{"id":5138,"date":"2014-12-18T05:14:48","date_gmt":"2014-12-18T13:14:48","guid":{"rendered":"http:\/\/blog.paladinregistry.com\/?p=5138"},"modified":"2014-12-18T05:14:48","modified_gmt":"2014-12-18T13:14:48","slug":"risk","status":"publish","type":"post","link":"https:\/\/www.paladinregistry.com\/blog\/investing\/risk\/","title":{"rendered":"Where is the Risk?"},"content":{"rendered":"

\"market<\/a>This past year has left many investors scratching their heads and thinking, “Why all the focus on risk when the stock market keeps marching higher<\/a>?”\u00a0 Though risk is something most people don\u2019t ponder, every decision we make in managing our clients’ portfolios takes “risk” into account. The nature of risk is that many events could occur in the future, but not all events will occur.\u00a0 Over the past couple of years we have made portfolio adjustments out of concern over the following events and their potential to negatively impact our clients\u2019 accounts:<\/p>\n

Things that concern us:<\/strong><\/p>\n

– Slowing Emerging Market economies<\/p>\n

– A double dip recession in Europe<\/p>\n

– A real estate bubble burst in China\/another global financial crisis<\/p>\n

– Geopolitical risk in Ukraine and the Middle East<\/p>\n

– The end of Quantitative Easing<\/a> by the Federal Reserve<\/p>\n

– Structural changes in the US labor market<\/p>\n

– A lack of wage growth in the US<\/p>\n

– High Price\/Earnings ratios<\/p>\n

Current widely held public beliefs:<\/strong><\/p>\n

– Central banks will keep supporting the markets because it is good for our economies<\/p>\n

– Though other economies are slowing, that won’t have an impact on the US<\/p>\n

– Current Price\/Earnings ratios are justified because interest rates are so low<\/p>\n

– I would like higher returns.\u00a0 Please give me more stocks<\/p>\n

– Buy stocks whenever the market dips<\/p>\n

These views are worrisome to us because of their implied apathy regarding market risk<\/a>.\u00a0 Although our concerns have not materialized to date, does this mean that we should not have been proactive in trying to protect client assets against any adverse outcomes? \u00a0We think the answer to that is a resounding “No”<\/strong>. \u00a0The value of risk reduction is hard to see in a rising market.\u00a0 There will come a day when market sentiment and investor risk perceptions change, likely due to an \u201cunforeseen\u201d market moving event that causes wide spread investment loss. Like the flu virus which may or may not infect the patient, we will continue to focus on risk or \u201cget the flu shot\u201d, just in case.\u00a0 To quote Warren Buffet, “After all, you only find out who is swimming naked when the tide goes out” (Letter to shareholders 2001).<\/p>\n

To learn more about Kenyon Lederer, view his Paladin Registry profile<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

This past year has left many investors scratching their heads and thinking, “Why all the focus on risk when the stock market keeps marching higher?”\u00a0 Though risk is something most people don\u2019t ponder, every decision we make in managing our clients’ portfolios takes “risk” into account. The nature of risk is that many events could occur in the future, but not all events will occur.\u00a0 Over the past couple of<\/p>\n","protected":false},"author":50,"featured_media":5140,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[395],"tags":[],"class_list":["post-5138","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"yoast_head":"\nWhere is the Risk?<\/title>\n<meta name=\"description\" content=\"This past year has left many market investors scratching their heads and thinking, "Why all the focus on risk when the stock market keeps marching higher?"\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.paladinregistry.com\/blog\/investing\/risk\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta 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