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Whether anyone realized it at the time, the definitive signal the housing boom was over was Wachovia’s acquisition of Golden West Financial in May of 2006. Do you recall? Here was a pair of banking industry legends winding up their 40-year run by selling out at a big price during the fat part of the cycle, to a buyer with a reputation for being eager but not especially canny. What more do you want? Herb and Marion Sandler might as well have banged a gong. At the time, Herb said he and Marion wouldn’t stick around at Wachovia, but
dismissed speculation
the deal signaled coming problems in Golden West’s Pick-a-Pay portfolio as “a bunch of garbage.” OK then!
The reason I mention this is that another, smaller financial services industry transaction happened a few weeks ago that could be viewed in retrospect in a similar way. You’ll be forgiven if you missed it, but on July 15, Federated Investors announced it will pay $43 million, plus up to $99 million in an earnout, for David Tice & Associates LLC, manager of the $1.2 billion Prudent Bear Fund and the $507 million Prudent Global Income Fund. The sale comes after a spectacular twelve months for Prudent Bear (up 10% in a market that was down 11%). But it “does not represent my thinking that the [bear] market is over at all,” David Tice tells Investment News. “We still feel there is a long way to go."
Right! I don’t want to beat this to death, but you don’t need to be Kreskin to see the pattern: David Tice is one of the best known, best-regarded short-sellers around. His near-term numbers may be great but (not surprisingly for a bear-oriented fund) his longer-term numbers either match the market’s or lag them badly, depending on the time horizon you’re looking at. If there were ever a time for him to sell, this is it. Oh, and after the deal closes, Tice won’t actually be running Prudent Bear anymore, but will become “a chief portfolio strategist” at Federated instead.
Totally rational behavior!--but not what you’d expect from a professional short-seller who feels the bear market has “a long way to go.”
Oh, and don’t forget the deal was announced on July 15!
Gong!
What do you think? Let me know! |