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US Economy One Quarter From Recession. Really? Really. Really?

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Meanwhile, investors are also fearful that Syria's civil war is about to spill over into neighboring countries.

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Technically a recession is defined by two quarters of negative GDP readings. The US just got a surprising report that GDP for fourth quarter 2012 was teetering near negative 0.1%. There is plenty of blame to go around, most of it likely legitimate and short-term in impact.

That said, if Lady Liberty doesn't get its act together soon, we could find ourselves limping through the year and dragging down the rest of the world with us. I don't think we will get a repeat of the last quarter in the first quarter of 2013, but with Dysfunction Junction (a.k.a. Washington, DC) still in food-fight mode, you just never know.

As for the equity markets, the action stays positive as the inflows keep coming into stocks, keeping the Dow (INDEXDJX:.DJI), S&P (INDEXSP:.INX), and Nasdaq (INDEXNASDAQ:.IXIC) climbing higher. It's only been one month, but a "buy the dips" mentality may be setting in. A couple more months of this and we may have a trend or even something more.

The Wall of Worry stays at 23 as Syria's civil war looks like it wants to spill out into neighboring countries. So far it's mostly been about 500,000 refugees fleeing over the borders. Let's hope missiles and tanks aren't next.

Click on the image below for an interactive version of this week's Wall of Worry, or scroll down for the text-only version.



QE: Fourth-quarter GDP numbers light, QE delight.

US ECONOMY: Would another consecutive negative GDP reading mean America is in a recession? Technically, yes. Politically, yes, but it's the other party's fault.

UNEMPLOYMENT: Rises to 7.9%, but fear not -- it's because more people are coming back into the workforce. Really? Can't wait for 9.0%...not.

INVESTOR SENTIMENT: Joes warming up; pros still on the bench.

HOUSING CRISIS: Pending home sales slip a bit. Might just be a short-term thing as some sellers likely passed out when they were hit with more than one bid for their houses.

EUROPEAN ECONOMY: Germany PMI is a little bit better, France's is a little bit worse, and everyone else is just hoping that the other two carry them back to prosperity.

CONSUMER SENTIMENT: Slow thaw, kind of like the polar ice cap, and I guess we are the polar bears floating around on ice sheets, looking for signs of dry land.

SOVEREIGN DEBT: Still an occasional scare here and there, and especially there in Italy and Spain.

SPAIN: 55% of the youth population is unemployed. And you think it's tough around the house when the kids are off from school for two weeks.

VOLATILITY: Black swans, black swans everywhere, but a not a single event to wreak havoc on the markets…yet!

HIGH FREQUENCY TRADING:
Lloyd: Noise starting about bringing back fractions, losing decimalization.
HAL: Crazy talk. Would be terrible for the little guy investor.
Lloyd: What little guy investor?
HAL: The one that got chased out of the market by decimalization.

CHINA: Laying out the capital inflow welcome mat like never before. Caveat emptor, all you financial opportunists.

SYRIA: Clearly has set its sights on being a worse neighbor than even North Korea is to its local community.

GLOBAL ECONOMY: I believe the official communiqué out of Davos this year regarding this subject was: "Uh, not what we'd like it to be."

SPENDING CUTS: Will the sacred cows of Social Security, Medicaid, and Medicare be touched? The term "midterm elections" in 2014 should answer the question.

JAPAN: The revolving door at the Bank of Japan hitting warp speed as the old (months old, usually) pols go out and the new stimulus-minded pols come in.

EGYPT: State of emergency declared. State of emergency ignored.

DRAGHI: Still work to do! Text me when the next crisis hits.

EARNINGS SEASON: Coming into the home stretch, maybe only at a canter, but still moving forward nonetheless.

DEBT CEILING: Being pushed around the budgetary plate like that grouping of peas you never wanted to eat as a kid. But you know you can't leave the table until they're eaten.

SEQUESTRATION: The latest political Sword of Damocles hanging over the heads of the goodly people of the US of A. This is getting so tired.

US CONGRESS: From the mouth of my 12-year-old: "If pro is the opposite of con, then it must be that progress is the opposite of congress." Have faith, America -- our children will save us.

US PRESIDENT: With the inauguration's pomp and circumstance now behind us, is it back to daily throwdowns in DC?


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.
Also see:

Four Questions to Ask Yourself Before Making a Trade

The Lead-Lag Report: Correction... Starts?
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