Kass: Bernanke Can't Bail Us Out

Home prices are in a downtrend, and the recovery in housing seems several years away. The consumer is weakening under the burden of the negative wealth effect of housing, a levered balance sheet and an eroding jobs outlook. Mortgage equity withdrawals have slowed to a crawl and seem destined to bump along the bottom as mortgage credit remains limited.

Retail sales are fading fast, while the price of oil threatens real incomes. Also, an explosion in mortgage resets in the coming two years suggests further pressure on personal consumption. Finally, the improved chances that the Democratic Party will recapture the presidency in 2008 raise the specter that the consumer will be "taxed" even further.

It also seems logical that, with equities only a few percentage points from their multiyear highs, the pendulum of excessive optimism has not shifted anywhere near excessive pessimism. Most sentiment measures -- such as the Investors Intelligence survey or expectations from leading strategists -- seem to remain bearish for stocks.

As I am usually cynical and cautious, I see no need to spoil that reputation in such uncertain times.