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Jewish World Review May 12, 2009 / 18 Iyar 5769 On Wall Street, signs plant a seed of hope By Gail Marks Jarvis
http://www.JewishWorldReview.com | (MCT) After a long, cold economic winter, some see hints of spring in the economy. Last week, Federal Reserve Chairman Looking for so-called green shoots has become an obsession on Excitement over green shoots, even though they can be difficult to interpret, has propelled the Some skeptics have joked that green shoots might turn out to be weeds. But among the hopeful signs has been a little improvement in retail sales; consumer spending makes up more than two-thirds of the economy. In financial circles, on Thursday the government will reveal the results of "stress tests" on the nation's 19 largest banks to determine if they need to raise more money to withstand another economic emergency in the next two years. And there is an expectation that many of them will be able to meet their capital needs without further government capital. Both retail sales and confidence in banks have improved from where they were when the financial system threatened to collapse last fall. "There was a complete freezing of consumer spending," said Although thawing is welcomed and is a reason to slowly buy stocks again in anticipation of the eventual recovery, Herro and others say it's less clear what the economy will be like after the early phase of increased business activity. "We continue to expect economic activity to bottom out, then to turn up later this year," Bernanke said in testimony to a congressional committee Tuesday. But he doesn't necessarily predict a quick return to the relatively comfortable conditions that preceded the housing bust. "Even after a recovery gets under way, the rate of growth of real economic activity is likely to remain below its longer-run potential for a while," Bernanke said. He thinks the recovery will be "gradual," and "businesses are likely to be cautious about hiring." Most economists believe the unemployment rate will continue to increase, and many consumers are saddled with heavy debt loads. Although stocks of companies that depend on consumers have been strong performers lately, On Tuesday, Bernanke added to the upbeat mood, citing an increase in consumer purchases during the first quarter and firming sales of new homes. Bernanke thinks 30-year mortgages at current low levels will make homes affordable. But Bernanke is not viewing green shoots through rose-colored glasses. He noted that businesses cut spending on equipment and software at an annual rate of 30 percent during each of the last two quarters. And in contrast to last fall, when businesses had trouble getting banks to lend money, now many businesses don't want to borrow. In addition, with companies still reporting earnings from the last quarter, U.S. Steel, for example, was expected to report a Also, many companies are providing stronger-than-anticipated earnings by slashing costs, but analysts say that works for only so long. Once a competitor does the same, a company can lose its advantage. Rather than buying a stock based on a positive earning surprise, Silverblatt suggests selecting those that increase dividends. For example, he notes, luxury handbag-maker Coach "reported numbers that were OK, not great, but they initiated a dividend." "That's leading with your chin," he said. "It's like saying: 'The check is in the mail.' " Silverblatt also is telling investors to be wary of August and September, when companies will be setting 2010 budgets and cutting back if they don't see sales picking up. The current period is "a breather," he said. Every weekday JewishWorldReview.com publishes what many in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here. Gail Marks Jarvis is a personal finance columnist for the Chicago Tribune and author of "Saving for Retirement without Living Like a Pauper or Winning the Lottery." Comment by clicking here.
04/08/09: Analysts debate the future of the rally
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