Kass: The Yin and the Yang

This blog post originally appeared on RealMoney Silver on Aug. 18 at 7:48 a.m. EDT.

During this past weekend, some members of my most trusted hedge fund cabal (some of whom I have most admired over decades) grew ever more optimistic, but on The Edge, I have cautioned and maintained that swimming naked in the pool doesn't make much sense just because the temperatures have zoomed higher in late summer.

Similar to the weather, Mr. Market's upward momentum can be most unpredictable, as we witnessed on Monday.

From my perch, there are numerous economic outcomes possible, some of which are not market-friendly.

With the outcomes so hard to predict right now, we should pay attention to the following wise words of William Butler Yeats:

The best lack all conviction, while the worst
Are full of passionate intensity.

Five months ago when I made my generational bottom call with the S&P 500 at 666, it was materially variant in view. The planets were aligned, fundamentals were getting less worse, valuations were remarkably attractive, and we were at an extreme negative position in sentiment, but panic and fear filled the air, and the market overshot to the downside.

This is no longer the case. Indeed, a strong opinion in either direction seems inappropriate, smug and even glib.

We are clearly entering an improved earnings cycle as corporations are the beneficiary of huge monetary and fiscal stimulation, draconian cost cuts, wage deflation and well-below historical inventories. Despite that, I am relatively certain that the numerous uncertainties present unusual headwinds, especially as it relates to the consumer who is now deleveraging and hunkering down under the accumulated weight of lower stock and home prices and a bleak job picture over the last two years.