Just when many thought the economy was recovering, we were hit with the European crisis. One day the DOW is up 200 points and a few days later it’s down a couple hundred. Investors are jittery. There are reasons to be somewhat hopeful and lot’s of reasons to worry. Whether you are bullish or bearish, you can find lots of gurus whose views are in sync with yours. If you pick two economists at random, we suspect the chances are just as good that they’ll disagree on the future of the economy as they will agree on the future.

So what should we make of an article in Bloomberg Businessweek (June 14, 2010) titled “Lessons from the Biggest Bears”? The article discusses the views and past predictions of some of the most well-known bears who, despite some signs of recovery, see tough times ahead.

They included: Nouriel Roubini, also known as Dr. Doom, Robert Prechter who revived a system of measuring investor psychology called the Elliot Wave Principle; money manager Peter Schiff; Nassim Taleb, author of The Black Swan; Michael Panzner, author and stockbroker; investment adviser Gary Shilling; Stephan Roach, Chairman of Morgan Stanley Asia; Meredith Whitney, formerly an analyst for Oppenheimer who then launched Meredith Whitney Advisory Group; and James Grant, Publisher of Grant’s Interest Rate Observer.

In many cases, according to the article, these bears made predictions that came true, but not necessarily in a timely manner. Roudini predicted our current crisis originally in 2004. Panzner called for the collapse in 2005.

Prechter predicted the crash of 1987, telling his newsletter subscribers to sell their stocks two weeks before the crash. Later, according to the article: “….. in 2002, he predicted the Dow Jones Industrial average would fall below 1000. It surged 25 percent the following year and kept going until 2007.”

Peter Schiff had written a book prior to the recent market crash titled Crash Proof: How to Prosper from the Coming Economic Collapse. While he predicted the collapse of the housing market, his advice to investors, to invest their money in foreign stocks, was less than stellar.

To be sure, the bears as a group have been quite successful at predicting many of the past market events, though as we noted earlier, not necessarily in a timely manner. In some cases other predictions have proven to be off target. In general, they are currently very bearish about the prospects for the U.S. economy. How should you respond to their negative outlook?

First, we think you need to keep in mind that many of these bears have written books or newsletters and therefore have a need to stay in the public eye. While they may truly believe what they are saying, being a bit outrageous is good for their book and newsletter sales. So, we think their views should be considered, but perhaps with a grain of salt.

Even if they are right, we can’t be sure of the timing of their dire views. They have been off by several years in their past predictions. That could happen again. So what should you do?

We happen to agree with many of their concerns and can envision another economic downturn ahead. However, we don’t know for sure if that will happen, or when. It’s certainly possible, we believe, that the economy will improve to a point that investor confidence will return and we will see a significant bull market, at least in the short-term. Another downturn will eventually come, we just don’t know how soon or how severe it will be.

Our advice, for our clients, is to stay they course. Remain broadly diversified and rebalance at least annually. Avoid market timing, stay invested in all asset classes and don’t let your emotions drive your investment decisions.