Rising delinquencies of U.S. subprime mortgages, the turmoil they've caused on Wall Street and falling stock prices worldwide haven't changed James Paulsen stance on stocks.

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James Paulsen, chief investment strategist at Wells Capital Management, which oversees $200 billion, is more bullish on stocks than he’s been for most of the past decade.

Rising delinquencies of U.S. subprime mortgages, the turmoil they’ve caused on Wall Street and falling stock prices worldwide haven’t changed his stance.

The investment-management committee Paulsen oversees at Minneapolis-based Wells Capital recommends clients hold 80 percent of their money in equities and the rest in bonds. Paulsen favors so-called cyclical shares that tend to rise or fall in concert with the economy.

“There’s this chronic sense of pessimism in this country that’s emerged since the dot-com meltdown and the terror attack,” Paulsen said in an interview, referring to Sept. 11.

“Jobs have not gone away. The consumer is still spending. Most corporations are still making money.”

Paulsen, whose bearishness during the stock-market bubble in 1999 and 2000 was vindicated when share prices collapsed in 2001 and 2002, said he’s willing to be a contrarian. His view on stocks is more bullish than any of the strategists at 15 banks and brokerages surveyed by Bloomberg News.

Goldman Sachs Group chief strategist Abby Joseph Cohen has the second-highest recommended stock allocation, at 75 percent. Tom McManus, of Bank of America, recently raised his equity weighting to 65 percent, arguing the sell-off that pulled down the Standard & Poor’s 500 Index as much as 19 percent from its peak may signal it’s time to buy.

Decisive evidence that weakness in home prices and sales may spill over to other parts of the economy has yet to show up in economic data, Paulsen said.

Foreign trade, helped by a falling dollar, entirely offset the drag exerted by the housing industry in 2007, according to Paulsen. Americans should be happy about the dollar’s decline instead of worrying over a currency “crisis,” he said.

“Trade for the first time in 15 years is adding to real GDP growth in this country,” he said.

Paulsen, little swayed by the weight of opinion among Wall Street forecasters, has gone against the crowd in bullish and bearish markets.

He remained skeptical as technology stocks roared to a peak in 2000. By that time, he was with Wells Capital, having joined Norwest Investment Management in 1997 and moved to Minneapolis before the 1998 merger of Norwest’s parent bank and San Francisco-based Wells Fargo.

Paulsen appeared prescient when the U.S. went into a recession in 2001. Business Week said in December 2001 that he was the most accurate among 54 economic forecasters the magazine tracked. Paulsen turned bullish in late June 2002.

With the S&P 500 at about 1,000, he declared that valuations had become more reasonable and recommended that his clients overweight stocks. His investment committee shifted its asset allocation to 70 percent stocks and 30 percent bonds, compared with a neutral weighting of 65 percent equities.

On July 23, 2002, the S&P 500 hit a low of 797, about 20 percent below the level at which Paulsen turned bullish.

The troubling signs for investors ranged from declining consumer confidence to new revelations of corporate accounting frauds. Starting in October 2002, the market took off.

The S&P 500 got back to 1,000 in June 2003 and touched 1,500 last year. So Paulsen was off by a month in calling the end of a two-year bear market and the beginning of a five-year bull run.

Paulsen said recently that the U.S. will avoid a recession or that any recession will be mild. Goldman Sachs, Morgan Stanley and Merrill Lynch are forecasting a recession.

Paulsen said his goal is to accurately forecast economic trends and summon the conviction to stick to his views when short-term sentiment goes against him.

Being bullish as the market bottomed in 2002 caused him the worst moments of doubt in his career, and recent weeks have been almost as bad.

Paulsen is aware that the recent decline in stocks is “a big market move that I just missed.” Still, he is sticking to his view that the economy in 2008 will be stronger than people expect.

“When everyone’s prepared for the worst, you’re setting up the economy and the markets for the best,” he said.