Gross Output (GO) Growth Outpaces GDP Again to Suggest Robust Recovery

Washington, DC (Thursday, March 25, 2021): On March 25, 2021, the federal Bureau of Economic Analysis (BEA) released data for the fourth quarter 2020 gross output (GO) – the most comprehensive measure of total spending in the economy, including the supply chain. The data revealed that GO advanced significantly faster than GDP in the last period of 2020, a good sign that strong economic growth will continue into 2021.

While fourth-quarter GDP expanded 6.1% in nominal terms, GO surged 10.6% in comparable terms. Similarly, GO growth of 6.6% in real terms exceeded the real-term GDP growth of 4.3%. Furthermore, on an annualized basis, fourth-quarter GO and GDP exceeded their values from before the 2020 pullback and have risen near their respective highest levels ever – lagging slightly only behind Q3 2019 results in nominal terms.

After a minor dip in the first quarter 2020 and the sharp decline in the second quarter, the economy rallied back in the third quarter to recover most of the second-quarter losses. That growth trend continued in the fourth quarter 2020 at growth rates that exceed recent averages by a significant margin.

Many economists feared that the sharp economic decline in the second quarter would have negative effects on long-term economic growth.  To the extent that major sectors of the economy are still struggling (entertainment, sports, cruise ships, etc.), the US economy is still underperforming and is in many ways, a “K”-shaped recovery rather than a “V”-shaped recovery.

The report released today is based on fourth-quarter 2020 data, when we still did not have complete information on the implementation of Operation Warp Speed – whether vaccines will be effective or how soon we would have enough doses to vaccinate the population to the point of herd immunity. However, with more than one-third of the adult population already vaccinated, easing of government business restrictions and more states going back to business as usual will provide further support necessary to maintain the current economic growth trend.

A positive outlook can also be seen in the relationship between the GO and GDP decline during 2020. Earlier stages of production are generally more sensitive and more volatile in their response to economic disruptions. Therefore, during past recessions, GO commonly declined significantly more than GDP, which captures only final outputs in the economy. For instance, GO declined more than 26% during the last quarter 2008. In the same period, GDP pulled back less than 8%.

But the 2020 economic slowdown broke from this pattern and saw GO decline at similar rates as the GDP. This anomaly from the established historical pattern, provides another indication that the underlying business fundamentals are significantly stronger than originally anticipated, that government shutdowns in response to the COVID-19 epidemic might have been unnecessary and that those responses might have even amplified the initial economic contraction in the second-quarter 2020.

More importantly, as it did during the third quarter, business spending continued to outpace consumer spending in the last quarter 2020.

 

Business – Not Consumers – Drives the Economy

Contrary to views of many academic economists and wide-spread media reports, consumer spending does not drive the economy, and does not represent two-thirds of the economy. Using GO as a better and a more accurate measure of total spending in the economy, the business sector (B2B spending) is almost twice the size of consumer spending. Consumer spending is the effect, not the cause, of prosperity (Say’s law).

Therefore, our business-to-business (B2B) index is very useful for gauging the economy’s underlying health and the readiness to rebound after economic downturns. The B2B Index measures all the business spending in the supply chain and new private capital investment. In the fourth quarter, nominal B2B activity expanded more than 14% to $26.6 trillion. At the same time, consumer spending grew less than 4% on an annualized basis to $14.5 trillion. In real terms, B2B activity expanded at an annualized rate of 12% to $23.25 trillion and consumer spending remained flat at the same level as in the previous period of $13 trillion.

 

Gross Output

“B2B spending is in fact a pretty good indicator of where the economy is headed, since it measures spending in the entire supply chain,” stated Skousen. “After declining 5.4% and 44% in the first and second quarters, respectively, business activity expanded at an annualized rate of 39% and 12% in real terms in last two quarters of last year.”

