You may have heard the phrase “second derivative” bandied about; most users of the term fail to define it in plain English. Here’s my attempt: Imagine you jump from a airplane — for a while, you are free falling — accelerating downwards at increasing speeds*. After a few thousand feet, you pull the rip cord and your parachute opens up. In terms of direction, you are still heading down; In terms of speed, however, even though you are falling, you are falling at a much slower rate. As the parachute deploys, you are decelerating — the rate of your fall is slowing.
That pretty much sums up the economy lately — still contracting, but at a slower rate than the panic period from September to February. But this does not mean we are yet on the ground. That lack of change could be called stability. And the economy is certainly not expanding. That is likely several quarters (or longer) away.
And those investors who made recent bets that Green Shoots are a great entry for investing — well, they may be somewhat disappointed . . .
* We will save the discussion of terminal velocity for another time . . .
Previously: The Annual Existing Home Sales MSM Errata (March 24th, 2009) http://www.ritholtz.com/blog/2009/03/annual-existing-home-sales-errata/
Existing Home Sales, Non Seasonally Adjusted, Explained (March 25th, 2008) http://www.ritholtz.com/blog/2008/03/existing-home-sales-non-seasonally-adjusted-explained/
Temporary Help Services Employment Down 27% (April 3rd, 2009) http://www.ritholtz.com/blog/2009/04/temporary-help-services-employment-down-27/
See Also: The Economy’s ‘Green Shoots,’ Real or Imagined April 6, 2009, 6:32 pm http://roomfordebate.blogs.nytimes.com/2009/04/06/the-economys-green-shoots-real-or-imagined/
Ben Bernanke’s Greatest Challenge 60 Minutes, March 15, 2009 http://www.cbsnews.com/stories/2009/03/12/60minutes/main4862191.shtml
Recovery hopes begin to blossom Chris Isidore CNNMoney.com April 7, 2009: 7:29 AM ET http://money.cnn.com/2009/04/06/news/economy/recovery/index.htm?postversion=2009040615
Originally published at The Big Picture blog and reproduced here with the author’s permission.