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

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."

Source: Bloomberg Pro Terminal

Jr Trader Alexander Kumanov

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