This blog post originally appeared on RealMoney Silver on June 6 at 8:21 a.m. EDT.

" Ma nishtana ha-laila ha-zeh mi-kol ha-lelot?
(Why is this night different from all other nights?)"

-- Passover prayer
The investment mosaic is always complex, and my opening missive today cannot possibly cover all the bases that culminate an overall investment viewpoint.

"Ma Nishtana," the Jewish prayer above, comprises the four questions asked during the Passover seder. In Hebrew, its meaning is "what has changed?" -- in English, it is referred to as "the four questions."

Over the past weekend, many investors were asking themselves the following four questions in order to determine what (if anything) has changed and whether the consensus economic and stock market forecasts are still intact:
  1. Will the domestic economy proceed in a smooth trajectory, be self-sustaining and capable of maintaining itself in line with the historic length of previous economic expansions (lasting nearly four years)?
  2. Will S&P 500 profits meet the consensus earnings forecasts of $95 a share for 2011 and $100-plus per share for 2012?
  3. Is the consensus forecast for a year-end S&P target of 1450 still a reasonable expectation?
  4. If the answer to the first three questions is no, does that mean we are entering a bear market?
My answers? No, no, no and no.

Inconsistent Domestic Economic Recovery Will Be the Mainstay of 2011-2012

Above all, it remains my view that the optimists may be incorrectly viewing the strong resurgence of corporate profits and benign credit metrics in isolation -- somewhat similar to the mistake that was made in early 2008, when the bullish cabal (despite reams of data, tables and valuation models that seemed to be supportive of higher stock prices) grossly misinterpreted the consequences of the unprecedented housing speculation (and abuse in mortgage lending) as well as the financial damage from the proliferation of derivatives.

The world economies in early 2008 and (to a much lesser degree) in 2011 resemble the frail psyches of Cleopatra and Marc Antony, Kurt Cobain, Marilyn Monroe, Ernest and Margaux Hemingway, Hunter S. Thompson, Vincent van Gogh, Billie Holiday, Diane Arbus and Virginia Woolf. All were talented, most were respected, and many were beautiful. They appeared fine externally, but a depression haunted the very core of their existence. All succumbed to suicide.

History doesn't repeat itself, but it often rhymes.

Papering over problems (quantitative easing) over the last year has certainly raised animal spirits and share prices, but it has done little to resolve several consequential and fundamental issues that have resurfaced.

Excessive debt and the expected fiscal austerity (needed to rebalance the global fiscal imbalances) are not the ingredients to a smooth and vibrant recovery, so the recent soft patch could prove more problematic than many recognize.

In the current cycle, the optimists might be understating the influence of some challenging nontraditional headwinds that are beginning to assert themselves. Structural unemployment; an unprecedented 30%-plus drop in home prices (and a housing market still challenged by an expanding shadow inventory of unsold homes); fiscal imbalances at the local, state and federal levels (which will, as night follows day, bring with it austerity and rising tax rates); and the tail risk of the last cycle (manifested in the latest contagion of the sovereign debt crisis) are but some of the reasons this economic recovery is different this time.

The consequences and eventual impact of screwflation of the middle class and the associated behavioral changes of the average Joe could become an albatross weighing on economic growth and profits. These changes are already seen in the middle class's increased propensity to rent rather than buy a home and its vote of no-confidence in the system (whether it is in spending or investing), which, in the fullness of time, will victimize the very corporations that have achieved unsustainable and record high profit margins by cutting fixed costs to the bone and by making temporary workers a permanent part of the workplace.

Failing Targets for Profits and Stocks

For some time, I have felt as though consensus earnings forecasts were possible but not likely. Recent economic data reinforce my skepticism. As well, I have argued that not only were these estimates ambitious but that a combination of more-volatile-than-expected earnings and the tepid recovery's vulnerability to tail risks would lead to a contraction, not expansion, in valuation in 2011 and 2012.

As well, valuation models based on artificially low interest rates seem to be a somewhat questionable rationalization of higher stock prices, because anchoring short-term interest rates at zero should not only not be considered a permanent condition but they can cause unintended and adverse consequences.

There is nothing normal about this cycle, and many investors (until recently) appear to be ignoring that, once again, it is different this time, slapping only a somewhat less-than-average historic multiple (15x) against what might now be a difficult-to-deliver profit forecast.

Another emerging market headwind to the Street's optimistic price targets is the technical damage to the world's stock markets over the last month. Just look at the number of U.S. stocks and non-U.S. stock markets trading below their moving averages. This will take time to repair.

Investment Conclusion

To summarize, a spate of consistently weak economic data, rising sovereign debt contagion, a technical breakdown and other factors are supportive of my continued expectation that the U.S. stock market is likely to be range-bound between 1250 and 1350 on the S&P 500.

I am a buyer at the lower end of that projected range and a seller at the upper end of the projected range.

The downside is limited, in part due to the amount of liquidity in the system (and expected to be going forward), the strong financial and operating position of our country's largest companies, a still-cautious and underinvested individual investor and the fact that many of my longstanding structural concerns are in the process of quickly being accepted and recognized.

The upside is also limited owing to the likely markdown and volatility of profit and economic expectations, the vulnerability to P/E multiples, continued tail risk and the possibility of policy mistakes (both here and abroad).

If correct, risk/reward today is neutral (and uninspiring).

It's a show-me market, while we await more data in order to ascertain how long this soft patch might be with us.

While it is positive that more investors are growing appreciative and increasingly accepting of the emerging challenges, my guess is that the wait will be longer than many like or think.

Doug Kass writes daily for RealMoney Silver , a premium bundle service from For a free trial to RealMoney Silver 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.

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