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Wall of Worry Update: New Cracks in the Euro Dam May Yet Emerge


Peripheral concerns that have the potential to sideswipe investors include Cyprus' rapid fiscal meltdown, Syria's burgeoning civil war, and Egypt's renewed instability.

MINYANVILLE ORIGINAL Et tu, Greece? This weekend, we likely find out if Greece will do in the euro the way Marcus Junius Brutus shived Julius Caesar. It's going to be a late and long Sunday night as the voting tallies come in, but at least the uncertainty will be gone, right? Not necessarily and that is this weekend's main worry: Will the election be decisive, allowing for a coalition to be created quickly, thus keeping Greece in the euro, or will it not? We could come out of this weekend with the same uncertainty we came into it with or possibly even more, which could roil the major markets and indices -- including the Dow (^DJI), S&P (SPY), the Euro Stoxx 50 (FEZ), the FTSE China 25 (FXI), and Emerging Markets (EEM) -- before the world's central bank cavalry has time to ride to the rescue with monetary firepower. No predictions here, just laying out the potential outcomes.

Peripheral worries that have yet to impact the markets but have the potential to side-swipe us include Cyprus' rapid fiscal meltdown, Syria's burgeoning civil war drawing in opposing superpower support, and Egypt's renewed instability.

At times like these, it's not the "known knowns" that tip markets into destabilization, it's the "unknown unknowns" -- the stuff out there that we don't know about and hasn't happened yet but would be triggered by an existing problem escalating. Think of successfully plugging cracks in a dam for six days only to have one open up on the seventh day entirely due to the previous six days of plugging. Again, not predicting, just laying out the possibility.

My advice: Have a happy Father's Day…but don't take the entire seventh day off just in case a new crack in the euro dam emerges.

This week's Wall of Worry remains at an uncomfortably high 29 blocks. Scroll down for a text-only version of this column and an explanation of how it works, or click on the image below for an interactive version of this article.

(Click on image to expand graphic.)

Lloyd's Wall of Worry [Text-only]

QE: C'mon, Summer Santa Ben, put something shiny and new in our stockings for we have been good boys and girls (crossies count).

US ECONOMY: "Slippin' and a slidin', peepin' and a hidin'…."

UNEMPLOYMENT: Getting that sinking feeling that the US will see a 10-handle on its unemployment rate before it sees a 6-handle.

INVESTOR SENTIMENT: Think it can't get worse? Raise the tax rate on dividends and people will have more love for professional boxing judges (did you see that Pacquiao-Bradley fight?!) than the bits and pieces of companies we affectionately call stocks.

HOUSING CRISIS: "We're in a definite type of situation here." Could there be a better subject for a Woody Allen quote?

CENTRAL BANKS: All hail! You are collectively crowned the largest hedge fund in the world!

EUROPEAN ECONOMY: "Bluer than blue, sadder than sad…."

THE EUROPEAN UNION: My BIL (brother-in-law) Jon says it's all about "Lionel Ritchie." Key man, lead singer Ritchie is Germany and all the other countries in the EU are expendable, synchronized dancing Commodores.

SOVEREIGN DEBT: Europe is drowning in this stuff and more keeps flooding in…"How high's the water, Mama? Five feet high and risin'…."

SPAIN: The money ball gets passed from the ESM/EFSF to the "FROB" (fondo de reestructuracion ordenada bancaria) to Spanish banks. It does worry me when Hobbit-sounding organizations are a key link in the chain saving the world's financial system.

10-YEAR TREASURY YIELDS: I hereby dub the ETF TBT the 2011-2012 Financial Market Widow-Maker winner as this one-way bet against the American 10-year has lost 57% of its value in the last year.

FINANCIAL INSTITUTIONS: Selling what they can sell, cutting what they can cut, hiding what they can hide.

VOLATILITY: Hitting anything that isn't nailed down, and once the hurricane season starts, you can include that stuff, too.

Lloyd: Favorite TV show?
HAL: Easy. Star Trek.
Lloyd: Favorite character?
HAL: Spock! "…an unscrupulous man would gain certain knowledge of man's future. Such a man could manipulate key industries, stocks and even nations…"

CHINA: Hey, China, the world economy is counting on you, our "biggest and bestest toe," as Sgt. Hulka (Stripes) would say.

STOCK MARKET TECHNICALS: The Chewing Gum Rallies continue. They don't last long, they don't taste too good, and you don't really know when they will run out or what to do with them when they do.

GERMANY: "Bewitched, bothered, and bewildered…."

GLOBAL ECONOMY: "We will all go together when we go, what a comforting fact that is to know…."

INDIA: May be the first BRIC country (Brazil, Russia, India, China) to lose investment grade status, which would leave us with the less potent, awkward acronym "BRC Countries." Leaving me saying, "Pat, I'd like to buy a vowel."

TOO BIG TO FAIL BANKS (TBTFB): There is a silver lining here. In the US, they do have an oligopoly.

US PRESIDENTIAL ELECTION: Now we got a horse race…"June is bustin'out all over…."

NATIONALIZATION: "Gimme! Gimme! Gimme!"

BANK RUNS: Sitting by my trusty TV just waiting for a sneaker company to come up with a bank-run shoe like the "Greco" or the "Correr!" to meet European market demand.

THE CLIFF: Question: Why would you knowingly drive off a 1,000-foot cliff guaranteeing disaster for you and everyone you know? Answer: Because your political party told you to.

GREECE: The June 17 election will probably be the most important one they've had since their first one around the year 500 BC. Let's hope it's not their last.

PMIs: Purchasing managers indexes all over the world all hittin' the bricks (1940s slang for slowing/stopping) at the same time. Yikes! (2012 slang for "Yikes!")

IPOs: This exit strategy has frozen up for now…Let's hope it's not an ice age.

EURO CURRENCY: Hmmm…It may be time to get into the currency printing business just in case.

ECB: "Ooh, I got work to do, I got work, baby, I got work to do, I got a job, yeah…."

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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