Long a part of Wall Street lore, the Wall of Worry is a quick, handy way to gauge the emotions of investors. As interpreted by money manager Lloyd Khaner, a low wall, with seven or fewer blocks, indicates a complacent, even overconfident market:
Time to take profits. A high wall, with 15 or more blocks, suggests a squeamish market: Look to buy at bargain prices. In the middle range, reading the wall gets tricky; knowing not only where the wall stands but whether it’s headed up or down is the key.
It's a counterintuitive: mantra: Buy when the wall is high, sell when the wall is low.
This month’s wall:
Let’s not mince words: July ushered in the toughest market in decades. The Wall gained two new blocks,and the market isn’t happy. Rising Middle East tensions — see Israel and Hezbollah — and oil prices dictate the daily action, wearing down stocks and investor confidence.
The silver lining: At 14 blocks the Wall is approaching the kind of fear-inspired level that leads to discounts. The half-off racks may be wheeled out soon.
< The worries
1. U.S. economy: Slowing but growing. Time for China, India and Europe to take the economic consumption ball and run with it. Buy American!
2. Interest rates: Just as the U.S. looks to be winding down its increases, the rest of the world steps up their own. “Every time I try to get out, they pull me back in!”
3. Inflation: Not ballooning uncontrollably but growing incrementally. . . like my waistline.
4. Oil prices: The superspike mongers thrill at the idea of $100-abarrel oil. Not us.
5. Consumer spending: Beware the bigticket sales slump.
6. Housing bubble: Officially, a buyer’s market. Taking months, not weeks, to sell your house is normal — but a lot less fun.
7. Iran: Brinksmanship nearing the point of no return. Hey, Russia, free membership in the World Trade Organization if you talk them down.
8. Corporate earnings: “I can’t get no sat-is-fac-tion.” The market sees almost every glass as half full.
9. U.S. dollar: Paulsen’s puzzlement? How to strengthen the buck while the economy slows and interest rate increases taper off.
10. Volatility: With daily swings of 100+ points the norm, markets are as calm as Zinedane Zidane at family therapy.
11. Emerging markets: By comparison, they make bungee jumping feel like a pony ride.
12. Stock option pricing: Whether they are falling on their swords or being pushed, a lot of corporate soldiers are going down with this scandal.
13. Middle East: The road map for peace shows a detour. The stock market momentarily careens out of control.
14. North Korea: In a pot-stirring contest with Iran. Someone refill their line of credit and take away their matches.
Looking ahead
Consumer confidence: Slip-slidin’ away? Not yet.
Terrorism: World markets are digesting the hits with admirable strength. But ...
