Prudent Bear's Tice Says the Plunge Is Coming

In all, Tice argues that the rally of the past four years is masking a long-term bear market that began in 2000 and won't end for at least another five years.

The reason? In short, Tice argues that the bull market is simply massive asset inflation caused by reckless lending and easy money. Sooner or later, he says, it will have to be worked out of the system.

"Our philosophy is that this has been asset inflation, created by rampant, excess credit." He argues the global money supply has grown by 18% a year for the past four years (no wonder asset prices are booming).

"We believe in the Austrian school of economics," says Tice, referring to the late-19th-century economic theory developed by Austrian economists who emphasized usefulness to the consumer in determining the value of a product.

"If you create credit faster than GDP, you will get inflation. This has to be wrung out of the system. It's only a matter of time."

Crazy? Maybe. But anyone who looks at long-term charts must realize how utterly extraordinary, and unprecedented, the past dozen years have been. Stock market valuations, house prices, household debt, U.S. trade deficits -- they're all tied together, and they've all gone berserk.

It took the Dow Jones Industrial Average nearly 100 years to put on its first 5,000 points --- and just three to put on the second. Yes, there is plenty to make you nervous, and there are a lot of really good fund managers out there who are watching the latest boom with white knuckles and a large bottle of antacid. Tice is not alone.