On Wednesday morn, Doug Kass opined:
problems with the market run deep.
We live in a world in which the consumer is spent-up, not pent-up. If you
don’t believe me, the Federal
Reserve expanded on this subject last week. It is inevitable that the
American consumer will cease its consumption binge of the last decade and begin
to retrench and save as the one-time benefit of refinancing cash-outs slows to a
A parabolic boom in housing prices in certain "hot" regions of the U.S. —
and abroad — has stretched the relationship between household incomes to
housing prices to levels never, ever seen in the last century.
Spring 2006 will mark a substantive resetting of rates on adjustable-rate
and teaser mortgage loans, pressing the consumer ever more.
Our economy’s foundation is based on an asset-appreciation dependency,
compared to past cycles which relied on income and wage growth.
I continue to reject the government’s notion that inflation is in retreat.
Inflation statistics delivered by the BLS are works of fiction, as stubbornly
high energy prices, tuition, food, housing, commodities, insurance and other
costs are serving to pressure the consumers’ real disposable incomes.
The 28-year high in corporate profit margins is unsustainable
and likely to revert closer to the mean as (1) the benefits of four years of
cost cutting subside, and (2) cost pressures overcome pricing power.
A more hawkish Federal Reserve will raise federal funds to higher levels
than the consensus expected.
(Notwithstanding the results from various investor surveys) the body of
investors to be overly complacent (with a high measure of bullish conceit) as
fear and doubt had been driven from Wall Street.
A Second Shot Across the Bow?
Street Insight,3/1/2006 8:39 AM EST