NEW YORK (TheStreet) -- Rising levels of risk tolerance are becoming worrisome, but it is not yet time to hit the sell button, according to the most recent letter to investors from Oaktree Capital (OAK) - Get Report Chairman Howard Marks. 

"Markets are riskier than at any other time since the depths of the crisis in late 2008 (for credit) or early 2009 (for equities), and they are becoming more so," writes Marks, whose company manages some $80 billion, largely "distressed" assets. Still, he adds, "I don't think it's time to bail out of the markets. Prices and valuation parameters are higher than they were a few years ago, and riskier behavior is observed. But what matters is the degree, and I don't think it has reached the danger zone yet."

Among the reasons Marks isn't running for cover just yet:

First, financial engineering remains subdued. Marks writes that he "can't think of a single new 'modern miracle' that's been popularized since the crisis."

Also, the use of derivatives has also been limited, something Marks attributes to uncertainty over new regulations. (Nonetheless, some market watchers are getting excited about the return of risky new strategies using derivatives, something my colleague Antoine Gara highlighted Tuesday as he drew many of the same conclusions as Marks.)

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Marks, who is best known for leveraged buyouts, notes deal activity is well off the pace of 2006-2007, when "it seemed a buyout in the tens of billions was being announced every week."

In equities, Marks notes the S&P 500 is valued at 16 times earnings -- its historical postwar average -- vs. about 30 times earnings in 2000.

Still, Marks is concerned about a "global glut of liquidity," as well as issuance of high yield bonds that carry low credit ratings and have very few protections for investors. He also pointed to the investor frenzy to participate in the Twitter IPO, and the rejected $3 billion offer for Snapchat, a company with no revenues, as signs tolerance for risk is getting too high.

-- Written by Dan Freed in New York.

Follow @dan_freed

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.