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By Pat Dorsey, CFA | 06-14-2010 12:56 PM

What Tops Pat Dorsey's Worry List

The Morningstar director of equity research ranks the Greece debacle, margin sustainability, credit demand, inflation/deflation, and the U.S. deficit on the list of major concerns.

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Pat Dorsey: Hi. I'm Pat Dorsey, Director of Equity Research at Morningstar. In honor of Risk Control Week at, I thought I'd run through my personal worry list of stuff that either keeps me up at night or at least makes me sleep a little bit less soundly, kind of ordered from the most immediate to the further out into the future.

The most immediate, of course, is the current situation in Europe, particularly in Greece, in past weeks spanning out to Portugal, and the risk for the "contagion" in those financial and credit markets to wend its way over to this side of the pond.

Now I'm not terribly worried about a global credit lockup the way we had in late 2008 when Lehman failed, largely because policymakers have seen that picture before. It wasn't a very pretty one. And they are going to pretty much do all they can to avoid that kind of a credit lockup. So in that sense, I'm not terribly worried about contagion.

In the sense that what's going on with Greece's and Portugal's and Italy's sovereign debt, might heighten awareness of these parlous financial situation that the U.S. government is in, that is a bit of a worry, as it could force the day of reckoning for the U.S. deficit to move forward a bit. And so that's something I think to keep in mind, and I'll kind of return to that a little bit later in this video.

Second thing that I'm worried about a little bit and kind of keeping an eye on is margin sustainability. So far, for U.S. corporate earnings, profit margins have held up pretty darn well. There has been a lot of cost-cutting. We've talked before about companies saying that they've done three years of restructuring in three months during the Great Recession. And so far companies have not had to add a ton of cost back, even as revenues have increased. So, the question is simply how long they can keep going?

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