'Green Shoots' Not a Phrase Used by Those Who Know

When Fed Chairman Ben Bernanke coined the term “green shoots” of recovery during his 60 Minutes interview, it became entwined with the improbable – both in terms of timing and magnitude – rally taking place in the stock market. The S&P 500 went from a low of 666 to peak over 950, and green shoots abounded. Prices have slid back since then, because the perception of green shoots hasn’t matched with the reality of nobody involved in business seeing the same thing.

On DailyFinance, I devote time to tracking what influential people in business and finance are saying about the markets, and I haven’t heard any of the outright optimism that a 40% rally is predicated off of. Warren Buffett said that the economy is still in shambles, Mohamed El-Erian of PIMCO said that low interest rates will be necessary “for a long time” to heal the economy, and American Express CEO Ken Chenault hoped for growth resuming in the second half of 2010. Elsewhere, the KB Homes (KBH) conference call and other data showed no bottom is in for housing, and the Homebuilders ETF (XHB) is down more than 20% from its recent highs.

The predominant view is that business activity has stabilized on a month-over-month basis, but that still means it will be down year-over-year for at least several more quarters. The market pendulum seems to be swinging back to favor this view as opposed to an outright recovery, and many of the leaders that bounced hard are suddenly struggling. Any sort of sustained earnings momentum is going to be a phenomenon down the line, and expectations still look generally high for the second quarter.

Anecdotally, a number of people who told me they were liquidating stock holdings and/or switching to bond funds during the market meltdown have now started wading back into stocks in the last month. The plural of anecdote might not be data, but the extent of the rise and the evaporation of the excessive fear that existed going into March has made bargains much harder to find. My portfolio value is at an all-time high, though I’m now 50% cash and ambivalent as to what to do – a topic I’ll have to look at another time.

Disclosure: None.

Comments

[apppro:]

Whether you use the terms ‘green shoots’ or ‘less bad’, the one thing everyone does seem to agree upon is that Armageddon is no longer on the horizon and we are looking at a recovery, albeit a slow one. Fine, I can live with that! I’m not going to get into WHY all this short inspired chaos happened, let’s just except that as history and move on.

As far as the examples you used to show that things still stink:

Buffett: Maybe it’s HIS businesses that stink. From what I’ve read it appears that only Geico has a following anymore and that Fruit of The Loom has no green shoots sprouting. Maybe mold though.
Pimco: Keeping things in the toilet benefits their bonds and their bottom line. Enough said on that one!
American Express: I saw his interview and I totally don’t agree with how you (CNBC) interpreted it. Besides, after the media and pundits have bashed him over the head, how can anyone expect a CEO like that to stick his neck out? He said things have stabilized and looked for a recovery next year. Maybe he’s being overly cautious, but he did use the terms stabilized & recovery!

The main point here is that if we allow things to heal they will. Not 10 minutes from now, but in the very foreseeable future. Human nature being what it is, by constantly beating everyone over the head with this negativity no one is ever going to spend a nickel again and recovery may be for my children’s children.

Enough is Enough!!!!!!!!!!!!

Jul 13 07:16 AM

[apppro:]

And just to show my point here is a release this morning on how it's which business you ask:

finance.yahoo.com/news...

<<AMSTERDAM (Reuters) - Dutch conglomerate Philips Electronics (Amsterdam:PHG.AS - News; NYSE:PHG - News) signaled brighter business prospects for the second half of 2009, helped by cost cuts, as it surprised the market with a return to profit in the second quarter.>>


Enough is Enough!!!!!!!!!!!!

Jul 13 07:32 AM

[Old Trader:]

Of course, you'll note that this is essentially the same story repeated time and again last quarter...a "beat" based on cost-cutting..revenue was down sharply...something like 25%, if I recall.


On Jul 13 07:32 AM apppro wrote:

> And just to show my point here is a release this morning on how it's
> which business you ask:
>
> finance.yahoo.com/news...;.v=1
>
>
> <<AMSTERDAM (Reuters) - Dutch conglomerate Philips Electronics (Amsterdam:PHG.AS
> - News; NYSE:PHG - News) signaled brighter business prospects for
> the second half of 2009, helped by cost cuts, as it surprised the
> market with a return to profit in the second quarter.>>
>
>
> Enough is Enough!!!!!!!!!!!!

Jul 13 08:50 AM

[Bill James:]

There can be an economic boom if we repeat the lesson learned from de-monopolize communications infrastructure in 1984, the Internet and cell networks.

Mobilizing to fight World War I, bureaucracies were established to manage communications, transportation and power generation infrastructure. They froze in time the great innovations of at their founding of Bell, Ford, Edison and the Wright Brothers. In 1984 innovation was allowed in communications infrastructure; power generation and transportation infrastructure remain protected by monopolies.

Why do we pay to move a ton to move a person in repetitive, congested urban transport? Highways that kill 43,000 people a year are not the ultimate pinnacle of our engineering skills. Long-haul freight rail moves cargo 97.2 times more efficiently than we move cargo and people in cities. Morgantown's Personal Rapid Transit network has delivered 110 million injury-free passenger miles.

If we want a stronger economy we need to break the design monopolies over infrastructure.

Jul 13 09:22 AM

[Fitz919:]

Today CIT Group is crumbling. It's the biggest thing since WaMu if it collapses, and the market and financials are rallying over a banking sector upgrade, and the exact same person is saying unemployment will reach 13%.

Houston we have a problem!

Jul 13 01:03 PM

[T.Stamps:]

Green Shoots. This is a term made up by the state run media
to help build up the parties in power. 2005 and 06 the state run
media did what they could to bring down the economy and
the powers to be. A different power.

Jul 13 02:27 PM

[mr. mann:]

"Prices have slid back since then, because the perception of green shoots hasn’t matched with the reality of nobody involved in business seeing the same thing."

Nice sentence structure. WTF?

Jul 13 02:53 PM

[apppro:]

Yes, we have a probleb, but you don't get what the problem is! We are allowing, no encouraging a handfull of shorties to bring things down with no retribution or consequences.

Tax Capital Gains of short sales at 65% and you'll see how fast things get better.

Follow the money!


On Jul 13 01:03 PM Fitz919 wrote:

> Today CIT Group is crumbling. It's the biggest thing since WaMu if
> it collapses, and the market and financials are rallying over a banking
> sector upgrade, and the exact same person is saying unemployment
> will reach 13%.
>
> Houston we have a problem!

Jul 13 07:19 PM