Kass: Mind the Mindless Speculation

The self-proclaimed "anti-Cramer," Doug Kass, anchors Street Insight's "The Edge," a diary about stocks and investing. As a dedicated short-seller, Kass can seek out the bear market in any environment.

Today he blogged on Black & Decker's "negative release," the pleasant surprise in the core CPI and the market's varied melodies.

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Black & Decker Release Is Negative

Originally published at 10:02 a.m. EDT

The Black & Decker (BDK Quote) earnings release should be viewed negatively as it relates to the multiplier effect of the housing downturn.

At $1.60 a share, the company substantially beat first-quarter estimates of $1.26, but BDK did not raise its full-year estimates.

The company cautioned that it anticipates a "challenging economic environment" so only plans to increase its full-year guidance slightly when it reports first-quarter results later this month. Earlier, I described a likely "slow-motion downturn in consumer spending."

Black & Decker's release confirms my notion.

Some Caution in CPI

Originally published at 9:27 a.m. EDT

The core consumer price index was a pleasant surprise, the opposite of February's disappointment. But a look inside the report suggests some caution about interpreting the number too positively, because the good medical costs (flattish), apparel (-1.0%, the largest drop in nine years) and hotel costs (-2.3%) seem unlikely to be duplicated in coming months.

Meanwhile, the industrial production figure showed continued weakness.

Mulling Over a Melange of Market Melodies

Originally published at 8:37 a.m. EDT

I remarked near the close of Monday's trading that Mr. Market continued to play Jim Cramer's Symphony in B Flat Major ("Everything's Coming Up Booyahs") in yesterday's strong session.

With 11 out of the last 12 trading days moving positively, the market now appears next to invincible. As RealMoney's Rev Shark pointed out on Monday, some (particularly of a Cramer kind) are even beginning to posit the notion of another New Era!

My writings (perhaps stubbornly) continue to try to dispel the notion of anything resembling a New Era. Nor do I agree that the current rip is the beginning of "the mother of all short squeezes," because the dedicated short community is now next to nonexistent and certainly not anywhere as powerful as the bulls contend. In terms of long/short players, according to the "surveys," many hedge funds have gotten increasingly longer in the last several months. Rather, this is quite simply a strong rally with an abundant amount of momentum behind it. (Emphasis on the word "abundant.")

I do agree with Street Insight's Gary D. Smith that there are some short squeezes going on now (especially of a solar kind, such as with First Solar (FSLR Quote), JA Solar (JASO Quote) and Trina Solar (TSL Quote)). There always are. And precisely for that reason I avoid shorting stocks with high short interest ratios.

I have been wrong in disagreeing with those who are participating in the buying (at seemingly elevated prices); price momentum has clearly trumped any concerns. Nevertheless, my fundamental economic and investment blueprints remain materially unchanged: At the core of my ursine market view lie a slow-motion downturn in consumer spending (abetted by subprime woes, another leg down in housing and a high volume of mortgage resets), a deceleration in the rate of business spending, stubbornly high (cost push) inflation, persistent wage pressures (in the service sector), lower productivity, expanding political risks (tax rates on capital gains and income) and rising geopolitical issues.

Back to Cramer's Rhapsody in B Flat Major.

As I have written previously, speculation takes many forms. Sometimes it is a bubble in Internet and technology stocks (daytrading in the late 1990s), a bubble in home prices (especially of a West or East Coast kind) or (in 2006 on) a bubble in the availability of credit (and in private equity).

In 2007, I continue to be astonished by the blind, after-hours buying that follows Jim's "Mad Money" picks every night. It is something to behold, and unfortunately it continues apace even as Jim specifically cautions against it! It is yet another thin-reed sign of the sort of the mindless speculation last seen seven to eight years ago.