Bears Have Fight Left

Editor's note: This column by Doug Kass is a special bonus for TheStreet.com and RealMoney readers. It first appeared on Street Insight on Aug. 31 at 7:49 a.m. EDT. To sign up for Street Insight, where you can read Kass' commentary in real time, please click here.

Surprisingly (at least to me), the market averages appear to be headed toward their second best month of the year, experiencing higher returns in 10 out of the last 11 months (a streak that even New York Yankee shortstop Derek Jeter would admire).

Meanwhile, on the fundamental front, the rate of growth in economic activity continues to moderate. Even the Federal Reserve is recognizing this development, as evidenced by its pause this month.

Despite protestations from a number of corners, retail activity shows signs of weakness. The consumer's overconsumption binge is growing long in the tooth, as his levered balance sheet (increasingly reliant on the appreciation of homes and equities) is being weighed down by not only the impact of 17 tightenings, but also by the speculative air being taken out of the housing bubble.

Same-stores sales (especially in real terms and adjusted for the recently rising apparel inflation) reported last night and this morning are proof positive of a slowdown that, coupled with plummeting consumer confidence, is almost impossible to ignore.

Moreover, as reported recently, real median wages are showing no signs of improvement, and with the probable reduction in construction-related jobs in the months to come, job growth will likely disappoint.