RCM Editorial: It Takes A Lot of Manure To Get These “Green Shoots”

The equity markets continue to work their way higher as the government-sponsored and controlled bank stress test pageantry is in full swing. In my business we commonly refer to this type of charade as “putting lipstick on a pig”. However, the herd is content at the moment to try and make that silk purse, so we must respect the trend and trade from the long side. My advice: remain alert, we are witnessing the greater fool theory in full force. Keep one foot out the door or the market will cut off your legs when it turns.

I have heard a lot of talk about Ben Bernanke’s “green shoots” comment in regards to the economy. He points to different economic numbers that have been released over the last 6 weeks as reasons to be optimistic. I was asked about this “green shoots” theory during the interview I gave on The Financial Lifeline Radio show Monday. My question in return:

What does it take to get these “green shoots”?
Answer: A lot of manure.

Enough said about “green shoots” let’s make a reality check:

Creditors object to Chrysler deal, setting up fight
NEW YORK (AFP) – – A group of Chrysler creditors objected Monday to the struggling automaker’s bid for a quick restructuring, calling it an illegal bid by the government that violates constitutional property rights.

RCM Comment: The government conjures up green shoots by stepping all over the Constitution. Maybe Bernanke was right, yes something is growing, but it’s green mushrooms and they are poisonous.

Mike Morgan:

The moratorium on foreclosures lasted five months. That’s over now. And real estate brokers have been warned to expect a tsunami of properties to be listed and sold.

RCM Comment: Foreclosures are increasing in the luxury space. Prime borrowers are now losing their houses and these repossessed homes are recorded as sales in the national figures. So, now you have a “green shoot” reported by the press as “increasing home sales”. Then (to add a little more manure onto the “green shoot”) the press reports the increase in median home sales prices as a positive. Of course, the increase comes from the repossessed luxury homes that are valued at higher prices, but no one in the press bothers to mention that little annoying detail.

About Bret Rosenthal

Interpreting the news that moves markets. Principal of RCM, LLC, and founding partner of the Fortune's Favor Family of Funds
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