 

GO Continues to Grow Faster than GDP in Fourth Quarter to Suggest Strong Economic Recovery at least in the First Half of 2021

Despite significant declines in the first two quarters of 2020, Gross Output indicates robust long-term growth. Prior to what appears to be merely a short-term pullback, GO delivered steady quarterly growth over the previous 42 consecutive periods. Gross Output growth slowed in late 2019, which could have been an early sign of economic slowdown even before the pandemic and government shutdowns in early 2020.

However, GO’s renewed growth in the third and fourth quarter 2020 could set the tone for the overall direction of the economy for the entire 2021 and beyond. Gross Output is a leading indicator of what GDP will do in the next quarter and beyond. As David Ranson, chief economist for the private forecasting firm HCWE & Co., states, “Movements in gross output serve as a leading indicator of movements in GDP.”

The federal government will release the advance estimate for first-quarter 2021 GDP on April 29, 2021 and the full release of Gross Output, as well as the third estimate of GDP on June 24, 2021.

Important Note:  We are hopeful that in the near future, the BEA will release GO at the same time as the first estimate of GDP for the quarter, not the third estimate.

 

Report on Various Sectors of the Economy

After two periods of contraction and a robust rebound in the third quarter, all but a few of the individual economic sectors continue to expand.

After declining in the previous three quarters, the mining sector expanded nearly 10% in real terms during the fourth-quarter 2020. The Oil and gas extraction sub-segment, which accounts for more than 60% of the overall mining sector, expanded 5.3% in the previous quarter. While exhibiting significant growth, the mining sector’s share of only 1.7% of the economy contributes very little to the overall GO. However, since mining represents the earliest stages of production, we watch its expansion and contraction as an early indicator of what other sectors further down the supply chain might do in subsequent periods.

The Agriculture sector expanded slower in the last quarter than in the third quarter 2020, but still grew 3.3% on an annualized basis. Furthermore, Manufacturing grew 5.7% after spiking more than 40% in the previous period. The two manufacturing sub-segments with highest growth in the most recent periods were Computer and electronic products with 18% and the Fabricated metal products sub-segment with a 16.2% expansion.

More importantly Manufacturing of durable goods expanded at 10% versus the growth of only 1% for Nondurable goods. All these results suggest that, while short-term consumer spending is still lagging, businesses and consumers are confident about the long-term outlook for the economy.

The largest segment of the economy, Finance, insurance, real estate, rental, and leasing, which accounts for one-fifth of GO, grew nearly 5%. The finance and insurance sub-segment expanded 7.6% and the Real estate rental and leasing sub-segment contributed to the growth with an annualized expansion of nearly 3% in the fourth quarter.

The Construction sector delivered a strong growth of nearly 12% – its highest expansion rate last year. However, the Transportation and warehousing sector advanced even faster at 17.4% in real terms. Except for the Pipeline transportation sub-segment, which contracted 8.2%, most other transportation sub-sectors expanded at double-digit percentages. The Transit and ground passenger transportation sub-segment nearly doubled compared to the third quarter, Air transportation grew more than 60%, Rail transportation increased 27.4%, Water transportation volume improved 23% and trucking expanded 5.2%.

Government spending was a mixed bag of results. Federal spending fell 1.2%, but government spending at the state and local level rose 0.5%. While the federal government’s decline rate is higher, State and local government spending accounts for two thirds of total government spending. Therefore, State and local government spending increase erased all spending reductions at the federal level. On the upside, the offset was almost exact and total government spending was flat compared to the previous period.

 

Gross Output

Gross output (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 a financial accounting statement. In April 2014, the BEA began to measure GO on a quarterly basis along with GDP.

Gross domestic product (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 not quite the same as the “bottom line” (profit, or net income) of an accounting statement, but rather the “value added” or the value of final use.

GO tends to be more sensitive to the business cycle, and more volatile, than GDP.

About GO and B2B Index

Skousen champions Gross Output as a more comprehensive measure of economic activity. “GDP leaves out the supply chain and business to business transactions in the production of intermediate inputs,” he notes. “That’s a big part of the economy, bigger than GDP itself. GO includes B2B activity that is vital to the production process. No one should ignore what is going on in the supply chain of the economy.”

