Kass: 'Fast Money' Recap and More

Questions and Answers

In response to Guy Adami's question about whether I was more scared going ahead than a I have been in the past, I said that after the anticipated year-end rally, 2010 is likely to be challenging, which is unlike the opinion of many of the guests that I respect that have recently been on the show with more optimistic forecasts (Rich Bernstein, Byron Wien and Barton Biggs, etc.). I don't see the start of a self-sustaining or long-lasting business or stock market cycle. More importantly, I said to Guy that we seem likely to be passing on the first generation of lower living standards because all forecasts come prepackaged with lower growth rates and higher tax rates.

During the show, Karen Finerman waxed enthusiastically about the ISM report. I didn't have a chance to respond, but here is what I would have said in response to her optimism.

In the ISM report, orders were down for the second straight month, backlog was flat, and inventory was up 10% sequentially (month over month). Moreover, there was a meaningful downward revision in construction spending in the prior month. As Bill King wrote this morning in The King Report, "Industry is building inventory, but transportation data show that the goods are not yet moving in concert."

And here are some of the more ominous quotes contained in the ISM release:

• "Still a very difficult environment -- commodity increases threaten recovery and don't seem to correlate with any supply/demand fundamentals." (Food, Beverage and Tobacco Products)
• "The improvement seen earlier is not holding." (Primary Metals)
• "After several rather busy months, we are seeing the order intake for early next year soften." (Transportation Equipment)

It remains my view that the markets will look right through the strong ISM, just the way investors looked through the strong GDP print late last week. In fact, the ISM reading of 55.7 might be the most expensive in history. (Heck, we could theoretically get ISM to 100 if we throw another $25 trillion to $50 trillion at it, which may in fact be the plan!)