Risks, Chart of the Day

For all the risks in the global economy (more below) investors are historically complacent. Just how complacent? Take a look at the chart below, comparing the CBOE Volatility Index (VIX) with the Inter@ctive Week Internet Index (IIX). Pretty clear. The less investors care about risk (VIX), the more Internet stocks they buy (IIX). What kind of risk is being taken here? Here are the top five holdings of IIX and their respective p/e ratios. 1. Qualcomm (QCOM) -- p/e of 49 2. Broadcom (BRCM) -- no earnings, but it's losing about $9.90/share 3. eBay (EBAY) -- p/e of 99 4. Juniper (JNPR) -- p/e of 188 5. Symantec (SYMC) -- p/e of 39 But aside from simple market/value risk...there's plenty of Marco risk. Stephen Roach had an excellent report from the World Economic Forum at Davos. The outsourcing issue is beginning to rankle a lot of people...mostly because it's starting to cost high-paying white collar jobs as well as high-paying manufacturing jobs. He also makes the point that globalization is a destructive as well as a creative process. The upside for Americans, the rest of the world is producing astonishingly cheap goods for us to consume. The downside, Americans who used to make their living making this goods or providing these services are out of a job. The net result is a return to protectionism...which our fearless political idiot leaders in Washington have no shame in returning to right away. As the campaign heats up this spring and summer...don't be surprised if the candidates try to outdo each other on ways to save American jobs, the American farm, and the American worker. Globalization is generally good for us, except when it's not. From Roach (emphasis added is mine): "The fifth theme I took away from Davos this year is the most worrisome of the lot, the mounting risk of a protectionist endgame. Former senior policy makers were especially worried about the ramifications of the rapid emergence of China and India. One argued that the pace of change, to say nothing of the scale and scope of such development, shatters any semblance of globalization's status quo. Another stressed the precedent of agriculture as an example of how badly the modern world has bungled secular declines in core economic activities; the fear is that today's protectionist web of farm subsidies could well be a harbinger of what's to come in the aftermath of the secular decline in manufacturing. Needless to say, pressures on services would only exacerbate this risk. "Concerns over mounting protectionist sentiment in the US Congress were especially evident in Davos. Japan and the US have led the way in China bashing, and there is fear that Europe is about to follow suit. History does not speak well of the world's ability to cope with large entrants in the arena of global commerce. The darkest fears of Davos pertained to the lessons of such episodes in history and how they may apply to a world that is now attempting to cope with the rapid emergence of China and India, nations that collectively account for more than 35% of the world's population. Trade liberalization, the mainstay of globalization, cannot be taken for granted in this climate. "Yes, there was an improved tone in Davos this year. But it came off of easy comparisons, a world that a year ago was weak economically and on the brink of a serious war. A rebound in the global economy and world financial markets has certainly tempered any residue of angst -- at least for the time being. Moreover, there was a nearly unanimous view that nothing bad could happen to this US-centric world between now and the November 2 American presidential election. At the same time, there was a palpable sense of unease as to what might then follow in the post-election climate. This tug-of-war between a constructive near-term outlook and the ever-mounting strains of globalization was the essence of this year's debate at Davos. "