Kass: A Wolf in Sheep's Clothing

Valuation Is Volatile

Valuations are not demanding but, at the same time, are certainly not undemanding.

My ursine tone is also a reflection that, by most measures, the U.S. stock market is not meaningfully undervalued (against consensus forecasts) and that given the dynamic of the headwinds of slowing economic growth, a poor profit outlook and the developing weakness of policy are unlikely to be revalued upward in 2013 (as many strategists suggest).

Should my well-below-consensus corporate profits forecast be realized, current valuations could be viewed as more demanding than is generally assumed. And kicking the fiscal can down the road is not supportive of a 15x P/E ratio.

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