Green shoots or weeds?

The strenuous debate about whether the recent rebound is the beginning of the next bull market or just another “bear market rally” has most recently been discussed in terms of “green shoots.”  The “green shoots” thinking implies that the economic data that has been “less bad” than prior months indicates a reversal to suddenly positive economic growth in the very near future.  Critics of “green shoots” have enjoyed creatively rebutting the claim with suggestions that the green shoots are actually weeds, dandelions, or are growing over thin ice.  We tend to agree with the critics that, while the economy will indeed grow again, it will start from a lower base and is likely to be sluggish for an extended period of time.  The excesses of the past decade simply are not undone by a few months or even a year of consumers spending more carefully.  While it is possible – even likely – that GDP will increase in the 2^nd half of 2009, we see the cessation of job losses and eventual growth as the key indicator of a true economic bottom and subsequent turnaround.