There is an eerie stillness in the stock market. The wild price swings and huge volume that we have seen from September through the beginning of December has quietly gone away. The panic selling has gone away. True, there is little buying interest as well, but nobody is particularly complaining about the calm.
Still there are two big worries out there:
1) Redemptions are not over; they will pick up in January and February as investors try to pull out even more money from hedge funds on the heels of the Madoff scandal. It has happened right now because the period of asking for redemptions during this quarter has passed.
2) The weaker dollar is fueling arguments from the Armageddon Crowd that the world is losing confidence in the U.S. government's creditworthiness;
3) The traders who are trying to play the "reflation trade" (buying commodities/commodity stocks) are worried that a weaker dollar in the past two weeks is not causing commodities to move up; that relationship (weaker dollar/stronger commodities) worked very reliably in the past few years, but for whatever reason it is no longer working.
Another example of the eerie calm: GM announced that due to a cash crunch they were suspending work on the factory that will build the engine for the Volt. This is the car they are hanging their future on! What happens? Nothing. Stock does not move. Not clear when they will resume, but GM says they can still deliver Volts by 2010. With no engine?
Morgan Stanley's numbers are WAY below analyst expectations. Outside of opening retail banking branches, there is very little room for growth. What happens? Nothing! Stock up 4 percent.
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