Kass: The Anti-Cramer Returns
This blog post originally appeared on RealMoney Silver on Aug. 10 at 8:42 a.m. EDT.
It is clear that Jim "El Capitan" Cramer and I are in some disagreement regarding the future of both the economy and the stock market over the near to intermediate term.
Let's try to examine the primary differences so that our future polemic can be more focused.
Neither Jim nor I are econometricians, so neither of us knows exactly what trendline GDP growth will be in 2010 and beyond. We both read everything on the subject of the economy, but, frankly, we both prefer picking stocks to making economic predictions/models.What I am relatively convinced of is that, given the nontraditional headwinds and the great debt unwind, the world's economies face an uncertain outcome, which is far less predictable than in prior recovery cycles. So any discussion of valuation loses some relevance in such uncertain times. Jim is more optimistic, believing that the massive monetary and fiscal stimulus can get the economy back on a classical, reasonable and self-sustaining recovery. Arguably, to me, the S&P 500 at current levels is not now pricing in an uncertain outcome; it is likely pricing in the growing consensus and Jim's expectation of a self-sustaining economic recovery (albeit a shallow one). So, while respectful of the powerful market momentum, I would now prefer being short rather than long. Already, it's different this time, with regard to the several-quarter drop in nominal GDP, in the magnitude of the drop in real GDP and in the unprecedented drop in household net worths.
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