The 14 Worries Facing Investors Right Now

January 19, 2011

Editor’s Note: This is a text version of Lloyd’s Wall of Worry. For our graphic page, click here. For more on how to read the Wall of Worry, see below.

There are two new worries on this week’s wall: quantitative tightening and Mother Nature (see the news from Australia and Brazil). Investors are less concerned about the U.S. Congress and the bond market, however, so the total worry count holds steady at 14 blocks. Here’s the complete list:

CHINA: “He’s making his list and checking it twice, we’re gonna find out if he’s naughty or nice, Hu Jintao is coming to the White House…on January 19th”

SOVEREIGN DEBT: The EU thinking of selling financial instruments backed by good faith and credit of the European Community to sure up its weaker sisters. Capital idea! And then they can securitize the offerings and sell them all over the world in little pieces to insurance companies, banks and hedge funds so there’s no systemic risk and…hey, wait a second!

CALIFORNIA AND THE OTHER 49 STATES: The Midwest strikes first! Illinois takes the reins of fiscal responsibility (and of course that law thing about a state needing to balance its budget) and raises its personal income tax rate. Rumor has it there are some who are calling for yet another remake of the Cee Lo Green song, “Forget You” to commemorate this event.

QE II: “Keep it coming, love! Keep it coming, love! Don’t stop it now, don’t stop it, no, don’t stop it now, don’t stop it! Don’t let your well run dry, don’t stop it now. Don’t give me no reasons why, don’t stop it now! Keep it coming, love…!”

U.S. ECONOMY: It may not be text book or pretty, but America — home of jeggings, the slap chop and the chip clip — is charging back like Snooki and “The Situation” en route to a free day at the grand opening of a tanning salon.

UNEMPLOYMENT: Take a seat `cause the U.S. payroll roulette table is open! Number choices range from negative 100,000 to positive 500,000. I’m gonna need my complimentary watered-down drink asap.

OBAMA ADMINISTRATION PART II: Freight train of economic stimulus love arriving by the carload. Looking like this conductor is aimin’ to keep that striped hat on for a long stretch `a track. Hoo-Hoo!

HFT: While these traders are begging for another Flash Crash, the rest of us are praying that it fades into a footnote in history-land. Gonna be a regular Godzilla vs. Gamera (the flying, rocket propelled turtle) showdown.

INVESTOR SENTIMENT: The Pros are all in, but the Joes are all talk. Jump in, the water’s fine! And bring your 401Ks, IRAs and SEPs with you.

HOUSING CRISIS: Time to dig into the retail bag of tricks and offer up some BOGOs (“Buy One Get One Free” for all you non-American turbocharged consumers) on all homes this spring. If you’re gonna be bankrupt under the weight of a mortgage you might as well have a country house to escape to.

INFLATION/DEFLATION: Seemingly benign in the United States while going vertical in India, Brazil and China. How does America do it? “Oh ho-ho it’s magic, you know, never believe it’s not so…”

QUANTITATIVE TIGHTENING: While we here in the West are looking for ways to further loosen the monetary fit of our elastic waist economic sweat pants, the East and South (India, South Korea, China, Brazil, Peru and sundry others) are tightening their credit belts in an effort to fend off choking inflation and Tunisian-type leadership overthrow. Man, some countries are so selfish.

TRADE WARS: So far only small artillery stuff like rare earths, currency and wheat. If the big guns come out – tariffs et al — there won’t be enough camouflage in the world to hide behind.

MOTHER NATURE: She’s pissed. Australia, a natural resource king, is rapidly becoming a small sea and Brazil’s Rio de Janeiro, a burgeoning economic king, is the world’s largest mud slide. Pardon my soap box but economically and humanitarianly speaking, this is the opposite of good.

What is Lloyd’s Wall of Worry?
By Lloyd Khaner

Since the 1930’s, when Benjamin Graham created the concept of “Mr. Market”, investors have been trying to figure out what events or fears are influencing the market. Investors call this body of concerns the “Wall of Worry.”

Oddly, no one has ever kept a list of the worries, except for me. I’ve been managing money for the last 20 years and keeping a running tally of all the things that are bothering investors. It’s an important part of my value investment discipline, because when Mr. Market gets nervous, stocks tend to get cheaper.

As Warren Buffett says: “Be fearful when others are greedy and be greedy when others are fearful.”

Click on the image below for a graphic version of Lloyd’s Wall of Worry:

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<a href=",2005:cluster=, 18 Jan 2011 21:18:04 GMT 00:00″>The 14 Worries Facing Investors Right Now

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