Taper Fear Meme Strikes: Stocks Retreat

In Tuesday’s market action, major U.S. markets were down, while Tesla (NASDAQ:TSLA) jumped more than 16 percent.

If you check around at all of the financial websites, you will not find a satisfactory explanation for Tuesday’s stock market selloff. After stocks declined for the third consecutive day, commentators struggled for explanations. Not surprisingly, some sources fell back on the old “taper fear” meme, with the FOMC meeting set for December 17-18 and another press conference with Dr. Bernanke on December 18.

Nevertheless, most analysts have concluded that the Fed’s new mantra, “tapering is not tightening” has reduced the fear factor because investors now realize that the federal funds rate will not be increased when the Fed reduces its bond purchases.

The most logical explanation for the pullback is that investors are alert to the recent commentary suggesting that a serious risk of a stock market bubble is looming. As economist Robert Shiller recently observed that he does not currently see a bubble mentality, the recent stock market retreat is probably the best verification of that point.

Meanwhile, Tesla was on fire again — although this time it worked to the company’s advantage. Tesla shares skyrocketed 16.53 percent to $144.70 on Tuesday after the German Federal Motor Transport Authority concluded that the recent Tesla fires were not caused by design or manufacturing defects. Perhaps it’s time for the German Federal Motor Transport Authority to take a closer look at the Porsche Carrera GT.