Prudent Bear's Tice Says the Plunge Is Coming

Clearly, Tice isn't the only one nervous about the market. Funds under management are now $688 million, Tice says. They peaked at $702 million a few weeks ago. "Since early 2003, the S&P is up 70%, but our assets are up 40%," he says. "We have been more defensive than other bear funds because we have lost less money."

The reason? Tice isn't just betting against the stock market overall. He's also short individual stocks, including selected homebuilders, financials and consumer discretionary stocks. Some bets, particularly in the homebuilding sector, have obviously done well recently.

Prudent Bear has also invested about 18% of its portfolio in companies mining precious metals, including gold, silver and uranium. And the prices for those have been skyrocketing. "Gold is the one asset that is not someone else's liability," Tice argues. "Gold is an asset that you can carry around in your pocket, and it's of value."

Bears of all stripes believe gold will prove a "safe haven" if and when the economic reckoning arrives. The reality is that it has proven an exceptional investment over the past five years even while they wait. Part of Tice's analysis, after all, has already proven correct. Easy money has driven up the price of all assets, including precious metals. Meanwhile, America's crazy trade deficit has been slowly undermining confidence in the dollar as the world's reserve currency.

And as the greenback has slid, alternatives, including gold, have risen.

None of this has led to a dramatic market collapse yet. Tice notes that everyone in has a vested interest in keeping the game going as long as possible. "There are no enemies of asset inflation," he says. "Washington likes it. Wall Street likes it. Consumers like it." But as the sun shines on the markets around the world, he still believes storm clouds are on their way. "I am as confident as ever that we are going to be right," Tice says, though he concedes: "Things are playing out more slowly than we thought."