Posted by Davy Bui on April 23rd, 2009 in Market Commentary
Email Davy

When I first started blogging in late 2006, the economic buzzwords were “soft landing” and its close cousin, “Goldilocks economy.” People were waking up to the fact that housing was overpriced but allegedly, these problems would be “contained” to subprime borrowers and the economy would not be overly affected. Most mainstream financial pundits from journalists to economists parroted this line, even against fairly convincing arguments to the contrary.  I remember finding the imagery of the “subprime contagion” particularly ridiculous.

Of course, we all know how softly the economy landed (hint: Goldilocks’ mangled corpse is still rotting in the front yard) but never mind all that because we have new buzzwords today:  ”green shoots.” As in the economy is spouting little green shoots and laying the roots for an economic recovery. While the case against green shoots is not as airtight as the one vs. Goldilocks, I remain skeptical and present some tidbits to consider.

Today’s Wall Street Journal carries an article documenting that freight haulers haven’t seen any respite as of yet. For confirmation, check out UPS’ really bad day (hey, that’s today!).

Of course, these articles present evidence that the transport sector is still mired in the dumps with no sign of green shoots amidst the muck. Bastardizing Dow Theory somewhat, this bodes poorly for any economic recovery. A dearth of goods tranportation suggests a lack of economic activity.

I am inclined to pay attention to this signal despite some discussion that the transports no longer play a leading role in the economic cycle due to the evolved nature of the US economy. At the end of the day, we still can’t eat software or intellectual property.