Stocks are Cheap Statistically: Doug Kass

By on November 3, 2011

Doug Kass - Seabreeze PartnersCNBC’s Melissa Lee interviewed Doug Kass, Seabreeze Partners, today.  Lee asked Kass to comment on the troubles at MF Global and Jefferies Group.  Kass said he didn’t know much about Jefferies’ balance sheet, but said the drop in the stock was probably due to guilt by association.

Kass also mentioned some facts regarding what he called a statistically cheap stock market.

Kass said he began the year predicting a flat market for the year based on his view of the labor market and the housing market.

Kass stated the stage was set for a better 2012. He indicated that investors should be greedy and buy the dips and hold stocks.

Kass said retail investors have taken $420 billion out of equity funds and put $820 billion into fixed income since 2007. He added that pension funds are heavily skewed towards fixed income.

Kass believes the moves in Europe are going to, “catch on the economy.” He added that the risk of recession has receded from 40-50% to under 20% currently, by his estimation.

Kass said stocks, by any measure against interest rates, are very cheap. He mentioned Leon Cooperman, who on Monday cited a statistic that over the past 50 years the average multiple on stocks has been about 15.2 times earnings. We’re currently trading at 12.5 times earnings. This, while the 10 year yield is 2%, against a historical average of 6.67% over that 50 year period.

Kass stated if there was some good growth, “you could see a huge reallocation out of bonds into stocks in 2012.” He added if you can short fixed income you should do it with impunity. Retail investors should reassess their position if they have an imbalance towards bonds in their portfolio.

One Comment

  1. Wall Street Sucks

    November 5, 2011 at 8:59 am

    I’m tired of these Wall Street bastards being bailed out whenever they take on too much risk. Occupy them and run them out of town!

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