Kass: Earnings will disappoint this market

Earnings and the future of quantitative easing: the market's two biggest concerns. But they're one and the same to Doug Kass, president of Seabreeze Partners Management.

"I see a false economic dawn in the U.S. and around the world," Kass said on CNBC's "Futures Now," adding that the markets and economic data have been boosted by the Federal Reserve's monetary policies. "The bottom line is that interest rates are a very important raw material in the U.S. economy. As they rise, it affects everything—profits, capital spending, hiring."

Rolling back QE will have serious ramifications, he said, and for him there's no question that it's coming. "I think tapering is a given, probably in September," he said.

In the meantime, the earnings picture looks negative to Kass, because easing has obscured the truth about how weak corporate profits are.

"I don't expect earnings to meet consensus expectations," he said. "The singer Robert Palmer was 'Addicted to Love.' Unfortunately, our corporations, our consumer and even are government are addicted to lower interest rates."

Douglas Kass at the Reach poker tournament in New York.
Amanda Gordon | Bloomberg | Getty Images
Douglas Kass at the Reach poker tournament in New York.

So how bad will it be?

"Earnings are going to disappoint," Kass said. "I would say that in the second quarter that just ended, [they] are probably going to drop by 1 percent."

That would contrast starkly with what analysts expect. They are looking for second-quarter earnings growth of 0.7 percent, according to research company FactSet.

—By CNBC's Alex Rosenberg. Follow him on Twitter: @CNBCAlex.

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