Eight Reasons for Investors to Be Worried

Has economic volatility in the US and abroad left you somewhat twitchy? That isn't necessarily a bad thing. The trick is figuring out how best to expend your anxiety.

This is my fourth take in less than six months on how to worry.

I wrote the first one in October, when the Dow Jones Industrial Average ($INDU) had poked its head above 10,000 for the first time in a year and the Standard & Poor's 500 Index ($INX) was just about to kiss 1,100.

Now I'm writing on the topic just days after the Dow industrials touched 10,000 again, but this time headed in the other direction. The Dow closed at 9,908 on Feb. 8.

In October, the worry was that the stock market had gone up too far, too fast and was ready for a fall. Now the worry is that the long-feared decline has finally arrived and that it will be much worse than the correction that investors have been waiting for. Or at least that's the fear.

All this history tells you something about how tough the past four to five months have been on investors, who have been through two bear markets in less than 10 years and are justifiably inclined to jump at every bit of news, good or bad.Msn.Video.createWidget('PlayerAd1Container', 'PlayerAd', 304, 314, {"configCsid": "MSNmoney", "configName": "player-money-4x3-articles-inline", "player.vcq": "videoByUuids.aspx?uuids= 850b757f-0362-4cef-b33a-51a2db0b732a,bb5a32c3-d07e-4428-ad85-77b820cf6637,06ded7f1-00e2-4270-9247-3353dd9f8165,850b757f-0362-4cef-b33a-51a2db0b732a,421eed75-b67b-4495-9cfc-aea4544fc790,1ce1aced-db9a-449e-a0b2-fe87a4422637,918fb87d-b6c2-4ce0-a7b5-d8d71734f0ee", "player.fr": "iv2_en-us_money_article_Investing-JubaksJournal-inline"}, 'PlayerAd1');Msn.Video.createWidget('Gallery4Container', 'Gallery', 304, 150, {"configCsid": "MSNmoney", "configName": "gallery-money-articles", "gallery.linkbackLocation": "bottom_left", "gallery.numColsGrid": "3", "gallery.categoryRequests": "videoByUuids.aspx?uuids=850b757f-0362-4cef-b33a-51a2db0b732a,bb5a32c3-d07e-4428-ad85-77b820cf6637,06ded7f1-00e2-4270-9247-3353dd9f8165,850b757f-0362-4cef-b33a-51a2db0b732a,421eed75-b67b-4495-9cfc-aea4544fc790,1ce1aced-db9a-449e-a0b2-fe87a4422637,918fb87d-b6c2-4ce0-a7b5-d8d71734f0ee;videoByTag.aspx%3Ftag%3Dmoney_dispatch%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1;videoByTag.aspx%3Ftag%3Dbest%2520of%2520money%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1"}, 'Gallery4');Jumping at every bit of news is actually not bad behavior. The lesson of the past decade is that investors can easily get too complacent.

Remember the saying: You're not paranoid if they really are out to get you.Buy-and-holder beware I just came back from an investment conference in Orlando, Fla., where I heard a number of speakers proclaim that the 60% rally off the March bottom proves that buy-and-hold investing is alive and well. Well, frankly, I think all that remark proves is that complacency is alive and well even after two bear markets have left many buy-and-hold investors looking up at 0% for the decade.

No, being jumpier than a Chinatown cat during Lunar New Year celebrations isn't a bad thing. Since the real world is now full of contradictory trends that seem to take control of the market for just a week or two at a time, all being jumpy proves is that you're paying attention.

That doesn't mean, however, that you want to act every time a bit of news sends you twitching. The challenge now is to pay attention as you should -- but to separate the real worries you need to act on from the day-to-day flow of noise. If you act on every bit of noise that causes a moment's worry, you'll do a good job of turning your portfolio into a profit center for your broker. But you won't be doing your own returns any favors.

If you want a good example of exactly how twitchy the news is, look at my three blog posts from Feb. 9 on the Greek crisis: At 11:48 a.m. ET I posted "Just a euro bounce on rumors?" At 12:25 p.m. I posted "Euro rumors get more concrete." And at 1 p.m. I posted "Euro rumors get less concrete."

I hope everyone got the point that my increasingly silly headlines were supposed to convey: You shouldn't act by buying and selling on every twitch in the rumor mill.What, me worry? That still leaves us all with an important question: If some of this news is just noise (and not worth acting on) and some is important in the real world (and worth acting on), then how do we tell the difference?

And that's where my "how to worry" list of what's real-world important to worry about and when comes in. By listing the potential turning points in the stock market over the remainder of 2010, "how to worry" indicates what news might be worth acting on because it has a good chance of moving stock prices for more than a day or two or three.

Latest news on Greece's economy

The goal is to put together a list that tells you 1) what the chances are that something will go wrong, 2) how bad it might be if something does go wrong and 3) when things might go wrong.

