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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: energyplay who wrote (67993)	8/23/2005 4:56:40 AM
From: shades	Respond to of 74559

Energy - tice - you see him on CNBC recently - have you looked at the permanent portfolio fund? They seem to be well diversified. nytimes.com This Bear Is Running (To the Bank) By CONRAD de AENLLE THE stock market is supposed to climb a wall of worry, and there is no shortage of unsettling developments today to nip irrational exuberance in the bud. The Federal Reserve is raising interest rates every chance it gets, job growth seems either too fast or too slow, the growth of the current-account deficit is just too fast, and don't forget $66 oil. David W. Tice is one fund manager who is not worrying. He is confident about the direction of the market, even though he has far less to show for the 50 percent-plus gains in the Nasdaq and Standard & Poor's 500-stock index since the fall of 2002 than almost all of his peers. It's not that Mr. Tice thinks the fretters are agitated over nothing. It's that the direction he is confident that stocks will take is down. Mr. Tice runs the Prudent Bear fund, which seeks to benefit from declining share prices. There have been precious few of those for him to latch onto lately, but there is no need to pity him or his shareholders, especially after taking account of the fund's returns stretching further back than the recent period of outsize gains in equities. 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. 'It's not that difficult a concept, but it's crucial,' Mr. Tice said. 'Look at what happened in the United States in the 20's and Japan in the late 80's. There were asset bubbles with low interest rates that ended up in very bad economic periods for more than 10 years.' Investors are not prepared for such lean times, he said, questioning just how limited their enthusiasm really is. He suggested that there is palpable euphoria, much as in the late 1990's, only this time it is being churned up by the real estate market instead of Internet stocks. Mr. Tice is preparing for hard times by selling short financial issues - Fannie Mae, the Federal Home Loan Mortgage Corporation and J. P. Morgan Chase are three he especially disdains - as well as faded blue chips like General Motors and Eastman Kodak. He says he expects to add homebuilders to his list of shorts but is waiting for the right moment. Two sectors that he has no immediate intention of selling are technology and energy, and he is long precious metals stocks, which often rise when the broad market falls. Unlike the typical bear fund, which picks a stock index, then uses derivatives like futures and options contracts to achieve a return opposite that of the index, Prudent Bear is actively managed. So when the Internet bubble popped, he shorted dot-coms with both hands and let alone stable sectors that experienced a flight to quality. He was also able to lighten up on his short positions after the market bottomed out and started to recover. He likes to stress that he is not a permanent committed bear, no matter what the fund is called, and that even he will get excited about owning stocks one day. But not until imbalances in the economy are corrected and share prices have moved a lot lower. 'Eventually I can see myself turning bullish,' Mr. Tice said, 'but it's going to be a long time from now.'