Green Shoots Abound

I am reading the mainstream financial press and everything is coming up roses. I mean auto sales are picking up, unemployment numbers are better than expected, the stock markets are climbing around the world and they are giving away free beer at the local car wash. Okay, I made the last bit up but government dollars that will not last forever made up the rest of the story. Seriously folks, how long can we live off borrowed stimulus dollars? Let me put that question a different way, when do we run out of borrowed stimulus dollars and actually have to consider paying down the debt? More debt, even on a government level, does not cure debt on an individual level, especially the way we have been focusing our stimulus dollars.

I am a lawyer, not an economist (please hold the jokes), but I do not think it takes an economist to see what is wrong with this picture. Indeed, it seems to take some who are not economists to see what is going on. Daily I am seeing "economists" citing anecdotal evidence as proof the recession is over. Repeatedly ignoring fundamentals that I assume they had to be taught at some point in time before people started quoting them. I feel like the blind man pointing out that the King has no clothes.

I know I am not the only one in this situation, but I am amazed at the number of people who I follow saying the same thing while the mainstream press has a growing mass of green shoot spotters clamoring daily on this or that seemingly positive news. I like positive news. Ask my friends, I am an optimist generally speaking. Yet I am not willing to stick my head in the sand.

With this being said, let me note that the last three paragraphs were written before I started reading the post I am about to link. Kinda spooky if you ask me as Yves is saying the exact same thing. An important lesson in the linked piece is that confidence is an important piece to a recovery but it cannot substitute for a proper foundation. Another point I hate to add, but must, is that once we pop the bubble on this fake recovery, confidence will be very very hard to restore. It is not wise to build fake confidence.

http://www.nakedcapitalism.com/2009/06/team-obama-con-game-gets-official.html

The fact that Yves at Naked Capitalism is saying the same thing is not surprising to me as I have followed her closely and she knows her stuff. What surprises me is that she links a piece at the NY Times basically saying the same thing. Far too few mainstream media folks have had the courage to do this to date - perhaps toting the "it is all in our heads" mantra. This is an op-ed piece and well worth read. It asks some hard questions that Obama needs to answer. I voted for the guy but am not at all happy yet with his financial moves, which I am sure you have guessed if you have followed me at all.

So you do not believe me or Yves on our less than stellar view of the economy. Who should we trust? Well we know not to trust the media - they have news to sell and will tell us whatever will sell. We know not to trust the government, they have lied to us throughout this process - despite Obama recently noting he would always give us the truth (words I am sure he will have to eat in time). We can, however, trust insiders at businesses to tell us the truth with their actions. Namely, are insiders buying or selling their company's stock? You know the answer without me telling you. They are selling big time and there is very little buying. I guess we have to call that a brown shoot.

http://www.financialarmageddon.com/2009/06/wall-street-still-clueless.html

Okay, this is a bit coincidental. I just went to Mish's Economic Trend Analysis and his lead story is pretty much the same - economists are way too optimistic. He has some good stats to back up the claim. I like the prediction that unemployment would stay under 5% through 2013. Hopefully the economists giving that prediction are now among the unemployed. And as he points out, the "adverse" numbers used for the non-stress tests we did on the banks - you know the worst case scenario - are already proving to be much more optimistic than reality. Some were already blown out of the water before the results were announced, but we still stuck by our original test parameters. Now that is a confidence booster in my book.

Decide for yourself. I did not see the massive market rebound from March 9 coming and certainly do not see it continuing, yet who knows what trillions in stimulus might eventually do. What I can see is that fundamentals of a sustainable economy are still sorely lacking and that has me quite worried for the medium and long term. I am truly frustrated at the short term focus of most governments around the world and truly hope we start working on the disease, not the symptoms.

Disclosures: None.