| BUSINESSWEEK ONLINE : JUNE 19, 2000 ISSUE | ||||||||
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| BUSINESSWEEK INVESTOR
This Bear Is Roaring Wall Street's dour mood these days means that David Tice is finally a happy camper. During the great bull market, Tice's Prudent Bear Fund (BEARX), which was launched in December, 1995, languished. It ran up a 17.1% average annual loss over the past three years. But since the beginning of this year, Prudent Bear Fund has gained 10%, outdistancing 94% of all equity mutual funds, according to Morningstar. Personal Finance Editor Susan Scherreik recently quizzed the Dallas-based Tice, 45, about his outlook for the economy and stocks. Q: How do you pick stocks to sell short? A: We hold short positions in some 150 stocks, which amounts to about 70% of the portfolio. We target overvalued companies whose earnings are likely to disappoint Wall Street. About half of our short positions are in the technology sector. We also have short positions in financial stocks, brokerage-firm stocks, and blue chips in various industries. Q: What are some of your most successful short positions for this year? A: We caught the downward move in Red Hat from 67 on Mar. 9 to 18 in late May, when we closed out the position. Another winner was Metricom. We shorted it at 103 on Jan. 28 and got out at 23, also in late May. We shorted Globalstar Telecommunications around 40 in early January and covered that around 18 in mid-March. Q: Do you buy stocks, too? A: We own gold- and silver-mining stocks because they traditionally do well in times of financial crisis. Some of our favorites are Harmony Gold Mining, Anglogold, and Golden Star Resources. Q: What other trading strategies do you use? A: A small portion of our assets is in put options. Q: Why should someone own Prudent Bear? A: We see our fund as financial protection for investors in the event that the economy slips into a nasty recession. Q: How likely is that? A: My mistake was being too early in calling for a recession. But the credit bubble that developed in the mid-1990s has only worsened. In my wildest dreams, I never thought financial institutions would continue to make it so easy for Americans to borrow beyond their means. Foreigners are funding that investment, which is why the U.S. is running record trade deficits. Q: So when does the sky fall? A: As the Federal Reserve continues to raise rates, the economy will slow dramatically, real estate prices will drop, and unemployment will soar. I see the Nasdaq Composite Index falling to 1000 in the next 15 months. Q: How long will the bad times last? A: It could take several years for the U.S. economy to correct its credit imbalances. We see a secular bear market on the magnitude of 1973-74 or the 1930s. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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