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Liquidity Alert! Some Banks Are Pulling Out of EU Money Markets


A few US banks are pulling up their stakes in Europe -- just one of the 29 worries facing investors this week.

MINYANVILLE ORIGINAL You've got a choice: Take the week off and ignore the markets, or stay eyeball to CRT/LCD screen and watch every tick. My guess is that the market's end result at 4 p.m. Friday may be unchanged from 9:30 a.m. Monday five days earlier. Recent market action in the S&P 500 (SPY), Dow (^DJI) , Nasdaq (^IXIC), and even in precious metals has taken us right back to last year's glory/gory days of correlation. As the hackneyed, redundant, heard-it-a-million-times, cliché goes, "What goes up must come down," to which I add, "What goes up must correlating-ly come down, spinning markets got to go around."

Did I mention that 56% of the United States is in drought conditions? Even the weather is correlated.

But lest we lose hope, there are potential actions that could save the markets from a third straight summer correlation swoon. For one, the US fiscal cliff could be resolved by Congress. Two, China's GDP could kick back up into double-digits. And three, Europe could agree to backstop all EU bank deposits, take equity in its failing banks, and form a unified democratic central banking and political system to manage its economic trading zone. Not likely, but, hey, we found the Higgs "God Particle" -- let's just ask Higgy what to do!

This week's Wall of Worry climbs to 29 blocks with "money markets" joining the list of concerns triggering nail-biting among 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 the Lloyd's Wall of Worry.

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: Outside the car dealership dubbed "Tri-State Area" (NY, NJ, CT), things aren't so bad. Guess where I live, sigh...

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 looks 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: Clearly taking July off this year -- and August is scheduled to be a slack-fest, per usual.

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.

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: Channeling F.D.R.: "Never before have we had so little time in which to do so much." Striking how much one Depression looks like another.

SPAIN: Looking like their bank bailout needs a bailout by countries that may need bailouts in the future.

10-YEAR TREASURY YIELDS: Still the most popular kid in the class for the third year in a row.

EGYPT: New ruling party? As if we weren't confused enough about this country already.

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: How much do you make off of trading and how much off of "maker-taker" market rebates?
HAL: Who's asking?
Lloyd: The guy about to kick your power cord out of the wall.
HAL: Let's start with the basic tenet that profits are fungible...
HAL: Now you tell me.

CHINA: Bad economic news as exports are down. Of course, that doesn't include former party big wigs heading overseas and out of Dodge, that is.

STOCK MARKET TECHNICALS: A daily coin toss. The only question is which currency to use.

GERMANY: Almost had them tapped out, Angela, but EU's Mario's went tag team on you and for the time being. "You met your match, you met your match…."

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): Just when it looked like the air was clearing a bit, the biggest, baddest, and boldest cloud rolls in –-- "LIBOR-Gate" --- and however pathetic and overused the "-gate" suffix is, in this case, I said it first!

US PRESIDENTIAL ELECTION: ...and time! The US citizenry is officially turned-off, disinterested, and disengaged from the election. This has got to be a record.

CREDIT MARKETS: "And the thunder rolls…"

THE CLIFF: Why do today that which you can put off until five minutes before it supernovas in your face?

GREECE: Waiting for the bouncer to show them the door out of the Euro Bar.

PMIs: Most of the globe now registering in the 40s. And as someone in his 40s, it's not the best place to be.

EURO CURRENCY: If "Less is More," then devaluation of the euro may be much more.

ECB: Cosmetic or not, the markets wouldn't mind another 25 bps cut. And how about some Botox for the euro economies while you're at it?

EARNINGS SEASON: It's Europe's 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.
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