NEW YORK (Real Money) --

Even through the darkest phase
Be it thick or thin
Always someone marches brave
Here beneath my skin.Constant craving
Has always been.Maybe a great magnet pulls
All souls towards truth
Or maybe it is life itself
That feeds wisdom
To its youth.
-- k.d. lang and Ben Mink, " Constant Craving"

A bullish magnet has pulled Mr. Market in a northerly direction and has produced an almost constant craving for equities this year. As I wrote earlier this week, it's as if doubt and fear have been driven from Wall Street.

Only three of the 30-plus stocks I own are in buyable territory: An attractive entry price that provides favorable returns compared to risk should be important for every investor and trader. For, as Warren Buffett writes, "Price is what you pay, but value is what you get."

Since the Generational Low of 2009, the

S&P 500

index has moved from 666 to 1380, and it remains my view that most of the positive macroeconomic data have now been more than fully discounted at current valuations. My "fair market value" calculation for the S&P is around 1345 -- so we are now in the overshoot area.

There is nothing average about this economic cycle.

I, for one, am not willing to pay nearly 14x (close to the historic average of 15x) for earnings when profit margins are at 57-year highs and are vulnerable in a likely setting of rising costs (especially of an oil-kind).

On top of the fiscal imbalances (that are not being addressed and that our country faces), there remain substantive economic, political and geopolitical problems aplenty that represent

challenges to economic growth and market valuations


Besides the aforementioned secular headwinds, there remain ample near-term economic issues, both here and abroad, that go beyond a developing recession in Europe.

1. The U.S. Economy

: On Tuesday, the durable goods reports materially disappointed relative to expectations, falling by 4% (the largest drop in three years). Core capital goods, considered a good barometer of capital spending, declined by a greater amount (4.5%), for the steepest decline in over a year. This result indicates that there was pull-forward of capital spending in 2011 owing to the 100% tax credit available (which expired on Dec. 31, 2011).

On Thursday, the government reported that January personal income rose 0.3%, well below the consensus estimate of 0.5%, and spending was up only 0.2%, less than half the forecast. As a result of 0.2% personal consumption inflation (Bernanke's favorite measure of inflation), real income was up by only 0.1% and actually dropped by 0.1% as measured by after-tax disposable income. Meanwhile, real spending was flat.

Yesterday's 52.4 ISM reading for February was the first drop since October 2011, and it was a large disappointment relative to expectations of 54.5.

January construction spending also disappointed, dropping 0.1% (month over month); estimates were looking for a gain of 1%.

Meanwhile the price of oil -- now at nearly $110 a barrel -- poses a threat to forward economic conditions.

I would note that as a direct result of these (and other) reports, Goldman Sachs reduced its first-quarter 2012 GDP forecast


on Thursday, to under a 2.0% growth rate.

2. The China Economy

: A mixed picture was delivered on Wednesday night, as the HSBC February Manufacturing PMI (more geared toward medium-sized corporations) came in at a weak 49.6 while the government's PMI (more geared toward surveying the country's largest corporations) was an in-line 51.0. (It remains unclear whether China's landing will be "soft" or "hard.")

The bulls I know suggest that the above is too much parsing of the data or negative data mining. By contrast, I call it reality.

As Grandma Koufax (a brilliant investor well before it was fashionable and commonplace among her peers) used to tell me after big market runs, "Dougie, much can go wrong. Some can go right."

I have seen this sort of relentless buying and, arguably, developing complacency, more times than I can count over the past three decades. But as the wise man once said, "This too shall pass."

Remember this as the commentary in the business media grows more and more breathless as levels are breached to the upside this week. And, most important, remember it's not their money.

It's yours.

At the time of publication, Kass and/or his funds were short SPY calls, although holdings can change at any time.

Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.