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Sovereign Debt Joins the Wall of Worry


Fresh concerns about sovereign debt add to concerns facing world markets.

Editor's Note: This is a text version of Lloyd's Wall of Worry. For our graphic page, click here. For more on how to read the Wall of Worry, see below.

The Wall of Worry rises to 21 blocks with the addition of a fresh concern, sovereign debt. Here's an updated look at the issues facing world markets.

LIBYA: Isolated and seemingly devolving into madness.

BAHRAIN: The "Little Big Man" in the oil patch.

SAUDI ARABIA: The pin in the hand grenade that is the Middle East. Handle with care House of Saud, handle with care.


EGYPT: Quiet for the moment. I'm not complaining, mind you. It's just eerily quiet.

OIL PRICES: $100 oil, give or take, seems to be the new "just right" for the economy. Which means it's finally official -- I'm old.

JASMINE REVOLUTIONS: Now more a matter of who isn't shaking it up on the Middle East dance floor rather than who is. The remaining wallflowers: Syria and Jordan.

AFTERSHOCKS/TSUNAMI: Wall Street's crash course on hot zones and coastal geography begins. Might I suggest auditing seminars in "humbleness" and "gratefulness" as well?

JAPAN: Here it is, world, financial and otherwise, another one of those moments to step up and do the right thing. "Oh, I get by with a little help from my friends…."

CURRENCIES: The yen joins the monetary race to the bottom. The only ones more relieved than Japan's exporters are the 5x levered "I'd rather be lucky than smart" carry traders who are short the Japanese buck.

CHINA: Economic growth ratcheted down from torrid to white hot. And how does the massive, powerful, global economic zeitgeist react? By shuddering and hiding under the bed just like my childhood pedigree show poodle used to do. Reassuring.

CALIFORNIA AND THE OTHER 49 STATES: Let's start with the big stuff like paving the freakin' roads! Then we can move on nicks and nats like budget deficits, keeping the schools open and failed state bankruptcies.

QE II: "Like sands through the hourglass, so are the days of our lives…."

U.S. ECONOMY: Gasoline prices up, consumer sentiment down. We're a lot of things here in America, but complicated isn't one of them.

UNEMPLOYMENT: A problem, but nothing a couple dozen multi-billion dollar infrastructure work projects wouldn't fix. Has anyone seen my 1930s fiscal policy handbook?

U.S. GOVERNMENT SHUT DOWN: If my friends Jean and Nick can put together a spectacular wedding in just three months, the 535 reps in Congress should be able to work out a viable budget in the same time frame. Of course, I would have more confidence if my friends were on the case.

HFT: Hear no evil, speak no evil, see no evil. The Dodd-Frank Bill makes no mention of high frequency trading -- yet another testament to our "pay no attention to the man behind the curtain" conjuring of legislation.

INVESTOR SENTIMENT: We've all got that "shake, rattle and roll" feeling, but with banks paying infant rates (less than 1% on deposits) the markets are still the only real game in town.

HOUSING CRISIS: Another promising spring housing season is upon us! Though looking like it will once again finish Wicked Witch of the East-style.

INFLATION: The countries of the world can raise their interest rates all they want, but in the words of that inspiring '70s economic theory duet by Johnny Mathis and Deniece 'Niecy' Williams: "Too much, too little, too late…."

SOVEREIGN DEBT: This problem may be in hibernation but it ain't dead. When it wakes up, next year or tomorrow, nobody knows....

What is Lloyd's Wall of Worry?
By Lloyd Khaner

Since the 1930's, when Benjamin Graham created the concept of "Mr. Market", investors have been trying to figure out what events or fears are influencing the market. Investors call this body of concerns the "Wall of Worry."

Oddly, no one has ever kept a list of the worries, except for me. I've been managing money for the last 20 years and keeping a running tally of all the things that are bothering investors. It's an important part of my value investment discipline, because when Mr. Market gets nervous, stocks tend to get cheaper.

As Warren Buffett says: "Be fearful when others are greedy and be greedy when others are fearful."

Click on the image below for a graphic version of Lloyd's Wall of Worry:

Lasting through April 15, 100% of the donations made to The Ruby Peck Foundation for Children's Education will be channeled to the children of Japan as they attempt to find their footing following this natural disaster; and to kick off this drive, we'll pledge $5000 to get it started. Please do what you can, as it will add up, and thanks.
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