Skousen first introduced Gross Output as a macroeconomic tool in his work The Structure of Production (New York University Press, 1990). A new third edition was published in late 2015, and is now available on Amazon.

Click here: Structure of Production on Amazon

The BEA’s decision in 2014 to publish GO on a quarterly basis in its “GDP by Industry” data is a major achievement in national income accounting. GO is the first output statistic to be published on a quarterly basis since GDP was invented in the 1940s.

The BEA now defines GDP in terms of GO. GDP is defined as “the value of the goods and services produced by the nation’s economy [GO] less the value of the goods and services used up in production (Intermediate Inputs or II].” See definitions at https://www.bea.gov/newsreleases/industry/gdpindustry/gdpindnewsrelease.htm

With GO and GDP being produced on a timely basis, the federal government now offers a complete system of accounts. As Dale Jorgenson, Steve Landefeld, and William Nordhaus conclude in their book, A New Architecture for the U. S. National Accounts, “Gross output [GO] is the natural measure of the production sector, while net output [GDP] is appropriate as a measure of welfare. Both are required in a complete system of accounts.”

Skousen adds, “Gross Output 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,” he says. “By using GO data, we see that consumer spending is actually only about a third of economic activity, not two-thirds that 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 US economy.”

 

For More Information

Steve Forbes: What’s Ahead podcast. In this podcast, Steve Forbes discusses Gross Output with Mark Skousen on September 9, 2019:  https://www.forbes.com/sites/steveforbes/2019/09/09/were-using-the-wrong-measure-gdp-to-gauge-the-economys-real-health-mark-skousen/#35ff3d9a52fa

GO-Day podcast discussion panel hosted Mark Skousen that included Steve Forbes, Sean Flynn, Steve Hanke, and David Ranson, September 30, 2020: https://chapman.zoom.us/rec/share/KJ17YjuR_6zthmgOA5fNprv2e65F-jICOsf430bJvnu8qWzdPYPfTohPC48qRLe9.Q8rmnlXynnTN74Tv?startTime=1601488807000

The GO data released by the BEA can be found at www.bea.gov under “Quarterly GDP by Industry.” Click on interactive tables “GDP by Industry” and go to “Gross Output by Industry.” Or go to this link directly: http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=3&isuri=1&5102=15

For more information on Gross Output (GO), the Skousen B2B Index, and their relationship to GDP, see the following:

Mark Skousen, “If GDP Lags, Watch the Economy Grow,” Wall Street Journal, April 24, 2018:  https://www.grossoutput.com/2018/04/26/away-go-economy-growing-faster-expected/

Mark Skousen, “At Last, a Better Way to Economic Measure” lead editorial, Wall Street Journal, April 23, 2014: http://on.wsj.com/PsdoLM

Steve Forbes, Forbes Magazine (April 14, 2014): “New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal”: http://www.forbes.com/sites/steveforbes/2014/03/26/this-may-save-the-economoy-from-keynesians-and-spend-happy-pols/

Mark Skousen, Forbes Magazine (December 16, 2013): “Beyond GDP: Get Ready For A New Way To Measure The Economy”: http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/

Steve Hanke, Globe Asia (July 2014): “GO: J. M. Keynes Versus J.-B. Say,” http://www.cato.org/publications/commentary/go-jm-keynes-versus-j-b-say

David Ranson, “Output growth data that the economy generates months earlier than GDP,” Economy Watch, July 24, 2017. HCWE & Co. http://www.hcwe.com/guest/EW-0717.pdf

Mark Skousen, “Linking Austrian Economics to Keynesian Economics,” Journal of Private Enterprise, Winter, 2015: http://journal.apee.org/index.php?title=Parte7_Journal_of_Private_Enterprise_vol_30_no_4.pdf

To interview Dr. Mark Skousen on this press release, contact him at [email protected], or Ned Piplovic, Media Relations at [email protected]

# # #

________________________________________

[1] The BEA currently uses a limited measure of total sales of goods and services in the production process. Once products are fabricated and packaged at the manufacturing stage, the BEA’s GO only adds “net” sales at the wholesale and retail level. Its official GO for the 2020 3rd quarter is $36.94 trillion. By including gross sales at the wholesale and retail level, the adjusted GO expands to $45.11 trillion in Q3 2020. Thus, the BEA omits nearly $8.2 trillion in business-to-business (B2B) transactions in its GO statistics. We include them as a legitimate economic activity that should be accounted for in GO, which we call Adjusted GO. See the new introduction to Mark Skousen, The Structure of Production, 3rd ed. (New York University Press, 2015), pp. xv-xvi.

