Why listen to Kass?…   This is all part of what I call the hot hand theory… meaning that the guy with the hottest hand, sizzling… the one who has nailed all of the markets big moves, and he seems like he got tomorrow’s newspaper today… is probably worth listening to… and there is no question that that is Kass… he made his call to buy, buy, buy, when the S&P 500 was at 675... and guys like Roubini were saying dive, dive, dive… run silent run deep… well the S&P 500 bottomed at 674 intraday… one point from Kass’ called shot… now it is at 851 and change… holy cow.

Following the hot hand is usually the right thing to do short term… so do not have too much pride that the guy is really, really good and worth copying… I do not have that kind of pride and I am a total egomaniac… I believe that Doug Kass has the record to make him totally credible… he was maybe the biggest bear for the last 8 years and he became a bull at the exact bottom… and now he is still bullish but he thinks that the market is over bought… meaning that stocks went up too far, too fast… and could take a 5% or 6% pounding before they start going higher… you might think that this is funny… or you might that it is hopefully naïve… or you might think plain moronic… just to follow the hot hand… remember I have been doing this for 30 years… I gave my clients at my old hedge fund an annual return of 24%, after all fees… which could get pretty hefty… as like most hedge funds I took a 20% cut of the money I was making… so, maybe Cramer knows something… I don’t know.

I am not saying that Kass is definitely right… I am saying that he is worth listening to… so what is his argument… he says that many stocks have simply been too strong vs. the lacking fundamentals… he says that he sees so many stocks in the S&P 500 that are above their 50 day moving average… key measurement for technicians, the people who look at charts… and that such a level of enthusiasm has usually produced a sell off as there is too much bullishness… 89.2%, this is from him, of the S&P stocks are above their 50 day moving average on April 17th… see, so it is safe to say that it is overbought… so it is way, way up off the bottom… and he thinks that it probably goes down a little bit… he believes strongly for example in a housing bottom, he loved the Toll interview last night… thank you Bob… but he points out that the actual housing related stocks have already anticipated that bottom… no kidding, Toll has moved up big from the bottom…. so has Lowe’s, another good housing play…. Kass who remains extremely bullish for the long term.. .says the time to buy those stocks was when no one believed… hey how about right here when he called the bottom… that is a good time to buy… not now, he says that there are a lot of bullish converts.

Kass has the goods…. he has been so right… that just as we presume innocence in a court of law, we presume that Kass is going to be correct until he is proven wrong… I do not know if Doug is going to be right about the pull back… but I do respect a hot hand… and even more than that I do respect the idea that it important to sell… to take profits when you have them… and that is one of the reasons that I want to talk about his call… because there are so many pigs out there, that they get their heads cut off… you can decide for yourself whether you think he is right… but do not dismiss him out of hand because you think selling is wrong… that is why I want to make this point very clear… if you agree with Kass, then the responsible move is to sell, sell, sell… at least a decent chunk of your positions… and wait for the decline that he is calling for before you put money back in… I know that it sounds obvious… it is also difficult, it is like Amazon was up big after the bell… and you know my favorites, Research In Motion, Amazon, Google, and Apple are on fire… but a lot of you still are not going to sell even if you agree that a pullback is on the way.

I say come on… I am sure you are asking plaintively no doubt, how can anybody be so dumb to sell and then try to get back in… this is not about intelligence… investing is as much about your emotions and your prejudices as it is about your ability to think… in fact, probably more… and we have all been endlessly beaten over the head… with the idea that selling is irresponsible… and the only prudent way to invest is to buy… and then hold stock no matter what… even if you think they are going down… because eventually they are supposed to go higher… we are told over, and over, and over again that trying to time the market is the height of arrogance and irresponsibility… so if you sell to try to avoid a 5% decline, you are not an investor, you are a dirty, dirty, trader… or to put it another way, we have all been conditioned to think that we must take the pain… because somehow it is immoral or reckless not to take the pain… the bias is there… I need you to fight it… and your portfolio needs you to fight it… where does it say that you can’t or shouldn’t sidestep a decline… do you want to go get drilled at the dentist with no Novocain… I say take the Novocain… book some gains… it is okay… and avoid some pain… the pain that Kass predicts is going to happen… please remember what got us into trouble in the first place… an unwillingness to sell even when I screamed it on the show… that bias against selling created a false sense of security… and helped make sure that you took the round trip up and then down… instead of taking the fabulous gains that you had near the top… or even after the Dow had dropped a few thousand points… and you still could have taken off of the table.

The bottom line…