Here Comes the Fed!

By Lloyd Khaner  JUL 17, 2012 9:15 AM

What will Chief Bernanke say to Congress this week? The QE3 question is just one of 29 issues on today's Wall of Worry.


MINYANVILLE ORIGINAL Talk is cheap and quantitative easing is expensive, so what do the financial markets want the Fed to do regarding QE? Money managers say, “No more,” but their portfolios say, “Third helping, please!” And what will Fed Chief Bernanke say to Congress this week? My guess: Probably some confusing combination of no, yes, and maybe. And so it goes, and so it goes….
Last week’s market action went as predicted as the Dow (^DJI) and the S&P 500 (SPY) finished the five days of trading within a few points of where they started while gold managed to quietly tack on about 1% to its price. That said, the market action feels tired and fed-up (lower case “f,” that is). This week we will likely see a lot of stock specific pushing and shoving as the fire hose of earnings comes at us full blast. That said, by the end of this week’s five days of fun, the markets may just wind up where they started: Flat and fed-up. And so it goes, and so it goes….

This week's Wall of Worry stands at 29 blocks with "LIBOR" and "corn" joining the long list of issues facing global investors. Scroll down for a text-only version of this column and an explanation of how it works, or click on the graphic below for an interactive version of Lloyd's Wall of Worry.

Also read: Investing Like an Insider: What Three Legendary Stock Pickers Are Buying Now

Lloyd's Wall of Worry, Text-only 
QE: The UK jumps into the breach with some pumping, but all markets remain fixated on the US Fed for a major water bomb helicopter drop.
US ECONOMY: Burning up, literally, as 61% of the US is now in a drought. No wonder I can’t get the Joads (The Grapes of Wrath family) out of my mind.
UNEMPLOYMENT: Just read a story about a US unemployment office laying off employees. My ever-aching brain wonders where they go to collect unemployment insurance.
INVESTOR SENTIMENT: Straight-jacketed.
HOUSING CRISIS: Hey, mates in Australia! The joys of major asset collapse look to be coming soon to a former safe-haven country like you.
CENTRAL BANKS: They keep baking the same cake with the same recipe: “Cut rates, lower reserve ratios, celebrate our genius, watch markets react positively for five days, watch markets drop for three months, cut rates, lower reserve ratios, celebrate our genius.”
EUROPEAN ECONOMY: Going to get worse before it gets even worse than that. But hey, take off August anyway.
THE EUROPEAN UNION: They act like the coolest clique in high school. I wish that when I was in high school I had figured out that the cool kids hated each other and were flat broke.
SOVEREIGN DEBT: Only one way this ends and that’s with a “DNR” – Do Not Resuscitate/Default 'n' Restructure.
SPAIN: Looking like their bank bailout needs a bailout by countries that may need bailouts in the future.
10-YEAR TREASURY YIELDS: What’s all the fretting about? The 10-year is telling us that inflation will be only 1.50% ten years from now…and that we should all keep our voluntary suspension of disbelief on full blast until further notice.
JAPAN: I won a bet! I bet that scientists would find the Higgs Boson “God” particle before economists would find the Japanese economy.
VOLATILITY: Has moved back into the house permanently. All of our houses, that is.
Lloyd: Who do you think will win the presidential election in November?
HAL: Depends.
Lloyd: Depends on what?
HAL: On how many votes I’m able to register while the polls are open.
CHINA: Numbers keep coming out and they’re not too hot and…not too hot.
STOCK MARKET TECHNICALS: A daily coin toss. The only question is which currency to use.
LIBOR:  Heads rolling, dollars flowing, and politicians glowing.
GLOBAL ECONOMY: Like trying to walk an uncooperative dog on a leash. You make some forward headway, but man, it's a drag.
INDIA: Has anyone heard from roughly 18% of the world’s population lately? Oddly quiet.
TOO BIG TO FAIL BANKS (TBTF): “They say that breaking up is hard to do. Now I know that it's true…

US PRESIDENTIAL ELECTION: I wonder if the members of Congress will chose not to vote on this like all the other stuff they pass on?
CREDIT MARKETS: It ain’t saying much, but through all the muck, mire, and manipulation, they still point to financial true north as often as possible.
THE CLIFF: Why do today that which you can put off until five minutes before it supernovas in your face?
GREECE: Just sell Santorini to China and we’ll call it even.
CORN:  Price of the Golden Soybean is up about 40% in the last month. No inflation here, folks, just keep moving along…
THE EURO CURRENCY:  Slowly depreciating, like it's walking down a staircase. Let’s hope it doesn’t miss a step.
ECB: Celebrates cutting the overnight lending rate to banks to 0% with a crazed soccer goal knee slide.
Goodbye trickle of reports, hello fire hose.
MONEY MARKETS: US banks pulling in their horns and pulling up their stakes in Europe as the EU money market cupboard is bare. Remember what happened the last time money markets got rattled?  LIQUIDITY ALERT.

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.

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