"The narrative now is whether the Fed is simply pushing on a string," Kass said, "and many market participants are coming to this 'aha' moment."
Kass, the founder and president of Seabreeze Partners Management, believes that the data have been weak, and will get even weaker.
"I have a variant view on both corporate profits and the outlook for economic growth versus the consensus. My concerns have been ignored by the markets, but they have been supported by the cautious guidance by corporations during the first-quarter earnings calls as well as by the recent economic data," Kass said.
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The problem is that "central bank liquidity blurs the line of demarcation between economic reality and stock market euphoria." For Kass, market participants are buying into the idea that the U.S. economy is growing, when we're simply seeing the impact of more liquidity.