--as they surely must some day--Japanese investors may dump U.S. bonds and buy more Japanese government bonds. That, Metz frets, will just jack up interest rates in the U.S.

"The strange thing about the U.S. debt market is that there are no (long-term) investors interested in it,'' only speculators looking for the highest world-wide interest rates. And those cats, Metz says, will sell billions at the drop of a hat.

Incidentally, Metz does not foresee recession or a calamitous drop in corporate profits. Rather, he insists that the twin killers of rising inflation and rising rates will shake the market to its knees. In his darker moments, Metz makes a passionate case for gold, every eschatologist's dream investment.

For now, Metz' tale of woe has few believers. Although his job appears secure--he's a 26-year veteran at Oppenheimer--Metz has stood on the wrong side of the market for some time. Does he care?

"I think it's more important to be reasonable than to be right,'' he says.

Investors might disagree.

For now, the grim-faced Metz will hold the line, recommending inflation-hardy commodities stocks. But those with ears to hear should step warily. His top pick last year in a

Business Week


Homestake Mining

(HM:NYSE), was down 15% as the leaves fell from trees in Central Park.

By Alex Berenson