The wall of worry stands high this week, meaning the bargains are out there for value investors.
The market stands accused of being hyper-sensitive, but can you blame investors for being ready to jump? The confusion in Italy over China’s offer to buy bonds and the drama surrounding an on-the-brink Greece do little to stabilize market conditions. Meanwhile US economic indicators are still signally an S.O.S. message. At least jobs have finally become a priority – better late than never.
Not surprisingly, Lloyd’s Wall of Worry stands high at 27 blocks this week, meaning the bargains are out there for value investors.
To read more about the specific issues facing investors right now, click on the icon below, or scroll down for a text-only version of this column and an explanation of how it can be used as an investing tool.
Lloyd’s Wall of Worry
QE III: "Let’s twist again, like we did last summer, let’s twist again, twisting time is here…."
U.S. ECONOMY: Never thought I would see America give away an economic recovery. If it ain’t all about the Benjamins, what’s it all about?
UNEMPLOYMENT: Front and center…finally.
TERRORISM: "Verified" or not, this threat is never market friendly.
INVESTOR SENTIMENT: "When you feel down and out, Sing A Song, it’ll make your day, yeah, yeah, yeah."
HOUSING CRISIS: Principal reduction, mortgage relief, do-over – call it what you want but these things are looking more and more likely as home prices near a black hole event horizon.
INFLATION: Starting to show up everywhere except in wages and my ego.
CRISIS OF CONFIDENCE: How bad it is out there in the world? My fish, Picasso, is nervous.
ARAB SPRING: Looks like the Arab Spring is exiting the exciting revolution stage and entering the long slog, the what-are-we-going-to-be-when-we-grow-up phase. Personally, it wasn’t one of my favorite developmental periods.
EUROPEAN ECONOMY: This just in: It stinks and no one is doing anything about it. – This message was brought to you from the good people manning the Captain Obvious Economic Satellite.
THE EUROPEAN UNION: Everything will be fine once these 17 countries decide to share finances, interest rates and major political decisions. Unfortunately, Nostradamus prophesized out to the year 3797 and didn’t mention a thing about it.
JAPAN: Their fast-moving political revolving door is not exclusively for their prime ministers as the new Minister of Trade and Industry gaffs his way to a one-week tenure in office. (Note to self: It’s always too early for radiation jokes.)
U.S. CONSUMER CONFIDENCE: Dropping smartly. Smartly dropping. SOVEREIGN DEBT: If the expression, "Not worth the paper it’s written on", hadn’t been created already this would be an ideal time and place for its creation.
POLICY MISTAKE: Tough to avoid when you’re trying to pick the best of all the bad options. EUROPEAN CENTRAL BANK: Gonna be the shortest honeymoon in financial history for new Chairman Draghi. GREECE: Being measured for a casket.
CURRENCIES: Switzerland, the epicenter of all things money related, has declared war on its own currency, the Franc. Last major war fought and won by the Swiss? The Battle of Morat in 1476.
ITALY & SPAIN: As far as their sovereign debt ratings go, "Cannonball, cannonball coming…." ECONOMIC LEADERSHIP: "We have so much time, and so little to [do]. Wait a minute! Strike that. Reverse it. Thank you." CONGRESSIONAL SUPER COMMITTEE: Hey guys, we’re throwing in another $1 trill in cuts. You’re cool with that right? GLOBAL RECESSION: Not a foregone conclusion but I’ve never rooted so hard for space science to discover another habitable planet either. BANKS: The markets aren’t going to be healthy until the banks are healthy. Gonna be crowded in the infirmary for quite a spell.
VOLATILITY: Not as bad as the news says…as long as you stay under your desk in the fetal position hugging your woobie blanket. MONEY MARKET FUNDS: How can a so-called cash equivalent yielding basically nothing be so scary to hold? Think koala bear – cute on the outside, vicious on the inside. HIGH FREQUENCY TRADING: Now being watched very closely. What that means, I have absolutely no idea.
MOTHER NATURE: Three more months to go for hurricane season in the US, and, of course, earthquake season runs until further notice.
What is Lloyd’s Wall of Worry?
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.