It appears that Doug Kass — the money manager and RealMoney.com columnist who has been particularly bearish in recent years and predicted some of the economic crisis — is turning a bit bullish.

On his RealMoney blog, Kass says he sees “tentative signs, but positive signs nonetheless,” for the stock market. “On multiple fronts, equities appear to have incorporated the bad news and are undervalued both absolutely and relative to fixed income.”

Kass says that for the first time in several years, he is “in a (slightly) net long position”. He says that if forced to predict the S&P 500’s 2009 returns, he would guess a mid- to high-single-digit return for the full year, about 15% above current levels.

Among the good signs Kass sees:

1. The risk premium, the market’s earnings yield less the risk-free rate of return, is substantially above the long-term average reading.
2. Using reasonably conservative assumptions (most importantly, a near 50% peak-to-trough earnings decline, which is over 3x the drop in an average recession), the market has discounted 2009 S&P 500 earnings of about $47.
3. Valuations are low vis-à-vis a decelerating (and near zero) rate of inflation. Indeed, the current market multiple is consistent with a 6% rate of inflation.
4. Stock prices as a percentage of replacement book value stand at 1x, well below the 1.4x long-term average.
5. The market capitalization of U.S. stocks vs. stated GDP has dropped dramatically, to about 80%, now at the long-term average. Warren Buffett was recently interviewed in Fortune Magazine and observed that this ratio was evidence that stocks have become attractive.
6. The 10-year rolling annualized return of the S&P is at its lowest level in nearly 75 years, having recently broken below the levels achieved in the late 1930s and mid 1970s.
7. A record percentage of companies have dividend yields that are greater than the yield on the 10-year U.S. note. At 46% of the companies, that is over 4x higher than in 2002 and compares against only 5% on average over the last 30 years.

Kass also sees a number of broader signs for optimism. One is, well, all of the negativism, which can be seen in the rising popularity of doomsday pundits like Nouriel Roubini. Usually, periods of high pessimism are followed by strong stock gains, and we are in one of the most pessimistic environments ever. “Today,” Kass writes, “there is almost unanimity that neither an aggressive monetary policy nor a massive stimulus program nor an unprecedented and large bank rescue plan will have any possibility of success.”

“It’s so bad out there,” he continues, “that some are questioning whether the world’s economies will ever recover from the current mess. In doing so, they seem to be ignoring not only an emerging valuation opportunity but a number of events that should conspire to bring us out of the abyss, including (but not solely) the magnitude of the monetary and fiscal stimulation, the consumer tax cut and corporations’ margin benefit from lower commodities (particularly of an energy kind), improving investor liquidity, the lowered cost of credit and a sentiment extreme of negativity.”

Another good sign is the fact that certain parts of the market have had better price action of late. “The emergence of this sort of performance is a positive market tell and is a growing contrast to the uniform and correlated drop in almost every asset class during the second half of 2008,” Kass says.

Kass is still hesitant about stocks, but he seems to be saying that the pros of buying may have begun to outweigh the cons. “It might be too early to be greedy when others are fearful, but I suspect that we are not far off from there,” he says. “When I objectively weigh all the body of evidence … I conclude that we are likely at the lower end of a broad trading range for the S&P 500. Fourth-quarter 2008 lows should hold.”