NEW YORK (Bloomberg) — Steve Leuthold, whose Grizzly Short Fund returned 74 percent last year betting against US stocks, said now is the time to buy equities because investors are too fearful about the economy.

"These comparisons people make with the Great Depression are totally out of touch with reality, and pretty stupid," he told Bloomberg Television in an interview yesterday. "We've been in much worse, much more panicked and more scary situations in the US."

The economy isn't as bad as it was in 1974, when stocks began rebounding, said Leuthold, who oversees $3.2 billion at Leuthold Weeden Capital Management in Minneapolis. He predicted the Standard & Poor's 500 Index will surge to at least 1,000 in 2009, representing a gain of 44 percent from yesterday's 12-year low of 696.33.

The index rose 2.4 percent to 712.87 today on speculation China will add to a 4 trillion yuan ($585 billion) spending plan and US lawmakers will reach agreement on a plan to stem mortgage defaults.

Because a rally is likely, Leuthold said investors shouldn't buy his Grizzly Short Fund. It has returned 26 percent in 2009. Short seller Bill Fleckenstein, who warned of the housing bubble in 2005, closed his 13-year-old bear market fund last year because valuations made it "too dangerous" to bet on more losses, he said in a interview last month.

The Leuthold Core Investment Fund, which bets on stock gains, is most concentrated in biotechnology companies, automotive retailers and education providers, Leuthold said. Investors should also buy equities in China, Korea and Taiwan because their economies are growing faster and the Asian banking system hasn't been battered by sub-prime loans as badly as US financial institutions, Leuthold said.

The Chinese economy may grow 7.7 percent this year, compared with a two percent contraction in the US, according to the median economist estimates in a Bloomberg survey. North American financial firms have reported $811.2 billion in credit losses and write-downs tied to mortgage defaults, 27 times more than banks in Asia, according to Bloomberg.