Saut Vs Kass = More Stocks Vs Raising Cash

This is a kind of unpleasant feeling, when the "best in class" come in direct clash of opinions. Both guys have been good guides through the crisis so far. Their "ways forward" are parting now?

Let' s start with Jeff Saut, the strategist at Raymond James, comes with "Discovery?!" missive this morning. It is definitely worth reading the full script, but I make it short with the weekly call:

This week we exit the three-week “Dead Zone,” so often referenced in these missives, whereby many of Wall Street’s “finest” go on vacation with their kids before school begins. With the return of the Pro’s, we should get a better idea of the stock market’s near-term directionality. Our sense is they will show up in “buy ‘em” mode since stocks just won’t go down and the Pro’s are staring at their October fiscal year end where performance pressure, bonus pressure, and ultimately job pressure should push them into more stocks. Accordingly, we have added some long ETFs to portfolios. And don’t look now, but gold is moving in on new all-time highs, which is why we continue to recommend OCM Gold Fund (OCMGX /$21.55), managed by our friend Greg Orrell.

Jeff argues it is a new bull market according to Dow Theory... However, I am still observing a kind of "doji" indecisiveness to buy his own definition, as the Dow's Transports are "still" struggling around January 6 highs of 3737 (at 3760 as I write this sentence). In addition to all other obstacles, reading GaveKal research has an impact ...

Doug Kass, the admired short seller, made the bottom call in March, but so did for the 2009 top for S&P500 recently. Doug has updated the Model Portfolio today, with the main message, in my view:

Successful investing is anticipating the anticipation of others. As discussed in the body of today's update, this morning's aggressive moves look beyond the current stock market vigor and the immediate strength of corporate profit cycle and more toward a confluence of factors that could lead to disappointing profit and economic growth next year.

Today represents another major change in our model portfolio, with a further increase in the cash component of the portfolio from 43% to 54%. I am further reducing both recommended equity (to 41%) and credit exposure (5%) after a huge run in both asset classes.

Over the balance of this year, I expect to further reduce the portfolio's recommended investment positions and raise cash weightings if there are (1) renewed signs that my baseline expectation of a double-dip in the economy is rising in probability; and (2) we witness a dissipation in the strong price momentum that has characterized the U.S. stock market over the past several months.

Well, the inter-market message has been rather curious recently... The gold case in particular!

The latest US Consumer Credit data hit the wires couple of minutes ago. Trading room reflationists should be eating the gold bars now, as Dow Jones Newswires reports:

08 Sep 2009 22:01 EEDT DJ US Consumer Credit Falls Sixth Month In A Row By Jeff Bater Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--

Americans reduced their borrowing a sixth consecutive time during July in a bad omen for any easy economic turnaround.
Consumer credit outstanding tumbled a seasonally adjusted annual rate of 10.4% to $2.472 trillion, the Federal Reserve said Tuesday. The $21.6-billion drop in borrowing was a record.
Wall Street projected a $3.5 billion decline in consumer credit during July. Borrowing in June fell $15.5 billion, revised down from $10.3 billion. The last time credit fell six straight times was in the second half of 1991.
The consumer credit report is an indicator of spending by Americans. Consumer spending makes up 70% of gross domestic product, which is the broad measure of U.S. economic activity. People, afraid of unemployment and stuck under high household debt, aren't spending briskly, a restraint that held the economy in a slump and is seen preventing a quick recovery. Analysts expect more deleveraging by U.S. households.
The Fed data Tuesday said revolving credit, which includes credit card use, dropped in July by $6.1 billion to $905.6 billion, or 8.1%. Non-revolving credit, including automobile and mobile home loans, decreased by 11.7%, or a record $15.4 billion to $1.566 trillion.
The consumer credit data exclude home mortgages and other real estate-secured loans. These tend to be highly volatile from month to month and are frequently revised.
But the report still has interesting details on how Americans finance their lifestyles.

Obviously, nobody at Wall Street cares about Main-Street, as it is irrelevant for (bonus) inflation ...

Let' s see! Market is a process, not an event! This is not a one way street...

Intra-day Gold spot price, courtesy of Reuters, click to enlarge.