Let's just call this "part of" the bottoming process<g>:
biz.yahoo.com
Thursday May 25, 7:11 pm Eastern Time
Bear fund finally bears fruit on gloomy tech vision
By Andrea Orr
PALO ALTO, Calif., May 25 (Reuters) - If you had placed your money in the care of David Tice last year, you would have seen the value of your investments plummet 23 percent while a lot of your friends got rich.
The year before was even worse for Tice's mutual fund, which fell 34 percent as even the most inexperienced investors were racking up double-digit gains in technology stocks.
Tice's fund, in fact, has never had an up year. Since it was formed in 1996, it has averaged an annual decline in the high teens, an abysmal track record that makes you wonder why Tice has not altered his investment strategy or liquidated the entire fund by now.
The reason is that now, Tice appears to be on to something. His Dallas, Texas-based Prudent Bear Fund has become one of the few places where investors have actually made money amidst the carnage that has overtaken stock markets this year. Since January 1, Prudent Bear has gained 15 percent.
``We think the new economy has been dramatically overhyped,'' says Tice. ``Much of the new economy is not profitable. It's been a significant hype job in order for Wall Street to get Main Street interested in the stock market.''
Tice, who prefers gold and defence contractors to dot-coms and chip makers and has said the current economic climate is ``uncomfortably reminiscent'' of 1929, is finally winning respect. Assets under management in his fund have grown to $200 million from $150 million this year. And some of his grim predictions that a year ago made him look like just another irrational Y2K doomsayer, have started to come true.
One year ago, Tice included on his ``stocks to avoid'' list Coca-Cola Enterprises Inc. (NYSE:CCE - news), Coke's bottling and distribution affiliate, which he predicted would fall from $35 a share to $12. The stock has not gone quite that low, but a precipitous drop over the past year has taken it pretty close. It closed Thursday just over $16 a share.
Another on Tice's hit list, United Technologies Corp.(NYSE:UTX - news),fell from $135 last year to within $1 of his $45 a share target, before later rebounding to around $59.
His forecast for a 50-percent stock market crash by June has not come true, at least not yet. But with Nasdaq down more than 35 percent from highs touched just this winter, it does not sound so outlandish any more, either.
What believers find more alarming than Tice's limited success to date is his belief that the sell-off is not close to being over. Tice, who has made most of his money this year from short positions on technology stocks, says that even now, with many of those stocks reduced to a fraction of their highs, he continues to hold short positions.
By his estimates, Cisco Systems Inc.(NasdaqNM:CSCO - news), currently down 35 percent from its peak, is still about eight times too expensive. Amazon.com Inc.(NasdaqNM:AMZN - news), he says ``could easily fall to one-tenth of its current level.''
He also believes many Internet companies like Yahoo (NasdaqNM:YHOO - news) that get most of their revenue from advertising will be hit hard as other dot-coms that had been a staple of their advertising base go out of business.
Even in today's bear market, Tice remains in the minority with his relentlessly bearish outlook and his distaste for anything high-tech.
``People have to ask themselves what role is technology playing in their lives,'' says Steven Witt, managing investor at Firsthand Funds, a San Jose, Calif.-based group of mutual funds that are focused in the tech sector and have $5.5 billion in assets under management.
``He (Tice) may be bearish but we remain bullish. Technology is, and has been for some time, and will remain the growth engine for this economy.''
Tice admits he was more than a little premature in anticipating the unravelling of worldwide financial markets. By setting up his fund in 1996 he missed out on some of the best years in stock market history.
But he says there were signs that stocks were becoming grossly overvalued as early as five years ago. Federal Reserve Chairman Alan Greenspan, recalls Tice, was talking about the stock market bubble back in 1994.
Because the party was allowed to rage on on for so long, Tice is now braced for a whopper of a hangover. He believes that Nasdaq could fall to 1,500 by the U.S. elections about five months from now. Or, it could take a little longer if people still fail to see that the party really is over.
``A lot of times in a bear market, people hang in there because they feel like it's going to go up tomorrow,'' says Tice.
``Bear markets tempt a lot of people into thinking it's safe to get back into the water, and they end up gyrating enough to extract the maximum amount of pain.'' |