Business-to-Business (B2B) Spending Grows Faster Than GDP!

Washington, DC (Tuesday, December 22, 2020): On December 22, 2020, the federal Bureau of Economic Analysis (BEA) announced that gross output (GO) – the most comprehensive measure of total spending in the economy, including the supply chain – rose dramatically in the 3rd quarter 2020.

In the aftermath of a sharp economic decline reported in the second quarter 2020, Gross Output reversed its downtrend over the past two periods and soared in the third quarter 2020. While still not recovered fully to its past highs, third-quarter 2020 Gross Output rebounded to within 2.8% of its level one year ago. This rapid rebound offers supporting evidence that we might indeed see a brisk v-shaped recovery of the economy supported by positive news on new vaccines availability as we enter 2021.

During past recessions, GO generally declined significantly more than GDP. In the fourth-quarter 2008 GO dropped more than 26% while GDP declined less than 8%. Alternatively, GO also bounced back at faster rate than the GDP during past recoveries.  However, the 2020 economic slowdown does not follow the same pattern. Rather than dropping significantly more than the GDP, GO has maintained decline rates parallel with the GDP.

This break from historical recession patterns suggests that business and supply chain spending has remained relatively robust during this economic pullback. Therefore, third quarter economic rebound indicates strong economic fundamentals that could support rapid recovery as soon as economic shutdowns are lifted with widespread availability of vaccinations.

More importantly, business spending outpaced consumer spending during the third quarter.

 

Business – Not Consumers – Drives the Economy

Contrary to views of many academic economists and wide-spread media reports, consumer spending does not drive the economy, and does not represent two-thirds of the economy. Using GO as a better and a more accurate measure of total spending in the economy, the business sector (B2B spending) is almost twice the size of consumer spending. Consumer spending is the effect, not the cause, of prosperity (Say’s law).

Therefore, our business-to-business (B2B) index is very useful for gauging the economy’s underlying health and the readiness to rebound after economic downturns. The B2B Index measures all the business spending in the supply chain and new private capital investment. In the third quarter, nominal B2B activity soared nearly 43% to $25.7 trillion. At the same time, consumer spending grew less than 40% on an annualized basis to $14.4 trillion. In real terms, B2B activity expanded at an annualized rate of 39% to $22.6 trillion and consumer spending reached $13 trillion after expanding 34.5%.

Gross Output

“B2B spending is in fact a pretty good indicator of where the economy is headed, since it measures spending in the entire supply chain,” stated Skousen. “After declining 5.4% and 44% in the first and second quarters, respectively, business activity expanded at an annualized rate of 39% in real terms in the third quarter 2020.

 

GO Increase Outpaces GDP Growth in Third Quarter to Indicate Potentially Accelerated Economic Recovery

Gross Output suffered significant declines in the first two quarters of this year. However, prior to these pullbacks, GO increased steadily for 42 consecutive quarters. Even before the pandemic and government shutdowns in early 2020, GO began to show weaker growth in late 2019 falling from nearly 2.5% in the third-quarter 2019 to just 1.1% in the final period of last year.

However, GO growth in the third quarter could set the tone for the overall direction of the economy going into next year. GO is a leading indicator of what GDP will do in the next quarter and beyond. As David Ranson, chief economist for the private forecasting firm HCWE & Co., states, “Movements in gross output serve as a leading indicator of movements in GDP.”

