Kass: Putting Earnings Into Perspective

This blog post originally appeared on RealMoney Silver on June 1 at 7:26 a.m. EDT.

The ability of the U.S. stock market to continue its rally is dependent upon numerous factors, but, from my perch, the consumer holds the key.

The bearish consumer case is no longer a variant view and, as such, might be incorporated in today's share prices. It is now a widely held consensus that the consumer will be a drag on economic growth as the great debt unwind yields lower personal consumption expenditures and an elevated personal savings rate.

As well, most bearish observers hold to the notion that corporate profit margins, which, in 2006-2007, reached the highest level since the mid 1950s, are now vulnerable to mean-reversion in the years ahead. After all, the prospects for tepid top-line growth and continued cost pressures (importantly influenced by the costly burden of more regulation and the inevitability of higher corporate tax rates) seemed to point to obvious contraction. ...