Short Seller Sees High Gas Prices, Slowing Spending Hurting Market

Douglas Kass, President of Seabreeze Partners, a hedge fund that shorts the market, told CNBC’s “Squawk Box” that he believes the bear will wake from his slumber and soon growl at increasingly sour market conditions.

He called higher gas prices the “functional equivalent of a tax increase on the consumer” and said it will hurt consumer spending.

Kass said the housing decline is not in its “second leg” and the “slow motion decline in consumer spending is quickening.”

“Cisco’s U.S. business enterprise sector was weak in the quarter,” Kass said Tuesday. “Guidance is plus 4% sequential revenue growth – disappointing seasonally. The Vista launch by Microsoft has stalled. DRAM prices are down 70% below cash production costs.”

He said technology companies reporting weak earnings include Seagate, Motorola,Flextonics and Sandisk.

He said the fundamentals for transportation stocks are deteriorating and noted that JetBlue reported “terrible earnings.”

Kass said 29% of first quarter revenue growth came from positive exchange rates--not organic growth.

“This will end badly,” he said.