Kass Gets ‘Summer of 1987 Feeling’

Sentiment and valuations make a strong bear case for stocks, Doug Kass of Seabreeze Partners Mangement said Wednesday on CNBC.

"The secular challenges are unprecedented. We are in a period of slower growth. Ultimately, fundamentals rule stock prices," he said.

"I'm in Byron Wien's camp with regard to earnings. I think we face an earnings cliff ahead because of tax and fiscal policy. I think our domestic recovery is going to be weaker than expected."

Earlier, Wein of Blackstone Advisory Partners said that the stock market is facing a correction.

(Read More: Stocks Face Hurdles: Byron Wien)

On "Fast Money," Kass also said that Europe would continue to show economic weakness.

"It's unclear to me why we should pay a five-decade average multiple for a market whose earnings quality is weak, whose earnings and growth economically is dependent upon expansive monetary and fiscal policy," he said.

Kass said that the S&P 500 would be more accurately valued "80 or 90 points lower."

So what's the trade?

"I would raise cash. I'm getting the Summer of 1987 feeling in the U.S. equity market, which means we're headed for a sharp fall," he said. "I would be in cash, or you're facile enough, I would be short. I'm at my highest net short position I've been this year."

Trader disclosure: On Feb. 6, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Steve Grasso is long AAPL; Steve Grasso is long AMZN; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long GOOG; Steve Grasso is long GDX; Steve Grasso is long LF; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long P; Steve Grasso is long PXD; Steve Grasso is long NVIV; Steve Grasso is long PFE; Steve Grasso is long S; Steve Grasso is funds long HPQ; ; Steve Grasso is funds long ZNGA; Steve Grasso is funds long AAPL; Steve Grasso is funds long JPM; Karen Finerman is long AAPL; Karen Finerman is long AAPL PUTS; Karen Finerman is long BAC; Karen Finerman is long C; Karen Finerman is long JPM; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long MSFT; Karen Finerman is long GOOG; Karen Finerman is short JCP; Karen Finerman is long M; Karen Finerman is long FNP; Karen Finerman is short IWM; Karen Finerman is short SPY; Tim Seymour is long AAPL; Tim Seymour is long BAC; Tim Seymour is long CSCO.