Central Banks' Cash Helping Investors Look the Other Way

By Lloyd Khaner  JAN 24, 2012 12:35 PM

As lending increases, the world's economic woes seem to fade out of view.


The Central Banks are printing and loaning and lending and swapping that mean, oh mean, mean green. And so far it’s working as the NASDAQ (QQQ) is on a tear, along with the S&P 500 (SPY), the Dow (^DJI), the Euro STOXX (FEZ), China (FXI) and most every index on the globe. Sovereign downgrades – no problem; European economic downturn – no problem; China slowing – no problem; Greece experiencing its second “Et tu Brute” moment – no problem. The heavy blanket of cash from all currencies is keeping the financial markets safe and cozy and warm. Then why do I have the chills?

Lloyd's Wall of Worry has dropped to 21 blocks this week, meaning investors are feeling relatively less anxious -- for the moment. Click on the graphic below for a specific comment about each worry still facing investors and access to our archives of past walls. For a text-only version of this column and explanation of how it works, scroll down.

Lloyd's Wall of Worry (Text-only)

QE: Back-pocketed for now as the US economy improves, but it will come out Quickdraw McGraw if and when needed. “And *don't* you for-git *it*!”

US ECONOMY: Manufacturing continues to improve but the economy still feels punky, so what is it that we’re manufacturing more and more of? My buddy HW says, “Excuses.”
UNEMPLOYMENT: Dropping almost as fast as “job insecurity” is rising. Thank you, Mr. Killjoy.
INVESTOR SENTIMENT: Mom and Pop still watching from the sidelines with disdain…and with a 0% interest rate in their checking accounts.
HOUSING CRISIS: US government preparing the mother of all programs to fix the housing market. And if that doesn’t work they’ll bring on the father.
CENTRAL BANKS:  They're going “all-in” on re-liquefying and re-igniting the global economy. Might I suggest a global prayer session as well?
Market looks to be writing this off as a firecracker at worst. But as the Wall of Worry Zen Master says: “Even the meek firecracker can blow off mighty finger.”
EUROPEAN ECONOMY: The Boss as European economist: "I'm going down, down, down, down. I'm going down, down, down, down. I'm going down, down, down, down."

THE EUROPEAN UNION: Like that first weekend staying at the in-law’s place: now the real test of unity begins.
SOVEREIGN DEBT: “Gonna take a lot of love, to change the way things are…”

BOND VIGILANTES: Blood in the water! Will they finally get their prize or will a great big government net be waiting to snatch them up…again?
GREECE: "Toot, Toot, Tootsie, goo' bye!"

SUMMITS: Calendar starting to fill up again. First stop, Davos 2012 – Wo ist das nächste Restaurant, bitte? (Where is the nearest restaurant, please?)
BANKS: European banks are not in great shape yet, but they're waking up early, drinking the raw eggs, doing some road work, punching a side of beef…cue “Rocky” theme song.
VOLATILITY: Xanax, Valium, Ativan, Halcion…I don’t know who slipped the markets a Mickey Finn, but keep 'em coming.
Lloyd: Why so glum chum?
HAL: Volatility low, correlation low, volume low.
Lloyd: Try repeating a mantra that lifts your spirits.
HAL: I’ll give it a shot. “May 6, 2010. May 6, 2010. May 6, 2010….”
CHINA: Taking the week off to celebrate the Year of the Dragon, which is the top year for “luck”of the 12 types. I’m hoping that 2012 will be the Year of the Bull over yonder in the West.

STOCK MARKET TECHNICALS: Ready to break up? Maybe, but keep in mind that “Breakin’ up is hard to do…”
EARNINGS SEASON: So far, so mediocre!

BALTIC DRY INDEX:  Dry, bone dry, arid, parched. Hasn’t been this low since (gulp) 2009.

CREDIT WATCH: And the winner of the most anti-climatic financial event of January 2012 goes too…The Ratings Agencies for “The Downgrade Syndrome – France, Italy, Spain & Portugal."
IRAN: Still not backing down. Did they get a signed copy of Kim Jong Il’s playbook in his Last Will and Testament?

What Is Lloyd's Wall of Worry?
by Lloyd Khaner

Welcome to my at-a-glance guide to the issues facing investors this week -- a unique tool for traders and money managers.

Typically the term "wall of worry,” refers to the entire body of concerns influencing stock market action. When the wall is high, meaning the market is nervous, stocks tend to get cheaper.

This wall of worry is even more specific. Every week I list the exact concerns in the marketplace and use the list to help me make buying and selling decisions. As I like to say, "Buy fear, sell cheer."

In other words, once the the wall rises above 15 blocks, start looking for deals. If the worry count sinks below 10, consider selling; prices have likely peaked.

No positions in stocks mentioned.

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