Here's my current list of worries and the timetables they are running on:

Worry No. 1. The leaders of the European Union will fumble about issuing empty promises to support Greece in its budget crisis before cobbling together a "solution" that makes bondholders just happy enough and removes the threat now hanging over European banks outside Greece that are holding Greek sovereign and bank debt. The most likely outcome, now that it's clear to everyone exactly how reluctant (big-time reluctant) the German government is to get into the guarantee business and dent the country's AAA reputation for fiscal conservatism, is something that will turn a boiling crisis into a simmering problem.

I don't think this is going away anytime soon. "Fixing" Greece, whatever that means, will still leave the European Union with a list of problems that starts with Portugal and doesn't end with Spain. But unless the Germans do something that is currently unimaginable -- pull out of the euro -- this is a European crisis that in economic terms is limited to countries on the periphery of the European Union. In currency terms, a continuing euro crisis will lead to a stronger U.S. dollar.

Worry No. 2. The next session of China's National People's Congress begins March 5. If China is going to officially change monetary policy or shift more spending to domestic consumption, it's likely that the policy change will be announced as a result of this meeting. The big policy issues for China's stock market this year all concern cheap money. March could see the government announce that it will raise interest rates. That would push down stock prices in general and push down the share prices of real-estate developers and many industrial companies especially hard.

The other big policy question is whether the government will do something to toughen its now-rather-toothless system for setting lending targets for banks. That would also send China's stocks tumbling.

I think the odds are that the government won't do anything very dramatic at this meeting. Officials won't have final numbers on first-quarter gross-domestic-product growth and will still be studying how lending moratoriums enacted in late January have slowed growth. I'd expect an announcement of a loan target for the year (which banks will be free to ignore as usual), some more moves to equalize growth and to support the consumer economy, and promises to fight speculation, but I don't think Beijing is yet ready to rock its own economic boat.

Continued: Beware of first-quarter numbersMore from MSN Money and MoneyShow.com

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Jubak on video: Lower ratings for big banks

How to pick 2020's hot stocks now

Jubak on video: Where will Europe's debt crisis hit next?

Anarchy in the UK (and US, too)?

Relax -- market's drop is just a correction

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BUY GOLD!

BUY GOLD NOW!

If I see one more commercial selling paper, as REAL gold, held in some OBSCURE vaults they do not have, I'll scream!

It's all a scam!Stocks, banks, all of them.

Money is their God, and WE the People are their SUCKERS!

Protect yourself...forget paper!

Get some land, grow some food!

Not only is it smart, it's one investment that you can see grow, literally!

BTW: Screw Cargil, Monsanto, etc., etc., etc.

Get off your duffs and live, like you mean it!

ReplyReport Abusevig_raman #3Monday, February 15, 2010 10:01:12 PM

It is good to read your worries 1 thru 8, and even though the stock market may get hit by the factors you have enumerated,  those 8 factor are not sufficient to break the lower limits of stock market indices set in march 2009.

 

The stock market indices have risen more that 70% since its march 2009 lows. Even a Tom, Dick and Harry knows that it is reasonable to expect a correction currently underway in US stock markets.

 

Let us go a bit further and assume that stock market indices will end the year 2010 in red. Despite that, overall, the indices will remain in range. I predict the indices will stay in range for next four to five years. Also it is highly probable that the stock market indices will continue to test a range of high values set in 2009 for the next four to five years, irrespective of Obama, Dick Cheney or Sarah Palin's rants and chants.

 

The four critical issues that you and US leadership (Political, Business, Academic etc) must focus on and worry about are:

The US National Debt, which is spiraling out of control, and if left unchecked, then sooner than later US economy will be as good as current Greece economy - If this sounds a bit exaggerated, then you only  have to look at the downgrade of credit rating of Warren Buffet's Berkshire Hathaway, that surely tells us that the economic macros are in a downturn, even though the stock markets indices may remain unaffected/range bound for foreseeable future. US Production Capacity of Consumer and Industrial Goods - US has limited or no production capacity for consumer goods and is rapidly loosing its edge on industrial goods, thus creating more opportunity for rise in debt. Commodities Prices - With world demand rising for limited mining resources, this will create unprecedented levels of inflationary pressures on consumer and industrial goods and services. Domestic Unemployment which at the moment is out of control, in the sense that government is just borrowing money to spend it on unemployed. The intransigence of business/private sector leadership, evidenced by its unwillingness to hire/retrain US domestic workforce, will have economic/national security repercussions.

Look forward to reading your views on stock markets and economy.

 

You know, a layman can be irritating, but that's OK.

ReplyReport AbuseSybaris #4Monday, February 15, 2010 11:24:58 PM

Unlike others, I don't know exactly what's going to happen and when, but I do know that the four items of concern listed by vig_raman will all be overcome.

