Really gross domestic product

Happy Friday everyone!

I hope that this post finds each of you well. Today’s message is about the Fourth Quarter U.S. Gross Domestic Product number. In case you had not heard, the economy contracted at an annualized 3.8% rate. However, and this is the BIG however, most economists were expecting the decline to be around 5.5%. Either way, it is a big number. Consider that the economy typically averages growth of between 3-5%. So, effectively, one year’s worth of economic growth has been lopped off of the U.S. economy. Yet, most folks expect the 4th Quarter to be the trough of the recession and for it not to have been as deep as expected is a good thing.

Please don’t accuse me of being the Eternal Optimist, because I am much more the Eternal Realist, buuuut these economic statistics have already been baked into the financial markets. This data is backwards looking, whereas investing is a forward looking activity. Thus, the financial markets are usually also looking forward. My point is that the interesting data to pay attention to is data that gives us some indication as to what will happen in the near future. So weekly unemployment data is interesting. Retail sales and consumer spending figures are interesting. Etc. All of that data is down, so the recession is likely to continue through the first quarter. I am certain that this does not surprise any of you. Buuuuut things will shift and soon. My confidence comes from the fact that businesses, individuals, and governments worldwide are not sitting still. They are responding.

Layoff notices are coming fast and furious and that is a sure indication of two things: current economic trouble and economic change being afoot. Businesses are finally adjusting to the REALity of the situation and they are acting fast. So change is coming. And it means that things will recover. And it means that now is a good time to invest. Yes, I promise that it is.

I will paraphrase again for you one of my favorite investing quotes from John D. Rockefeller when asked how he had made so much money: “Always invest when there is blood in the streets.” Our really gross domestic product looks pretty bloody.

Smiles sent your way!

Jason