Kass: My 'Fast Money' Recap

This blog post originally appeared on RealMoney Silver on Nov. 19 at 9:07 a.m. EST.

Last night, I rejoined joined Melissa Lee and CNBC's "Fast Money" team. I did my best to construct a logical and well-reasoned argument given the staccato pace of the show.

Let's go to the tapes.

Melissa asked me to response to Raymond James' Jeff Saut's bullish comments from the previous evening. Jeff, a buddy/friend/pal, has been correctly bullish and publicly so -- for that, he deserves all of our praise and kudos. On Tuesday evening, he posited that, with credit spreads back to pre-Lehman bankruptcy levels and with a greater clarity to solid first-half 2010 earnings, the S&P 500, too, could march back to the 1,200 level that stood in place before Lehman failed.

I admire Jeff a lot and welcomed the opportunity to debate him, even in his absence.

Here are my comments (and more) from Wednesday night's show.

I started by respectfully disagreeing with Jeff. His argument, I objected, was too linear as his principal focus was on improving credit spreads, which basically reference the relative health of large businesses. We all already appreciate that those large businesses have benefited from cost-cutting, productivity gains and are flush with cash. I felt that Jeff was missing the bigger part of the story. Jeff's bullish case omits the small business and consumer sectors, which account for a much more meaningful part of the economy than the large business sector he highlighted in his credit spread argument.

Indeed, the conditions in small businesses and in the consumer sectors have deteriorated markedly since the Lehman bankruptcy; they are in a sorry state now, and the outlook is not encouraging. I reminded the "Fast Money" crew that the National Federation of Independent Business Index, which surveys small business confidence, now stands at more than two standard deviations below its long-term average, as noted by a Goldman Sachs (GS - commentary - Trade Now) economist about 10 days ago. (This statistic was at the core to Goldman's view that third-quarter 2009 GDP would ultimately be revised lower.) Also, unemployment is now at 10.2% (vs. 7% to 8% before Lehman's failure) and probably going to 10.5% to 11% in early 2010; when you couple those figures with underemployment at 17.6% (vs. under 15% in mid-2008) and likely approaching 19% shortly, the consumer's condition is worse than 12 months ago. (Remember the so-called "Blue Chip" economists told us at the beginning of 2008 that unemployment would peak out at 6%, and remember that in 2007 Bernanke was firm in his belief that subprime lending was good for America and that the housing recovery would be sustained for years in light of low unemployment and even lower interest rates.)

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At the time of publication, Kass and/or his funds were long HD, BAC, CB, JPM, LM, PNC and STT, and short BEN and TROW, although holdings can change at any time.

Doug Kass is the general partner Seabreeze Partners Long/Short LP and Seabreeze Partners Long/Short Offshore LP. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.