The unemployment problem should be the first on the list.  Spending money on the unemployed is just pay-back for the billions taken from them in taxes when they were working.

Has anyone calculated the total amount of money given to our elected officials by special interest groups compared to what the government is giving back to its citizens.

If the unemployment problem is fixed, three of the four items listed earlier go away.

ReplyReport Abuseihuiutdeio #5Tuesday, February 16, 2010 12:39:30 AM

Get rid of that n!gger in the white house!

 Last thing we need is the white house smelling like n!gger.

    F u c k  all you n!ggers

ReplyReport Abuseihuiutdeio #6Tuesday, February 16, 2010 12:41:54 AM.i.   <<----- suck that you n!gger a$$holes!!ReplyReport AbuseGas Guzzlers #7Tuesday, February 16, 2010 2:23:39 AMAll the twitches or headlines usually has nothing to do with the leverages on stock prices..   you see, once you leave your stock in "street name" , your stock belong to your broker in real flesh or a online computer owned by a bank or other legal registered financial institutions  of all sorts. your name is never printed on the X shares of the stock that you read in your monthly statements...  Your statements just serves as a reminder to your broker that he is using your money for his own account or other affliated parties. They never bother to read your portfolio in person as they simply feed your stats into the computers running on Sun Sparc chips.  They try to characterize you as either a complacent buy and hold fool or a twitchy trader or to the extremes like comatose or maniac depressive . They can be very cynical toward you but not to others. They put special codes tailored to each of you and the computer programs written by computer crooks smart enough to run the computers to constantly bilk you out of most of your money unless they like you because you probably possess a master degree or you are a star sport player or Mother Theresa.  If you are one of them, it doesnt matter if you are near comatose or go wiild, you will get ahead.. If they are cynical toward you, you will go nowhere despite around the clock researching...  it is called market pscyhology..  may I suggest something , please... The SEC should require stock certificates for all shares with your own name on them not the brokers' unless they trade them for their own accounts..  if someone want to short a stock , you can offer your shares to them for a fee. Nobody has any business shorting your shares without your permission nor your broker's  . This is what stock certicates do to protect yourselves from the crooks !  Would you buy your house without a title paper? Heck no! You have title insurance, right?   To make sure your name is on your house! Right?  Stocks is no differnt!! make it stick to you not the "Street name" usually your brokerage house or Warren Buffet's.ReplyReport AbuseHello2U #8Tuesday, February 16, 2010 2:25:39 AM

ihuiutdeio,

Really, that is totally uncalled for.\

 

Everyone wants to blame someone else for their problems and woes, truth is it's not Bush, Obama, Clinton or the Congress' fault.

It is everyone who got greedy-------- world wide------- not just Americans.

We won't recover fully until we pay for the "free lunch"! Which is why the false recovery will end up failing. Of course the numbers will look good "vig_raman" this year when you throw a several trillion dollars at them.  But they wont last because they still didn't pay for, or fix, the real issues.

 

However insults, name calling, racist tantrums do nothing to help anyone, even your problems whatever they may be.  

ReplyReport AbuseGas Guzzlers #9Tuesday, February 16, 2010 2:32:50 AMStock certificates can be issued electronically using Acrobat Reader for you to save after downloading and then print it for safekeeping or not necessary. It doesnt matter in any form as long it is a stock certificate . you can send it back to your broker online in PDF format, no sweat.. It should not interfere with any of your trading style be it a buy and hold or a twitchy day trader or minute trader.. Hey, we already live in the Internet age! Stock certificates is never obsolete because it is an critical function in the daily trading patterns of the stock market.  Today, brokers and their affliated partners are taking total control of everybody's Keogh, IRA, individual and trust accounts because they are left in street name not printed in stock certificates . Stock certificates doesnt have to be in paper. It can be in PDF format which is every bit the same thing in a solid state sense!ReplyReport Abusechekc please #10Tuesday, February 16, 2010 2:57:32 AMIt is good that we owe China so much money.  They are smart enough and able enough to manage us through this crisis.  Just sit back and watch China (learn too).  As long as China needs us as consumers they will take care of us.  And they still need us.ReplyReport Abuse1 - 10 of 17PreviousNext_ucf13('0'); _iuc2Om1('MSNPortalInlineComments','Initial_Load_Comment_View','http://articles.moneycentral.msn.com/Investing/JubaksJournal/8-reasons-for-investors-to-worry.aspx?','en-us');Are you sure you want to delete this comment?Report AbusePlease help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease notify us using the Report abuse form below. We will investigate your report and take appropriate action against offenders. We report all illegal activity to authorities.CategoriesSpam or advertisingChild pornography or exploitationProfanity, vulgarity or obscenityCopyright infringementHarassment or threatOtherAdditional comments(optional)100 character limit Read Full Article »