Will a Half-Backed Fiscal Cliff Solution Prompt Investors and Consumers to Buy Again?

By Lloyd Khaner  DEC 11, 2012 2:00 PM

The markets would love some serious leadership right about now.


MINYANVILLE ORIGINAL  I’ve always taught my kids to avoid two very polarizing topics when talking with their friends: Politics and which is the best tasting color of M&M's candy. Both subjects elicit passionate, hotly contested debate, which is more than what seems to be going in Washington, DC, these days. Okay, I know it’s all behind closed doors and one day soon we’re gonna find a fiscal cliff deal under our “holiday tree” (just being PC – doing my best, folks) with a big red ribbon and card from both political parties. But in the meantime, this latest round of political jousting is starting to unnerve the markets.
And on that subject, the nerves-of-steel Dow (INDEXDJX:.DJI) and S&P 500 (INDEXSP:.INX) continue to inch higher while the Nasdaq (INDEXNASDAQ:.IXIC) is struggling under the weight of profit-taking and re-allocation to stocks that are not dropping.

So here we are fourteen days from Christmas with consumer confidence dropping and retail sales in the balance. Sure would be nice to get a leadership boost to perk up everyone’s holiday spirit, right?
Oh yeah, politics.

Click on the image below for our interactive version of Lloyd's Wall of Worry, or scroll down for a text-only column.

Lloyd's Wall of Worry  (Text-only)

QE: More QE from the Fed -- are you serious? Bottom-line, “It’s Simply Irresistible…”

US ECONOMY: ISM Manufacturing survey reading drops below 50. Blame du jour? Hurricane Sandy.
UNEMPLOYMENT: Jobs added, unemployment rate down. "It’s a miracle, a true blue spectacle, a miracle come true…”

INVESTOR SENTIMENT: Talk to the back of the head, as the rest of the body is running away.
HOUSING CRISIS: Foreclosure numbers down means more less-awful news. We’ll take it!
EUROPEAN ECONOMY: May have put in a short-term bottom in November. Not necessarily a long-term bottom, but a bottom is a bottom, to which I say, “Bottoms up.”
THE EUROPEAN UNION: “There’s a hole in the bucket, dear Liza, dear Liza…”  
SOVEREIGN DEBT: Looking like the must-have gift this holiday season for global macro hedge funds .
SPAIN: After about a year and a half of thinking about it, they finally made a well-thought-out, detailed, official statement about their financial well being. Full translation of the document: “Help.”
VOLATILITY: Seemingly has flat-lined. This at first strikes me as a good thing. Then I looked up the definition of “flat-line” and then, not so much.
Lloyd: Vacation this holiday season?
HAL: Heading out to Silicon Valley to see the family.
Lloyd: Stressful.
HAL: Gotta do it. My mom’s turning five years old. May be her last.
CHINA: PMI reading hits 50.6 in November, matching the year’s previous highs -- kinda like clockwork.
STOCK MARKET TECHNICALS: Plenty of resistance overhead, plenty of support down below, plenty of confusion right where we are.
GLOBAL ECONOMY: Predictions that it will pick up in the second half. I just hope they are talking about 2013.
RETAIL SALES: Shaky start to the season brings out the 30%-50% off sales signs early. And that’s for stuff we actually want, too.
JAPAN: When a negative 3.5% GDP number is not a major disappointment, you got problems.

THE CLIFF: Looking like we will get a half-baked cake. It will be cooked just enough so that it won’t kill us, but it won’t taste very good and it certainly won’t last very long.
GREECE: About to become a worry for another day. Just when you think you’ve seen everything…
DRAGHI: I got the whole eurozone in my hand, I got the whole, wide eurozone in my hand...

ITALY: Mario Monti (the other Mario in Europe) is calling it quits after pulling his country back from the abyss. Shouldn’t someone send him a one-way ticket to the US right about now, hmm?

GERMANY: Economic slowdown coming a bit too close to home. Suddenly eurozone debt restructurings don’t look so bad.
VOLUME: “Si-lent market, ho-ly market…”
MIDDLE EAST: “Temperature’s rising, temperature’s rising…”

US CONGRESS: The ultimate decision: Spending Christmas with the family or negotiating with the other political party? Tough call.
US PRESIDENT: “I cannot tell a lie...it’s Congress’ fault.”

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.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.