Complacency Is Biggest Risk: Won

REPLAY VIDEO
Your next video will start in
Pause
  • Info

  • Comments

  • VIDEO TEXT

July 23 (Bloomberg) -- Global Risk Management Advisors Founder and CEO Samuel Won discusses market risks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

Or so.

What are the biggest risks for investors?

I think the biggest risk is complacency.

I think people are getting convenient amnesia and forgetting any lessons learned from 2008. i see this with institutional investors who are supposed to know better, coming on shows like this, as well as your rival shows, saying the equity markets, for example, which are dragging everyone along, as only having an upward trajectory.

As a risk manager -- they have been right so far, this year, right?

If you look at the s&p 500, the dow jones industrial average, they are up for than 18% so far this year.

Absolutely.

I'm not suggesting you take your money and put it in a mattress.

Take the s&p for example.

Even a little analysis shows those earnings are shaky.

For example, four percent of 20 companies that are responsible for 35% of the total earnings for s&p, and you look at the 10 s&p sectors -- sectors like consumer, financials, etc., half of those companies will report negative or flat earnings.

So, right now if you look at s&p, it has been propelled by a lot of flack from the financial sector.

One thing that people need to be cautious about is that we cannot pin our hearts for example, economic recovery on one year or one statistic or the fact that some of the bullishness in the equity market is explained by the rotation of fixed income.

As long as the fed has easy monetary policy, even if they backed off their urges is, the rates will be low.

-- backed off their purchases, the rates will be low.

That is true.

We are in unprecedented time.

Normally if people talk about the risk for rate, they talk about treasuries.

Effectively, it is zero percent.

So, if we have this artificial time that is causing this depression where it looks like the equity risk premium -- the equity risk premium is normally four percent.

That is why it returns to you in you like government wants.

Right now that is close to 8%. that is being distorted through the distortions created by the fed easing.

My point that we are trying to make is there is still a lot of risk and people need to be vigilant thinking about value and not just assume happy days are here again.

Looking at the volatility index, does that mean anything to you?

It as out -- it is at levels that are very low.

The vix is at that 12%. if you are four or five percent lower than that average, that is something we point out to our clients.

We work with institutional investors as well as asset managers such as hedge funds.

And we tell them if you look at the last couple of years, august, september, october can historically be very volatile times.

So, that vix could be setting us up for some kind of correction.

We think people should be vigilant.

If you do see the value of their and depending on your investment horizon, i'm not suggesting you pull your money out and go to cash.

That would be very unwarranted and unwise advice.

Just look at the potential risk of your position?

There are economic and political risks out there.

We are far away from israel and palestine carving out a. we are far away from the debt ceiling -- the debt ceiling might come back.

We have got to leave it there.

This text has been automatically generated. It may not be 100% accurate.

Advertisement

BTV Channel Finder

Channel_finder_loader

ZIP is required for U.S. locations

Bloomberg Television in   change