Taking Apart David Tice on His Dow 3000 Call
Editor's Note: Arne Alsin's column runs exclusively on RealMoney.com; this is a special free look at his column, which was originally published Nov. 25. For a free trial subscription to RealMoney.com, where you can see Arne's commentary regularly, please click here.
Doomsday scenarios attract attention. Bill Gross made a Dow 5000 call in September that generated a lot of attention, though the underlying message was flawed. He said, "The market needs to yield close to 3.5% before it approaches fair value, and that means Dow 5000."
As I explained in my column on the subject, "dividend yields don't determine value," and any prudent buyer of a business knows that business value is determined by "earnings, cash flow and net assets... not dividends."Bill Gross' message was worthy of attention because he may be the best bond manager around. Similarly, one of the best short-sellers around, David Tice, manager of the (PBRCX)Prudent Bear fund, has been preaching a doomsday sermon of his own. Among other things, Tice says that the Dow will reach 3000 before the bear-market decline is through.
The David Tice Rationale
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