5 Things That Make Me Nervous

 | Jan 09, 2014 | 3:30 PM EST  | Comments
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People keep asking me: Doesn't anything make you nervous about the market? What keeps you up at night?

What keeps me up at night is a cup of coffee after 9 p.m. Close friends know that I will not go to sleep that night and will naturally just stay up, not even trying to sleep, because with caffeine that late in the day, it is just hopeless.

But seriously, what am I worried about?

First, I'm no perma-bull, even as people think I am because I have been bullish during a period when we have had a tremendous bull market. That doesn't mean I haven't been wrong on things, but when you are bullish during a bull market, that means you have been right. I like being right.

So, I bridle at that ridiculous charge.

Yet there are things that are making me nervous, especially since the year began, so let me tick down what's bothering me and testing my conviction that we will have another good year -- something that the statistics say should happen given that we have almost always been up the year following a blowout year like 2013.

First concern? Washington. As I say in my first line of Get Rich Carefully, my new book, "I know we are in for still another year during which Washington will provide no rest for the weary. This book is about getting rich carefully. Washington is writing a serial novel about bankrupting us slowly."

Yet, it's been quiet down on the shores of the Potomac of late, and that's most worrisome. Do we really think they have gone away as an impediment to savings? Do we really think that the budget deal that avoided a shutdown is going to extend to the debt-ceiling fight that's lurking a month from now? They can't get along on extending unemployment benefits. Isn't it too juicy an issue not to go to bat again against the debt ceiling when the issue of government debt resonates with the Republican base? I think it is. So, I worry about that.

And I am concerned about the possibility that the Affordable Care Act is going to cause such fear, right or wrong, among small businesses that do the real hiring in this country that we slip back into a slowdown and don't build on the head of steam we have going since the government got out of the picture.

Second concern? China. Do you know that I can't think of a single number of late that's been any good emanating from China? The one I monitor most closely is the Baltic Freight Index, which is a measure of the rates to ship hard goods, virtually anything but oil. Why does it seem to tick down every day of late? I don't like that at all. I don't like the fact that copper, which you can follow by hitting up the iPath DJ-UBS Copper TR Sub-Index ETN (JJC), seems to be drifting into oblivion, and that's a terrific indicator of the strength or weakness of China.

My charitable trust owns a stock that's been just terrible, Vale (VALE), and it's a giant iron ore producer. That stock hasn't had a good day in ages. You know China's slowing if that's the case. The Chinese stock market has been awful again, the worst of the year of the major indices I follow. We can't have China fall off the grid. That means that many of our stocks that have been rallying off a return of worldwide growth will not be able to hit their numbers. Sure, our economy is the leader in the world right now, the locomotive, but China's far from being the caboose. We need to see some commodity pick-up. Thanks to our associate Matt Horween for keeping that front and center for me.

Third concern? There's nothing wrong with oil coming down. Good for the big users, good for you and me. But the precipitate nature of the decline makes me feel that something's gotten weaker here of late. Plus the oil stocks, a linchpin of the bull market, have been totally lost here and seem like they are going lower. The plusses of lower oil will be good down the road but, right now, they are showing a surprising lack of strength.

Fourth concern? It was disturbing to see Family Dollar (FDO), L Brands (LB), the old Limited, and Bed Bath & Beyond (BBBY) miss estimates so badly when they reported, something that seems to verify the weakness we see again in the stock of The Container Store (TCS) after its disappointment the other day.

We are not oblivious to how tough it can be to execute within an economy that could be faltering. That's why we cheered when Macy's (M) reported a terrific number, something that showed CEO Terry Lundgren could triumph over economic weakness.

We love that Costco (COST) could rally on a terrific month of sales. That's a good sign. But it now seems like an outlier in a sea of dismal retailers.

The people at L Brands, Bed Bath, Container Store, and Alex Smith at Pier 1 (PIR) -- another typically bankable CEO -- aren't buffoons. These companies are signaling a level of frugality and chariness that's obviously worrisome. It is possible that the missing piece of the puzzle is online, as Macy's has a terrific online presence and the others don't, at least not yet, but it doesn't seem right that so many quality companies can't reach expectations that they set for themselves.

Fifth, and final, concern? Why can't the real estate investment trusts and master limited partnerships sustain advances? Doesn't that mean that higher rates beckon? Isn't that always what they signal? Perhaps these kinds of stocks, with their above-average yields, are overreacting and when we see the employment number tomorrow, we will recognize that.

I am not advocating that we are going to have a big correction here, Wall Street-speak for a real hammering, and not something of the garden variety. I am saying that as we embark on earnings season, these issues could be a chink in the armor of the bulls. Understand, again, it's not a bullfight, where it always seems to end badly for that particular animal. And I am not worried about what everyone else seems to be worried about, namely the Fed's next move. Has the Fed not vindicated itself enough over these past five years to be an endless source of worry? I never worry about what everyone else is worried about. That's the sucker game.

But the bottom line is that the clouds that were on the horizon in 2013 are now on top of us, and to ignore the weather is always a foolish thing to do.

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