Kass: They're Still Not Getting It on Housing

I accused Dennis as being too linear in his comments, especially on the market. By that, I meant that diagnosing the recovery in equities (in any one day) and making a grand statement about its import was a one-dimensional (or linear) way of looking at things.

The investment mosaic is multidimensional and incorporates a lot more than just recent market behavior. From my perch, his view of the meaning of the market recovery on Wednesday could prove as wrong as when many made the incorrect observation when homebuilder stocks rallied impressively in May 2007 that this was an indication of a likely recovery in the housing markets.

I asked, what would he have said after Friday's schmeissing? "Buy," he said. Point made: Buy when they drop; buy when they pop.

On housing, I expressed the view to the panelists that leaning on the Fed with shock and awe (again) next week would have little positive effect on the housing markets, just as the last 50 basis point had no impact (as housing statistics continue to move lower). The affordability issue remains unresolved, and the inventory of unsold homes remains at record levels -- and, according to traffic readings, looks to worsen in the months ahead.

As to Dennis' remarks that most consumers are well off after the long rise in home prices, I expressed the view that the problem was the mortgage loans that were made at the margin over the last three years; they are coming back to bite the homeowner in mortgage rate resets in lower home prices and in a difficulty getting a loan as the originating business evaporates.