On the short side, I have, as you know, for over a decade looked for companies that face cyclical and secular challenges. And I think among the sectors asset managers and retail stocks remain the most attractive shorts in our portfolio.
So some representative shorts would include companies like Energizer, Fastenal, a bunch of dental distributors - Henry Schein, Patterson Dental, Danaher. Asset managers, as I mentioned, Mike Franklin Resources, Perrow, Price, Webel, and Reed (ph).
And finally, most recently, reflecting my concerns about the consumer, we recently initiated short positions in several apartment REITs.
HOLLAND: Interesting. Just so you know, this is a balanced program. Later on the show we'll have Brian Rogers of T. Rose Price, and Chief Investment Officer. Again, one of the finer investment minds of our generation. And I'd like to hear why you think the asset managers are dangerous in here.
KASS: Well, as you know, I think that there is a cap to the upside of the equity markets so there is cap to these stock prices because they are perceived as leverage plays on the equity markets.
But more importantly, 12b-1 fees - the fees that the actual investors of mutual funds reimburse the management companies for, these are distribution and marketing costs, - are under the microscope and Shapiro, the head of the SEC, has said that she wants to address that. And I suspect the allowance of these fees to be reimbursed will either be reduced or possibly even totally eliminated, which would be very deleterious to these companies.
The second thing is most of the asset growth - the assets under management for companies like Franklin Resources, have been in fixed income and I think there's a bubble in fixed income.
HOLLAND: Could we - could we stay on that for one second, Doug?
KASS: Sure.
HOLLAND: Many of the listeners I'm sure have a major chunk of their assets in fixed income, whether its CDs, money market funds, treasuries, bond funds. Could you kind of put some flesh on that comment you just made in terms of when you say it is a bubble, is this a dangerous area for the listeners?
KASS: Yes, a combination of a flight to safety with all of the concerns most recently about the euro combined with the fact that the due bills are coming, as I said in the opening, introductory remarks, from the fiscal stimulus that took us out of the recession both in the U.S. and over there abroad, all over the world. It is going to ultimately put pressure on interest rates.
And one of the reasons I think the equity market has gotten attractive, I am pretty convinced that the S&P is going to earn somewhere between $82 and $85. So if you think about it, the stock market is trading at about a 12.5 multiple within the context of an environment where cash has no return and as we said rates are low. The yield on the ten year is around 3.25 percent. That compares to around an average of around 17.5 times under similar circumstances over the last century.
