This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Kass: Tug of War

This blog post originally appeared on RealMoney Silver on Feb. 24 at 7:56 a.m. EST.

While the magnitude of the drop in the Conference Board's Consumer Confidence Index seems suspicious and unjustified based on previous indicators (e.g., a more upbeat February University of Michigan confidence reading, growth in hours worked, stabilizing home prices, improving retail sales and other forward-looking economic reports), yesterday's release does reinforce my view that the economy on the ground is not as upbeat as the view of the economy in the charts.

As I have written repeatedly, with so many cyclical and secular issues and headwinds to growth and a widening gap between the operating and financial health of large businesses vis-a-vis small businesses and the consumer, there are many more economic and market outcomes than usual that, in the aggregate, could offset the growing consensus of smooth and self-sustaining growth.

I continue to recognize that stocks are not meaningfully overvalued and that downside risk is limited. Stocks, unlike other assets classes (e.g., fixed income, private equity, residential and nonresidential real estate and commodities), have not had their valuations stretched. Most already expect a relatively shallow economic recovery. Also, inflation and inflationary expectations are subdued, and an elevated unemployment rate and large output gap are among the many reasons why the Fed will be on hold and the curse on cash will be intact for most of 2010.

Of late, there has been an increase in optimism with regards to profit growth based on better sales, improving margins (lower-than-expected unit labor costs) and rising cash flows, which are leading toward more aggressive share buybacks. The consensus for 2010 S&P 500 profit forecast is now moving toward (and even over) $80 a share, and the 2011 consensus is leaning toward the view that profits will exceed the previous 2007 record level of $92 a share.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,042.90 -28.32 -0.17%
S&P 500 1,972.29 -5.51 -0.28%
NASDAQ 4,493.39 -12.4620 -0.28%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs