CNBC Stock Blog

Sovereign Debt 'Mirrors' Subprime Crisis: Pro


The Dow has inched closer to the 11,000 mark, yet some investors are still skeptical about this rally. Dan Veru, executive vice president and co-chief investment officer at Palisade Capital Management, and David Tice, bear market strategist at Federated Investors, discussed their market outlooks.

Should You Trust the Rally?

“I’m extraordinarily worried—we have taxes going up, rates going up, Greek problems, Portugal problems, UK problems and Japan problems—there are problems everywhere,” Tice told CNBC.

Tice warned investors not to be fooled by the current rally, which is an “echo bubble” that follows a market bubble—and normally “ends in tears.”

“1,220 is a significant resistance," he said of the S&P. "However, that’s where we started the big decline and we’re 3 percent out from there.”

“You look at risk reward…maybe it goes up 4 to 5 percent and could go down 40 percent and I don’t like those odds," he said.

Tice added the sovereign debt issue is the next big concern for the markets.

“The complacency that exists around sovereign debt really mirrors what happened in subprime,” he warned. “Governments have created their own bubbles in order to keep creating credit to overcome private credit demand shrinkage, and that’s the next big problem.”

Counterpoint: 'Great Opportunities'

In the meantime, Veru said there are still great individual opportunities for investors to make money.

“I wouldn’t be buying an S&P index fund, but I would be focusing on active management,” he recommended.

In particular, he likes Genesee & Wyoming .

“The railroads are an early cyclical indicators of a global recovery in economies,” he said of the firm.

Market Point/Counterpoint:

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Norfolk Southern


No immediate information was available for Tice or Veru.