This blog post originally appeared on RealMoney Silver on May 25 at 8:06 a.m. EDT.

Last night when I arose to check the S&P futures, they were down by nearly 10 points.

It is hard to gauge the proximate cause.

Was it

Greece's finances

? Further evidence of

a double dip inhousing

? China's infrastructure spending hitting the wall?

Applied Materials'

(AMAT) - Get Applied Materials, Inc. Report

profits warning

(likely not, as it was telegraphed)? The Democratic congressional

upset win

in upstate New York (which could make a budget compromise less likely)? Or talk of

nearly $20 billion of bank mortgage liabilities

(a vivid example of the "tail risk" I have warned about for some time)?

Or maybe a lot of people were reminded how close to the financial abyss our system was after watching Andrew Sorkin's

Too Big To Fail



. (I was!)

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Hard to say.

Though the futures have rallied markedly since last night's nadir, the market has experienced a slow drip in value over the past few weeks. The river's songs have not been sweet, as the economic data points (here and abroad) have grown increasingly ambiguous and another tail risk of eurozone sovereign debt issues continues to weigh on prices and investor sentiment.

Meanwhile, a market without memory from day to day and with limited price direction/momentum also has investors on the defensive. So does the uncertainty of policy (monetary and fiscal). And, as the materials, industrials, technology and financial sectors weaken, defensive consumer nondurables are the world's fair, raising a technical warning sign.

Equally important, many formerly strong emerging stock markets are, at best, lifeless (see China's 10% drop).

I continue to see, as I have for months, an inconsistent and uneven economic recovery -- difficult for corporate managers and investment managers to navigate. Tail risk, greater earnings volatility and corporate margin and profit challenges are the headwinds I see above and beyond the nontraditional issues of fiscal imbalances, higher marginal tax rates and elevated structural unemployment caused by globalization, technological advances and temporary employment as a permanent fixture to the jobs market.

And I see a U.S. consumer, who has been victimized by


, as particularly vulnerable and exposed. Money freed up from nonpayment of mortgages and recession fatigue have likely temporarily buoyed retail sales, but that slope is slippery and provides the sustainability of growth with a weak foundation.

As a consequence I envision, unlike most, some pressure on P/E multiples this year: I still expect a flat year for the

S&P 500


Despite the economic ambiguity seen in recent surveys and releases, the bulls remain convinced that a smooth and self-sustaining domestic economic recovery is in the cards (3% GDP growth over the balance of the year), that the


recognizes the importance of price stability and is unlikely to raise interest rates until late 2012, that current inflationary pressures are transitory and will drop to under 2% and that S&P profits of $95 a share is a minimum expectation (with $100-plus-per-share profits in sight for next year).

My advice remains unchanged: err on the side of conservatism. Rest your bones, listen to the river's sweet songs and remain underinvested. Trade opportunistically, and wait this one out.

Doug Kass writes daily for

RealMoney Silver

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and exclusive access to Mr. Kass's daily trading diary, please click here.

At the time of publication, Kass and/or his funds had no positions in the stocks mentioned, 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.