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Plagued by a levered balance sheet heavily dependent on rising home and stock prices, the consumer faces numerous headwinds -- and that bodes ill for a range of retailers.

The headwinds include rising inflation and tepid job growth, which leads to flat real disposable income. Moreover, with refinancing cashouts slowing to a crawl, the consumption binge fueled by extracting money out of homes and the negative impact of adjustable mortgage resets will further strain the consumer.

Recently a host of middle-end casual dining companies have experienced weakening comps, including

Darden Restaurants

(DRI) - Get Report

,

Applebee's

(APPB)

and

Outback Steakhouse

.

On Monday,

Whole Foods

( WFMI) whiffed and on Tuesday,

Panera Bread

(PNRA)

disappointed. These two were previously regarded as hyper-growth high-end restaurant concepts.

After Wednesday's close,

Starbucks

(SBUX) - Get Report

, a standard bearer of the growth set, reported in-line earnings (adjusted for a penny nonrecurring gain) but its comps only rose 4% -- the lowest rate since 2002 -- providing more evidence that even the upscale consumer is about to retrench. (The company rationalized the shortfall by blaming a queuing problem at its stores.)

As night follows day, a consumer-led recession is imminent. Consumers will be downscaling their purchases and increasingly frequenting

Gap Stores

(GPS) - Get Report

instead of

Ralph Lauren

(RL) - Get Report

,

Blue Nile

(NILE)

instead of

Tiffany

(TIF) - Get Report

and the local hardware store instead of

Williams Sonoma

(WSM) - Get Report

.

By the time all of this is obvious, the

Retail HOLDRs Index

(RTH) will be trading 5 to 10 points lower than it is now -- and Starbucks comps will have fallen into the low-single-digit area for months on end.

At time of publication, Kass and/or his funds were short RTH, SBUX, PNRA, RL and TIF, although holdings can change at any time.

Doug Kass is general partner for two investment partnerships, Seabreeze Partners L.P. and Seabreeze Partners Short L.P. Until 1996, he was senior portfolio manager at Omega Advisors, a $4 billion investment partnership. Before that he was executive senior vice president and director of institutional equities of First Albany Corporation and JW Charles/CSG. He also was a General Partner of Glickenhaus & Co., and held various positions with Putnam Management and Kidder, Peabody. Kass received his bachelor's from Alfred University, and received a master's of business administration in finance from the University of Pennsylvania's Wharton School in 1972. He co-authored "Citibank: The Ralph Nader Report" with Nader and the Center for the Study of Responsive Law and currently serves as a guest host on CNBC's "Squawk Box." Kass appreciates your feedback;

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