Climbing the wall of worry over Wall Street
“Hey, Investor, why are you carrying all those ropes and ladders?”
“To climb the ‘wall of worry' darkening the sky, Neighbor,” said the stock market-investing veteran.
“What do you mean? Things are looking up. The stock market's booming,”
“Every bull market climbs a ‘wall of worry,' as they say on Wall Street. Investors are afraid of all the factors that could reverse everything. And this is the steepest wall in my experience,” the investor said.
“How so?” said his neighbor, a newbie at the investing game.
“We never had a federal government going so crazy on the spending side, Neighbor. Or a Federal Reserve pumping so much money into the economy. Borrowing it, printing it, inevitably cheapening it.”
“Not so. They're stimulating business. People go shopping, banks can lend,” his neighbor countered.
“But the benefits aren't happening to the extent promised. Where's the growth in jobs? All these billions created out of thin air will bring us an awful inflation eventually.”
“Hold on there. Inflation is still tame. Quit anticipating so much.”
“You mean not even anticipate 2014 — just seven months away — when Obamacare hits everybody full blast? Watch health care go through the roof, higher business costs, turmoil, uncertainty and perhaps unrest.”
“Hey, Investor, give it a chance.”
“Government's taking over everything — incompetently. That can't be good for business in the long run. Regulation is rampant, and half the people now depend on government checks. We're spending the country into the poorhouse even as we neglect roads and bridges,” the veteran said.
“But the stimulus from the Fed ...”
“... Just keeps interest rates artificially down, so Uncle Sam can handle the service charges on a horrendous national debt.”
“What's wrong with that?”
“It keeps rates down for everybody else, too, Neighbor. People can't depend on income from their savings. They've got to get into the stock market for dividends. Which means more risk. Even I would diversify into bonds for the safer return.”
“Why don't you?”
“Because as the economy gets stronger, interest rates are bound to go up and bond prices down. Plus, government interest costs will surge. Lot of luck ever balancing the budget when that happens,” said the veteran investor.
“But parts of the economy are doing well — cars and houses.”
“Ah, welcome to another bubble. We never learn. Lenders are promoting sub-prime mortgages again and speculators are ‘flipping' houses for quick resale at a profit. That'll end badly.”
“How about the boom in new discoveries of oil and gas?”
“If the environmentalists don't manage to derail it with fears of fracking.”
“You're making me glad I'm not in the stock market.”
“But you probably are, Neighbor. Everybody is. Especially if you count on a pension or 401(k) plan someday. I'm tempted to bail out of the market myself, except I want more profits before it ‘corrects,' as they say. And now, excuse me, there's a wall of worry to be climbed.”
“Hey, Buddy, can you spare a rope and ladder? I think I better climb, too.”
Jack Markowitz is a Thursday columnist for Trib Total Media.