Whitney Tilson - "Overall economy will continue to suffer"

Whitney Tilson smells panic and fear in the market, you may remember him from the 60 Minutes story A Second Mortgage Disaster On The Horizon?.  Tilson did an interview with Barron's over the weekend.

Whitney Tilson is the founder and Managing Partner of T2 Partners LLC and the Tilson Mutual Funds.  The two funds that are offered at Tilson Mutual Funds are Tilson Dividend (MUTF:TILDX) and Tilson Focus ( MUTF:TILFX ), Wall St. Nation covered them last month - click to access story - Whitney Tilson seen on 60 Minutes, his Investments

The TILDX is up 2% today, what are the top 10 Holdings?  That would be:

Whitney told Barron's this weekend:

Barron's Online: What can we expect this year? Does the S&P 500 end 2009 lower than 2008?

Whitney Tilson: My guess would be the S&P 500 is 10% higher. It rises by 10% next year but with a heck of a lot of volatility. The economic fundamentals are going to continue to get worse. The housing market, the housing bubble is going to continue to burst and be terrible so there will be tremendous economic headwinds. The reason I think the stock market might go up a little bit is because I think the stock market is already reflecting this and probably toward the end of next year the decline will start to taper off and we will start to see a bottom both in terms of the housing market.

We are very invested and very long right now. The things we own are unbelievably cheap. We have never seen bargains like this before so that overcomes our sort of macro bearishness.

Q: How do you find bargains these days?

A: Number one is companies where we are not buying earnings but we are buying the balance sheet, where companies are trading near or below liquidation value and so the balance sheet is providing downside protection. It almost doesn't matter what earnings are in 2009.

The other types of companies that we are purchasing are in areas of extreme distressed selling -- companies that are heavily owned by hedge funds where we think there is forced selling due to liquidations, redemptions, delivering and year-end tax selling. So we think there are companies that are very out of favor where the selling has been massively overdone and where they are being priced as if the company is about to go bankrupt and we don't think it is.

Click to Read the Barron's Article