The biggest risk facing investors right now is the unsustainable stock market valuations that will eventually mean revert, said Ted Oakley, founder and partner of Oxbow Advisors.
“From this level, if you look at your standard deviations of valuations relative to where the market is, and you just go back to an average of where it should be, that’s probably right now, somewhere between a 40% and 50% break,” Oakley told David Lin, anchor for Kitco News.
Oakley noted that while a correction of that magnitude is not necessarily imminent, but a large correction is likely within the next two years.
If investors have ample liquidity to capitalize on such a correction, “you could really make a lot of money,” he said.
“The highest risk is in the stock market. I think real estate is risky too. We’re in a period that we call it ‘everything is speculative,’ and that’s true, almost everything is speculative. Private businesses are selling for speculative prices, but the markets are selling for prices that actually have never existed before,” he said.