After the first-half 2020 pullback, both GDP and GO roared back in the third quarter. However, with a third-quarter annualized growth rate of nearly 40%, Adjusted Gross Output (GO*)[1] outpaced the 33.8 % GDP growth rate in the same period by more than 6%. In real terms, the variance between the growth rates of 30.6% for GO* and 29.9% for GDP was slightly lower at 2.3%.

The federal government will release the fourth-quarter and full-year 2020 advance estimate for GDP of for on January 28, 2021 and the full release of Gross Output and third estimate of GDP on March 25, 2021.

Important Note:  We are hopeful that in the near future, the BEA will release GO at the same time as the first estimate of GDP for the quarter, not the third estimate.

 

Report on Various Sectors of the Economy

After two periods of contraction, all major sectors of the economy expanded in the third quarter 2020. All but one if the 21 sectors expanded at double-digit percentages.

The mining sector delivered a significant expansion of 56% after contracting 35% in the previous period. However, while important to the economy as an early stage of production, the Mining sector accounts for only 1% of the overall GO and does not contribute to the overall GO as much as some of the larger sectors.

After contracting for four consecutive quarters, the Manufacturing segment expanded 51% in the third quarter. However, since manufacturing is the second largest segment and accounts for 16% of GO, its impact on the overall growth of the overall GO is substantially higher than that of the Mining sector.

Furthermore, another indication of the economy’s strong fundamentals and a positive outlook for continued growth is that the Durable goods sub-segment, which has a larger impact on long-term economic expansion, grew nearly 74%. At the same time, the Nondurable goods sub-segment expanded 27.6%.

The largest segment of the economy, Finance, insurance, real estate, rental, and leasing, which accounts for one-fifth of GO, grew nearly 12%. The finance and insurance sub-segment expanded more than 8% and the Real estate rental and leasing sub-segment performed even better with a 14.8% expansion that follows a 14.7% contraction in the previous period.

The Agriculture, forestry, fishing, and hunting sector expanded 32%. Spending in the Utilities sector advanced 11.4%. The Construction sector was the only sector that did not achieve a double-digit growth rate in the third period. This sector still expanded at 9.6%.

Transportation and warehousing, as well as the Retail trade and the Wholesale trade, grew in excess of 50%. Because of the devastating decline in the second quarter, the Arts, entertainment, recreation, accommodation, and food services rebounded nearly 160% in the third period.

After pulling back slightly in the second quarter, overall government spending increased 5% in the third quarter. State and local government spending expanded nearly 11%, which drove the expansion of the overall government segment.

Federal government spending contracted nearly 7% compared to the previous period. However, that contraction is slightly misleading. The reason for this contraction is that federal government spending spiked 16% in the previous period, which was the first double-digit increase for this segment in more than a decade.
Gross Output

Gross output (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 a financial accounting statement. In April 2014, the BEA began to measure GO on a quarterly basis along with GDP.

Gross domestic product (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 not quite the same as the “bottom line” (profit, or net income) of an accounting statement, but rather the “value added” or the value of final use.

GO tends to be more sensitive to the business cycle, and more volatile, than GDP.

About GO and B2B Index

Skousen champions Gross Output as a more comprehensive measure of economic activity. “GDP leaves out the supply chain and business to business transactions in the production of intermediate inputs,” he notes. “That’s a big part of the economy, bigger than GDP itself. GO includes B2B activity that is vital to the production process. No one should ignore what is going on in the supply chain of the economy.”

Skousen first introduced Gross Output as a macroeconomic tool in his work The Structure of Production (New York University Press, 1990). A new third edition was published in late 2015, and is now available on Amazon.

Click here: Structure of Production on Amazon

The BEA’s decision in 2014 to publish GO on a quarterly basis in its “GDP by Industry” data is a major achievement in national income accounting. GO is the first output statistic to be published on a quarterly basis since GDP was invented in the 1940s.

