Doug Kass: High Oil Pushing Recovery Near Tipping Point

U.S. crude ended at a 2-1/2 year high though Brent closed slightly lower on Wednesday with chatter focussed on the level at which oil pushes the bull market over the edge.

As you’re well aware, the concern is that if oil continues its current path higher, increased prices at the pump will put the recovery in jeopardy.

On CNBC’s Street Signs, hedge fund billionaire Leon Cooperman said $125 Brent would send us into a double dip.

”The economy can handle Brent crude to $125,” he said. “Much above $125 there will be an effect on the economy that will be adverse. And most oil shocks in the past have led to recession so we have to watch that very carefully.”

Although strategist Doug Kass tells Fast Money that he finds it hard to pinpoint a number like that, he does largely agree with Cooperman’s analysis. That suggests the tipping point is about $10 dollars away.

And the CNBC contributor and Seabreeze president recommends watching for a few key signs as ‘tells’.

First he says watch the latest consumer confidence numbers. “We’ve seen the Gallup numbers as well as the University of Michigan reports show serious declines. (U.S. consumer sentiment declined in March at the fastest pace since the financial crisis began in 2008)

Kass also points to the most recent housing numberswhich show new home sales fell in February to a record low and prices hit their lowest since December 2003.

On top of that Kass is focused on a key technical signal. He says the RTH broke its 50-day moving average and he takes it as a sign that retailers are starting to break down.

”I’m short the RTH and a number of consumer stocks. Retail and apparel and most vulnerable to elevated oil prices.”

Of course, not everybody agrees with Kass. Tim Seymour only thinks these oil prices are a problem if they’re sustained for a long period of time. “And gas demand was up in the states,” Seymour says. That suggests to him the US consumer isn’t yet crying at the pump.”

It’s worth noting during his CNBC interview Leon Cooperman appeared to be bullish. “But if the price stays below $125 we remain in a self-sustaining economic expansion. And the average economic expansion lasts 5 years. So we’re relatively early into this expansion,” he said.

* As you may know, Kass is widely followed for his market timing. He correctly called a bottom last summer and also predicted the crisis lows in March 2009.

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Trader disclosure: On March 23, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Tim Seymour is long (AAPL); Tim Seymour is long (BAC); Tim Seymour is long (SBUX); Tim Seymour is long (TM); Tim Seymour’s firm is long (ANTO); Tim Seymour’s firm is long (NEM); Guy Adami owns (AGU); Guy Adami owns (C); Guy Adami owns (GS); Guy Adami owns (INTC); Guy Adami owns (BTU); Guy Adami owns (NUE); Guy Adami owns (MSFT); Steve Cortes is long (TM); Steve Cortes is long (GS); Steve Cortes is long (CSX); Steve Cortes is long (SDY); Steve Cortes is long (SO); Steve Cortes is long Crude Oil; Steve Cortes is short (F); Steve Cortes is short (BAC); Steve Cortes is short (UNP); Steve Cortes is short (SPY); Steve Cortes is short (DBA); Steve Cortes is short Natural Gas; Steve Cortes is short Wheat; Steve Cortes is short Soybeans; Steve Cortes is short Corn; Steve Cortes is short CAD/USD; Steve Cortes is short EUR/USD; Pete Najarian is long (AAPL); Pete Najarian is long (AAPL) call spreads; Pete Najarian is long (BAC) calls

BRIAN KELLY
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LARRY HAVERTY
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