Enjoy the rally while it lasts: Famed bear David Tice warns 'the market is going to suck' in 2018

  • Surging stocks could go even higher, but then succumb to a market that's "going to suck," David Tice told CNBC.
  • The decline could be as deep as 50 percent, the permanently-bearish investor said.

Investor David Tice isn't heading back into the bear cave yet — but preparations are underway.

Tice, who's known for running the Prudent Bear Fund before selling it to Federated in 2008, predicts stocks could sharply rise again in 2018.

"There's potentially a 50 percent chance there will be a 25 percent rally," he said to CNBC's "Trading Nation" this week. "The market is going up some more... People are still not talking at cocktail parties about the hot stocks," he said.

A 25 percent jump would take the Dow to over 30,400, a gain of more than 6000 points from current levels. Yet his bold forecast included a risk that's hard to ignore.

"[There's a] 25 percent chance that we can have a 50 percent decline," he warned. "Longer-term, the market is going to suck."

A 50 percent drop would slice the Dow to a little over 12,000, a level at which it hasn't traded since June 2012.

The odds are high a black swan event will hit stocks within the next year, according to Tice. He lists North Korea as the top threat to the rally.

Tice is also citing history as a reason to turn pessimistic. Based historical data from the Shiller price-earnings (PE) Ratio, he sees the next ten years' return for stocks being anemic.

Tice has made bearish calls like this in the past. He called for a 30 to 50 percent stock market pullback in 2012 and 2014, as well. He acknowledged the wrongness of those early calls, but stood by his prediction.

"I've been wrong a lot by being too early, and I know where this ends long-term. Longer term, I'm completely confident this market is going to be down a lot," he argued.

Tice is urging investors to dramatically cut their exposure to the stock market, and put at least 15 percent into gold.

"If you think you could be really smart, you think you could get out, you think you could play it for six or eight months, then I can't argue about you being in stocks," Tice said. "It's still a greater fool theory bet. It's a bit of Ponzi investing type of bet. And, I think it's dangerous."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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