The BEA now defines GDP in terms of GO. GDP is defined as “the value of the goods and services produced by the nation’s economy [GO] less the value of the goods and services used up in production (Intermediate Inputs or II].” See definitions at https://www.bea.gov/newsreleases/industry/gdpindustry/gdpindnewsrelease.htm

With GO and GDP being produced on a timely basis, the federal government now offers a complete system of accounts. As Dale Jorgenson, Steve Landefeld, and William Nordhaus conclude in their book, A New Architecture for the U. S. National Accounts, “Gross output [GO] is the natural measure of the production sector, while net output [GDP] is appropriate as a measure of welfare. Both are required in a complete system of accounts.”

Skousen adds, “Gross Output 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,” he says. “By using GO data, we see that consumer spending is actually only about a third of economic activity, not two-thirds that 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 US economy.”

 

For More Information

Steve Forbes: What’s Ahead podcast. In this podcast, Steve Forbes discusses Gross Output with Mark Skousen on September 9, 2019:  https://www.forbes.com/sites/steveforbes/2019/09/09/were-using-the-wrong-measure-gdp-to-gauge-the-economys-real-health-mark-skousen/#35ff3d9a52fa

GO-Day podcast discussion panel hosted Mark Skousen that included Steve Forbes, Sean Flynn, Steve Hanke, and David Ranson, September 30, 2020: https://chapman.zoom.us/rec/share/KJ17YjuR_6zthmgOA5fNprv2e65F-jICOsf430bJvnu8qWzdPYPfTohPC48qRLe9.Q8rmnlXynnTN74Tv?startTime=1601488807000

The GO data released by the BEA can be found at www.bea.gov under “Quarterly GDP by Industry.” Click on interactive tables “GDP by Industry” and go to “Gross Output by Industry.” Or go to this link directly: http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=3&isuri=1&5102=15

For more information on Gross Output (GO), the Skousen B2B Index, and their relationship to GDP, see the following:

Mark Skousen, “If GDP Lags, Watch the Economy Grow,” Wall Street Journal, April 24, 2018:  https://www.grossoutput.com/2018/04/26/away-go-economy-growing-faster-expected/

Mark Skousen, “At Last, a Better Way to Economic Measure” lead editorial, Wall Street Journal, April 23, 2014: http://on.wsj.com/PsdoLM

Steve Forbes, Forbes Magazine (April 14, 2014): “New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal”: http://www.forbes.com/sites/steveforbes/2014/03/26/this-may-save-the-economoy-from-keynesians-and-spend-happy-pols/

Mark Skousen, Forbes Magazine (December 16, 2013): “Beyond GDP: Get Ready For A New Way To Measure The Economy”: http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/

Steve Hanke, Globe Asia (July 2014): “GO: J. M. Keynes Versus J.-B. Say,” http://www.cato.org/publications/commentary/go-jm-keynes-versus-j-b-say

David Ranson, “Output growth data that the economy generates months earlier than GDP,” Economy Watch, July 24, 2017. HCWE & Co. http://www.hcwe.com/guest/EW-0717.pdf

Mark Skousen, “Linking Austrian Economics to Keynesian Economics,” Journal of Private Enterprise, Winter, 2015: http://journal.apee.org/index.php?title=Parte7_Journal_of_Private_Enterprise_vol_30_no_4.pdf

To interview Dr. Mark Skousen on this press release, contact him at [email protected], or Ned Piplovic, Media Relations at [email protected]

# # #

________________________________________

[1] The BEA currently uses a limited measure of total sales of goods and services in the production process. Once products are fabricated and packaged at the manufacturing stage, the BEA’s GO only adds “net” sales at the wholesale and retail level. Its official GO for the 2020 3rd quarter is $36.94 trillion. By including gross sales at the wholesale and retail level, the adjusted GO expands to $45.11 trillion in Q3 2020. Thus, the BEA omits nearly $8.2 trillion in business-to-business (B2B) transactions in its GO statistics. We include them as a legitimate economic activity that should be accounted for in GO, which we call Adjusted GO. See the new introduction to Mark Skousen, The Structure of Production, 3rd ed. (New York University Press, 2015), pp. xv-xvi.

