Doug Kass has a level-headed piece on The  Doug argues the market is behaving too optimistically about “second derivative green shoots”:

“On a valuation basis, equities are no longer on sale. On a fundamental basis, we have not distanced ourselves and perhaps are too readily dismissing the substantive nontraditional headwinds that will frame the lumpy and inconsistent economic recovery I envision in 2009-11.

Some of those nontraditional headwinds include the following:

  • the broad geographic reach of the current recession;
  • the increased burden and cost of regulation;
  • the economic impact of the obliterated (but previously important) shadow banking system and the associated reduction in securitized lending market capacity;
  • the more important role of government in the private sector;
  • the possible impact of protectionism and trade barriers;
  • the degree to which individual and institutional investors have become risk-averse and have been “turned off” to equities; and
  • most important, the unusual causes of the current economic downturn and uncertainty of business confidence that follows from the deleveraging of debt on bank and consumer balance sheets.

I am growing increasingly concerned that the same investors/traders that panicked in January to early March are now panicking in the opposite direction in a market that too often worships at the altar of price momentum and that the aforementioned challenges to economic recovery are being ignored.”

Swamp Report agrees.  The market is getting carried away. Zero Hedge has another piece wherein Contrary Investor compares a “real bull market” to the current one that is behaving more like a  “casino”.