This weekend The New York Times ran a profile of commited bear David Tice, manager of the Prudent Bear Fund (BEARX). Not surprisingly, he's calling for big drops the stock market:
Prudent Bear is the best performer over five years among 23 bear-market funds tracked by Morningstar. The fund recorded an annualized gain of 12.31 percent, compared with a return of 0.76 percent for the average bear fund. The average domestic equity fund in Morningstar's database, the ordinary kind that seeks to profit from rising prices, shows virtually no five-year gain or loss.
Mr. Tice says that we are headed for a period that will treat investors more like the miserable years of 2001 and 2002 than the more pleasant time since then.
"I'm as bearish as ever," he said. "I'm all beared up."
Mr. Tice views stocks as being "in a topping process within a correction in a secular bear market," the next phase of which will be propelled by several factors, in his opinion, but especially one.
"We're in a credit bubble that is going to cripple the economy," he warned. That bubble has been driving up prices of assets like stocks and real estate, while interest rates and prices of goods and services have remained stable, creating what he sees as a false sense of economic well-being. We have been here before, he noted
OK, His 5-year record is good, but the opposite of the market in volatile times is still just a lot of ups and downs; a lot of volatility. He lost money throughout the late 90's, made money in 2001 & 2002, and has been losing it since, as the chart reveals. Big deal. One has to wonder: wouldn't it have been better to go long the market in late 2002, when sentiment was quite low? David Tice may think of himself as a contrarian (I don't know) but he's no different than Abby Joseph Cohen, Ralph Acompora, and Joe Battipaglia--broken watches who are only right sometimes. At least the bulls have history on their side (stocks do tend to rise over time). While I sympathize with Mr. Tice's bearishness in these times, it seems that investors could do better elsewhere.
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