Kass: Reality Check

The media need to check the bulls, who have gotten away using every appearance as a pulpit.
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This blog post originally appeared on RealMoney Silver on April 15 at 7:43 a.m. EDT.

Yesterday, we

dealt with

the threat of the next shoe to drop: investor disinterest and apathy.

Today, we'll deal with the recognition of reality (especially of a media kind).

Wachovia's

(WB) - Get Report

and

General Electric's

(GE) - Get Report

first-quarter 2008 earnings reports are helping to put a nail in the coffin of the equity permabulls, and the recent economic releases have done the same to the economic permabulls (with the possible exception of my friend/buddy/pal, Brian Wesbury).

After dismissing the forecast of a housing depression three years ago and, then again, rejecting the notion two years ago that the subprime issue would move up the credit ladder in an unprecedented and contagious manner, the bulls have even recently denied the legitimacy of the credit writedowns. I am told that they are a figment of accounting convention by the bullish types.

Memo to bulls: The Sunshine Boys at Wachovia do not make the decision to slash their dividend on figments of imagination. They do it out of desperation and in the face of a horrific credit backdrop.

Frankly, I have heard just about everything from the dogmatic bulls this year, who trot out in the media with their happy talk and reject nearly every miserable data point and instead emphasize that stocks, in the long run, are always buys. A tautological duh!

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Last week, I even heard from several relatively sober souls in the media (at least I think they were!) that the absence of profit warnings was a sign that first-quarter earnings would be just fine.

As

Han Solo

might say to the bullish types these days, "Your powers are weak, hokey religions and ancient weapons are not match for a good blaster at your side."

Which gets me back to the media and a recommendation that I respectfully suggest to every host on

CNBC

,

Bloomberg

and

Fox Business Network

-- when interviewing a member of the bullish cabal, ask the following questions:

    1. What is your investment mandate? 2. Do you have the flexibility to raise or reduce the cash component of your portfolio? 3. What was your cash position two years ago, what was your cash position a year ago and what is your cash position today? And why were your cash positions at those levels? 4. Have you ever been bearish? 5. How have the deteriorating economic conditions and worsening profit picture affected your market and economic views? 6. What change in conditions from current expectations would lead to a further change in your market views?

I might add, in bull markets, the obligation of the media is to ask the bears the same questions.

Doug Kass is the author of The Edge, a blog on RealMoney Silver that features real-time shorting opportunities on the market.

At the time of publication, Kass and/or his funds were long General Electric, although holdings can change at any time.

Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd.