Kass: Housing Red Ink Could Spell Recession

This column by Doug Kass appeared at 8:50 a.m. Wednesday on TheStreet.com's Street Insight.

My article Monday offered a sober view of the U.S. economy, documented the government's illusion of low inflation and healthy job growth, and discussed why stagflation will continue to serve as the functional equivalent of a huge tax increase on the middle class.

From my perch, the odds favoring a housing-induced recession are now increasing. My bearish preoccupation with the health of the housing markets appears to be justified by history.

The slow-motion drop in consumption seen in the last 12 months will likely accelerate, aided by growing evidence of a second housing downturn this year and possibly another downswing next year, which will be exacerbated by ever-increasing supplies of unsold homes served up, in part, by mortgage resets in 2007 and 2008. ...