How New Economic Data Forecasts Recession, but not Bear Market

Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

My gross output (GO) statistic for the fourth quarter was released today by the federal government. Here’s what it showed:

U.S. economic activity continued to slow dramatically in fourth-quarter 2015, threatening recession. As a whole, the growth rate of the economy was anemic, almost flat, for 2015. This is why the Fed has aggressively been pumping new money into the system. The money supply has been growing at 7-9% rate in the past few months to stimulate the economy. The Fed’s easy-money policy has resulted in higher stock and gold prices.

Gross output (GO), the new measure of U.S. economic activity published by the Bureau of Economic Analysis (BEA), showed that spending throughout the economy declined slightly in the fourth quarter of 2015. And my Skousen B2B Index — a measure of business spending throughout the supply chain — now has fallen two quarters in a row. Both data points suggested a mild business recession as we entered 2016.

Based on data released today by the BEA and adjusted to include all sales throughout the production process, nominal GO fell 0.6% in the fourth quarter of 2015, compared to the 2.3% growth rate of the third quarter. Adjusted GO was $39.0 trillion in the fourth quarter, more than double Gross Domestic Product (GDP) of $18.2 trillion. Nominal GDP actually rose 2.3% in the fourth quarter. When GO declines relative to GDP, it’s usually a sign of recession.

b2b

Deflationary pressure on prices continued in the fourth quarter. So in real terms, the adjusted GO growth rate rose slightly, by 0.8%.

GO and GDP are complementary statistics in national income accounting. GO is an attempt to measure the “make” economy; i.e., total economic activity at all stages of production, similar to the “top line” (revenues/sales) of an accounting statement. In April 2014, the BEA began to measure GO on a quarterly basis along with GDP.

In turn, GDP is an attempt to measure the “use” economy, i.e., the value of finished goods and services ready to be used by consumers, business and government. GDP is similar to the “bottom line” (gross profit) of an accounting statement, which determines the “value added” or the value of final use.

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b2b2

GO and GDP are complementary aspects of the economy, but GO does a better job of measuring total economic activity and the business cycle, and demonstrates that business spending is more significant than consumer spending. By using GO data, we see that consumer spending is actually only about a third of economic activity, not two-thirds, which is often reported by the media. As the chart above demonstrates, business spending is in fact almost twice the size of consumer spending in the U.S. economy.

I’ll have more to report on GO on my website, www.mskousen.com.

For more background on this revolutionary new statistic, order a copy of my book, “The Structure of Production,” from Amazon here.

You Blew It! More Americans Having ‘Tattoo Regret’

“Tattoos are like a metaphor for life. We all make mistakes. Sometimes I look at some of the tattoos I have and say, ‘Yeah, I have to live with that the rest of my life.’”

—  J. J. Redick, Los Angeles Clippers guard

I’m not a big fan of tattoos. I don’t think I’ve seen a tattoo yet on an NBA player that I thought looked cool. Most of the time, I think, “did he forget to shower?”

When I see young people with tattoos all over their arms, legs or bodies, I want to go up to them and say, “At what point in your life did you want to advertise to the whole world how crazy you are?”

Not surprisingly, a growing number of people are regretting getting a tattoo. Currently, 17% have tattoo regret, and that number is rising. The older you get, the more you realize what a mistake it was to get a tattoo. When I was growing up, the only people with tattoos seemed to be navy veterans who apparently got their tattoos when they were half drunk.

When a young person thinks of having a tattoo, too bad there’s not a parent around to ask them, “Would you want to wear the same T-shirt every day?”

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Cato Institute to Host GO Event: What Really Drives the Economy?

It’s time to celebrate! I’m pleased to announce that the Cato Institute is hosting a luncheon and policy forum on Gross Output and my book “The Structure of Production” on Friday, May 13. This is going to be a big event. Come join me, Steve Forbes and George Gilder for the event of the year at the Hayek Auditorium at the Cato Institute, 1000 Massachusetts Ave. NW, Washington, DC 20001.

The topic will be “GO Beyond GDP: What Really Drives the Economy?” Get a seat early for this historic celebration of the Feds’ adopting my GO statistic, and what it means to investors, businesses and government policy. Afterwards, we will have a luncheon and autograph session for each of our books: My “Structure of Production,” Steve Forbes’s “Reviving America” and George Gilder’s “The Scandal of Money.”

This is a free event but you must register at http://www.cato.org/events/go-beyond-gdp-what-really-drives-economy. You can also email events@cato.org or call (202) 789-5229. If you can’t make it, you can see this event live by going to www.cato.org/live. But if you live in the area, I urge you to come in person.

Maxims of Wall Street Almost Sold Out

At the Investment U conference last week, Alex Green and I (both past chairmen of Investment U) enjoyed a popular “Duel of Financial Gurus.” During the duel, Alex Green told the audience, “The Maxims of Wall Street is a classic, and should be THE reference bible for all investors. It distills the wisdom of the ages of all the great financial gurus, from J.P. Morgan to Warren Buffett.”

Skousen-signingMaxims4C

After he spoke, I sold out of the three boxes I brought! But I still have a few boxes left of the 4th edition at my home. If you want an autographed copy, you can buy the first copy for $20 and all additional copies for $10, and I pay postage. If you buy a box of 32 copies, the cost is only $300 postpaid. To order, call Harold at Ensign Publishing, toll-free, at 1-866-254-2057, or go to www.miracleofamerica.com.

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Last week, we had our first showing of FreedomFest TV, where master of ceremonies Terry Brock interviewed me for half an hour on money, taxes and FreedomFest. If you missed it, you can watch it online.

You can still register at last year’s rates if you sign up by May 1. Go to www.freedomfest.com, or call, toll-free, 1-855-850-3733, ext. 202. We’ve just added Floyd Brown and Rodolfo Milani, two financial experts with excellent track records. Plus, the Duel of the Financial Gurus was so popular that Alex and I are going to do it again at FreedomFest. Come join us for the fun.

Upcoming Conference

Sign up before May Day!

FreedomFest convenes at Planet Hollywood, Las Vegas, July 13-16, 2016. Note: Our final “early bird” discount ends on May 1, so I urge you to register now: http://freedomfest.com/register-now/ or call Karen, Jennifer or Amy toll-free at 1-855-850-3733, ext. 202. And be sure to watch our short video of last year’s exciting program: www.freedomfest.com/videos.

Earth Day Skepticism: Is the Sky Really Falling? 
FreedomFest TV with Michael Shermer, April 22, 1 pm EDT

Join us on Earth Day to talk about the benefits of critical thinking for all inhabitants of planet Earth. Host Terry Brock will interview Michael Shermer, best-selling author, columnist at Scientific American, and publisher of Skeptic Magazine). Terry and Michael will discuss Global Warming, the myths of overpopulation, and what it means to be a skeptic today, Ask Michael your own questions or “pop into” the studio from your own computer or mobile device. Subscribe now at www.bit.ly/fftv02.

Twitter handles/hashtags: @TheFreedomFest  @TerryBrock #thefreedomfest #earthday

You can RSVP on the Facebook event:
https://www.facebook.com/events/1762367243999046/

You can RT our tweet:
https://twitter.com/TheFreedomFest/status/722899064472244224

See you Friday!

Please jump on at about 9:45 am PT: www.bit.ly/fftv02.

In case you missed it, I encourage you to read my e-letter column from last week about the recipe for a high-quality financial newsletter. I also invite you to comment in the space provided below my commentary.

 

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