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.
this month’s wall:
The market was upbeat and relatively restful in August, thanks to defanged inflationary fears and a show of strength from British intelligence, which foiled a major terrorist plot to bomb several airplanes in midflight. Still, other pressing concerns caused the Wall to rise for the third straight month. At 15 blocks it is now officially in the high zone. Any more unsettling news — say, oh, a pungent whiff of recession — should bring us into the land of opportunity, the magical place when we can buy growth stocks at value prices.
The worries
1. U.S. economy: “Looks like a soft landing.” Just what my brother said as he pushed me out of a tree in the first grade.
2. Interest rates: Does Big Ben’s pause toll an end to hikes?
3. Inflation: Not rampant, but still spreading like mildew in a wet basement.
4. Oil prices: Attention all tree huggers: $75-plus oil puts us five bucks from the big decision: Kick-start our nuke plants or defrost Alaska.
5. Consumer spending: Struggling to keep its head above water as it fights off $3 per gallon gas.
6. Housing prices: Going south like a duck in winter.
7. Iran: Building financial friendships faster than it is making ideological enemies.
8. Corporate earnings: It’s harvest time, and so starts the annual third-quarter vigil. As investors wait for October’s earnings guidance, the trick is to be on the tractor and not under it.
9. U.S. dollar: Is the greenback going the way of poor old Pluto?
10. Volatility: Prolonged exposure to market swings can cause dizziness, irritability, hair loss, sudden death or, in extreme cases, loss of capital.
11. Stock option pricing: Backdating options, a.k.a. rewriting history, would be shrewdly Orwellian if it weren’t so obviously stupid.
12. Middle East: Add one more year to the 3,000 in history of hate and mistrust.
13. Terrorism: There will always be an England, thank God. But what about the rest of us?
14. Hurricane season: Still learning from Katrina — and Spike Lee — the market this year worries more than ever.
15. North Korea: Overdue for a tantrum.
Looking ahead:
U.S. midterm elections: Can a fired-up blogosphere split Con- gress and thrust us into fiscal responsibility?
Unemployment: In the sweet spot now, but keep a tally of those daily layoff numbers.
China: The bull in the bull market.
Consumer confidence: For realz?
