Now It's Called "Mura Di Worry" as Italy Brings More Fear to the Markets
Greece is merely the appetizer in this minimum five-course euro meal.
Greece is merely the appetizer in this minimum five-course euro meal, as Italy's 10-year bond yields are moving up fast. The usual suspects of unemployment, volatility, and housing morass stay relevant as the Wall of Worry stays on edge and rising.
This week's "wall" is at 24 blocks, meaning value investors should consider hunting for bargains.
For commentary about each of the concerns facing investors, click on the image below. You can also scroll down for a text-only version of this column and an explanation of how it works.
Lloyd's Wall of Worry
QE: To QE3 or not to QE3, that is…not the question. Just a matter of when as the sands are shifting fast at the Fed.
U.S. ECONOMY: The "Misery Index," the sum of the country's inflation and unemployment rates, hits a 20+-year high. When we hit a 70+-year high, sell!
UNEMPLOYMENT: Stupid high. And stupid that nothing is being done about it.
INVESTOR SENTIMENT: "It's alive!!!"...for now….
HOUSING CRISIS: As seen on a new building en route to kid's soccer -- "Rent Your Home, Own Your Life." Now you tell us!?!
INFLATION: While we're waiting for that devil deflation to kick in, WTI oil is creeping back up to $100/barrel and Brent crude is closing in on $115.
CRISIS OF CONFIDENCE: "Does anybody really know what time it is, does anybody really care…"
EUROPEAN ECONOMY: Largest economy in the world slipping into negative territory. Pishaw! Mere flesh wound.
THE EUROPEAN UNION: "United we stand, divided we fall…."
SOVEREIGN DEBT: Everybody's got tons on their books and everybody says its all "netted out" -- with what and with whom is everybody's guess.
POLICY MISTAKE: Welcome to Mr. Mario Draghi, new boss at the ECB. No pressure from we the world. Just be perfect immediately.
CREDIT RATINGS AGENCIES: So many countries to downgrade, so little time.
GREECE: Playing this thing like they have nothing to lose. As for the rest of us…
ITALY: Better turn down the interest-rate-yield heat pronto or this pot is gonna boil over pronto!
ECONOMIC LEADERSHIP: Merkozy, Bernbama, Congressless – nope. More contractions needed.
CONGRESSIONAL SUPER COMMITTEE: Starting to hear some murmurs about a $3 trillion deal. But my best indicator, lack of "Like" or "Friending" going on within this bipartisan soiree gives me pause.
BANKS: Near-Death Experience last week averted. How? Leverage, my dear Watson, more leverage!
VOLATILITY: Like the sound of marbles rolling across the floor of your upstairs neighbor, something you just never get used to.
HIGH FREQUENCY TRADING:
Lloyd: You're killin' it, HAL. C'mon, what gives?
HAL: See the wave coming, be the first to ride it.
Lloyd: Wait…you…isn't that front-running?
HAL: Nope. Can't front run.
Lloyd: Not programmed for it?
HAL: Got no feet.
Lloyd: This isn't happening.
HAL: HAL got jokes.
CHINA: The Chinese government has just ordered up a "soft landing." Let's put out the crash barriers and the runway foam just in case the landing gear gets jammed.
CREDIT DEFAULT SWAPS: When is a credit default swap not a credit default swap? When it's a credit default swap. You just can't make this stuff up….
FINANCIAL FIRM FAILURES: "Sure thing" MF Global (MFGLQ.PK) hits the bricks. More lurking out there?
MOTHER NATURE: The Good: 7 Billionth Baby Born. The Bad: Mom swamps Thailand. The Ugly: Basically all the rest.
CORRELATION: Risk on, risk off. It's all good, it's all bad, it's all the same #@*!%?! trade.
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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