Wild Ride on Wall Street: When Will it Recover?

By thiggins

Wall Street is going through a period of adjustment with the collapse in oil prices and threat of rising interest rates. But I don’t think the latest instability will derail the bull market in stocks. I’m still 100% invested.

Gold is also rallying, but it’s hard to say how long it will last. Certainly, gold stocks are cheap, and we’ve played them profitably in my short-term trading services.

Our healthcare and biotech stocks are still in a major uptrend. For specific recommendations, go to www.markskousen.com.

What Drives the Economy? The Consumer or Business?

Like a bad penny, one particular economic fallacy keeps coming back. Yesterday Reuters reported that one of the reasons why the markets dropped was because of disappointing holiday sales in December. Why is that important? Because, said the reporter, “consumer spending accounts for two-thirds of all U.S. economic activity.”

How many times do I have to debunk this myth? It is simply not true. Consumer spending actually accounts for only about one-third of U.S. economic activity, and thus, it is not listed among the top 10 leading economic indicators.

The business sector, which conducts business-to-business (B-to-B) transactions, is twice as big as consumer spending.

The problem is that journalists keep thinking that gross domestic product (GDP) represents total economic activity, when it actually only represents final spending on finished goods and services. Consumption is two-thirds of GDP, but only one-third of total spending in the economy, as measured by my own Gross Domestic Expenditure (GDE).

Even if you use the government’s new Gross Output (GO) statistic, consumer spending is less than 40% of GO.

First Textbook to Include My GO Statistic

I’m happy to report that textbook writer Roger Leroy Miller has included a new section in his new 18th edition of “Economics Today” that is devoted to Gross Output, and he explains why it’s important to measure. Bravo!

The textbook is available on Amazon but costs $292! Yesterday’s Wall Street Journal had an op-ed by a professor complaining about the high cost of economics textbooks, and I have to agree.

I suggest you buy my textbook, “Economic Logic,” which is now in its 4th edition and costs only $52 in print or $46 on Kindle.

Plus, my textbook is special: It integrates the new statistic Gross Output (and my own Gross Domestic Expenditures) into standard economics in an easy, understandable form. And it’s a no-compromise textbook in free-market economics. Buy it today!

Government to Announce Third-Quarter GO Next Thursday

The federal government’s Bureau of Economic Analysis (BEA) will report third-quarter 2014 Gross Output on Thursday, Jan. 22, and I expect it to be higher than GDP, indicating a robust economic recovery. I will be on CNBC on Friday morning, 10:40 am, Jan. 23, with Rick Santelli to discuss the results. Stay tuned!

“Getting Gross Output incorporated into the national income accounts is a HUGE achievement,” writes Northrup Buechner, a professor of economics at St. Johns College. Thanks for the vote of confidence.

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You Blew It! Universal Free Community College?

“Every American, whether they are young or just young at heart, should be able to learn the skills necessary to compete and win in the 21st century economy.” — President Barack Obama, January 9, 2015

President Obama thinks a valuable commodity like college education should be free to all students, rich or poor. The poor are already covered by federal Pell grants, but now the middle class and apparently even the rich can go to a two-year community college and pay no tuition.

The federal and state governments would foot the bill, which would cost $6 billion a year or more.

The biggest problem with this harebrained socialist scheme is that when consumers don’t pay the true cost of education, they don’t value it, and it becomes wasteful. They don’t do their homework, they miss class, and they don’t really learn the skills necessary because someone else is footing the bill.

President Obama needs to take a course in basic economics and learn the “accountability” or “user pay” principle. Benefits should be paid by the user, not a third party.

Studies show that students who pay for their education choose their major earlier, earn their degree faster and get better grades.

Obama needs to learn the welfare principle. You help those who need help, but you should never help those who don’t need help (the wealthy). It destroys initiative.

You can see how “universal free” education has done for public high school students — there has been virtually no progress for years.

Tragically, if this legislation gets passed, it will begin the destructive course of American education. It will probably mean the end of for-profit higher education and maybe even hurt our top colleges and universities.

ALERT: “Early bird” discount at FreedomFest ends today, Jan. 15 (we extended it for people who were on holiday)Sign up here. As Keith Fitz-Gerald, editor of the hot Money Map Report, says, “You MUST attend this conference and the historic Krugman-Moore debate! I’ll be there all three days!”

Last call: The early-bird Discount Ends on Jan. 15 (Today)! Get $100 off per person/$200 per couple with the “early bird” discount at next year’s FreedomFest, July 8-11, 2015 at Planet Hollywood. We’re putting together our Dream Team of business leaders, including Steve WynnSteve ForbesJohn Mackey (CEO, Whole Foods Market) and billionaire Peter Thiel. Plus, listen to our team of financial gurus such as Keith Fitz-Gerald (Money Map Report), Alexander Green (Oxford Club), Donald Smith (top New York hedge fund manager), Adrian Day and Mary Anne and Pamela Aden — and we just added Rick Rule, director of Sprott Global USA. Our team of political analysts includes Grover NorquistDinesh D’SouzaMichael MedvedCharles Murray and Kevin Williamson (National Review — just added). Plus, watch our Dream Debate of the Century, Paul Krugman vs. Steve Moore! Sign up at www.freedomfest.com, or call Valerie Durham, our new conference director, at our new toll-free number 1-855-850-FREE (3733). You also can email her at valerie@freedomfest.com. See you there!

In case you missed it, I encourage you to read my e-letter column from last week on Eagle Daily Investor about the world’s most dangerous tax. I also invite you to comment in the space provided below my Eagle Daily Investor commentary.

Good investing, AEIOU,

Mark Skousen

Mark Skousen
Presidential Fellow, Chapman University

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