Ideal Holiday Gift! New 10th Anniversary Release of “The Maxims of Wall Street”

Dear friends,

A hundred years ago, in 1920, the great author and poet Rudyard Kipling wrote a poem, “Gods of the Copybook Headings.”  He was referring to the proverbs or maxims often drawn from sermons, almanacs, and scriptures extolling virtue and wisdom that were printed at the top of the pages of notebooks used by British school children.

The students had to copy the maxims repeatedly, by hand, down the page.  The exercise served as a form of moral education and penmanship.

Kipling’s first stanza reads:

As I pass through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market Place.
Peering through reverent fingers I watch them flourish and fall,
And the Gods of the Copybook Headings, I notice, outlast them all.

Kipling bemoaned the fact that we no longer teach aphorisms to students or adults.

As a result, to quote another great poet T. S. Eliot, “How much wisdom have we lost to knowledge, and how much knowledge have we lost to information?”

But Kipling and Eliot would be happy to know that the age-old wisdom and timeless truths of the “copybook headings” are alive and well on Wall Street.

For years, I’ve been compiling these financial adages, ancient proverbs and immortal poems found in new and rare financial books and quoted regularly by investors, money managers, brokers and old timers.

Finally, I published them in a handsome volume in dark green leather and gold lettering with a ribbon.  “The Maxims of Wall Street” was first published in 2011, and has been a bestseller ever since.  Over 35,000 copies have been sold through seven editions.

Maxims

 

“Maxims” is the Closest Thing to Wall Street Scripture

The Maxims contains:

  • Over 800 adages by such notables as Warren Buffett (“The stock market can go from green to red without stopping at yellow”)….J. P. Morgan (“Troubled waters make for good fishing”)….Humphrey Neill (“The public is right during the trends but wrong at both ends”)….Richard Russell (“In a bear market, the winner is he who loses the least”)….and Steve Forbes (“Everyone is a disciplined, long-term investor….until the market goes down!”).
  • Old Timer’s stories like the “trading sardines”…where are the customer’s yachts?….the gold bugs….commodity traders….The origin of “blue sky”…
  • Famous lines from Baron Rothschild, Ben Franklin, John D. Rockefeller, Joe Kennedy, J. P. Morgan, Bernard Baruch, John Templeton, Jesse Livermore, John Maynard Keynes,and Ben Graham
  • All quotations are divided into categories, with sage advice on beating the market, diversification vs concentration, value vs growth, bulls vs bears…black swan events….day traders….doomsayers and casandras…plungers and the peacocks….hot tips and insider information…losing money and missed opportunities…Wall Street vs Main Street….chartists vs fundamentalists….leverage and debt….privacy and government….taxes and tax havens….inspiring “Rich Man’s Pearls of Wisdom.”

Providing A Shortcut to Financial Wisdom

The book has been endorsed by Warren Buffett, Jack Bogle, Dennis Gartman, Barron’s, and many others.

Alex Green, chief investment strategist of the Oxford Club, wrote the following last month:

“Wouldn’t it be great if someone collected the wisest thoughts of the world’s greatest investors, men like Jesse Livermore, Baron Rothschild, J.P. Morgan, Benjamin Graham, Warren Buffett, Peter Lynch, John Templeton and others?

“As a matter of fact, someone has, my good friend and colleague Dr. Mark Skousen. His book ‘The Maxims of Wall Street’ is a crash course in how to survive and profit in today’s volatile markets.

“A college economics professor, founder of FreedomFest and bestselling author, Mark has spent more than four decades reading, writing, teaching and lecturing about financial markets. Along the way, he has collected a treasure trove of proverbs, slogans, stories and juicy quotes.

“I found myself chuckling (and occasionally sighing) when I first read this book. And I still refer to it regularly. Over my 35-year career, I learned much of this investment wisdom by trial and error. Fortunately, you don’t have to. The Maxims of Wall Street is a pithy and indispensable guide.”

 

New 10th Anniversary Edition Released in Time for the Holidays

Last week my grandson Luke and I drove to Chicago to pick up the new 10th anniversary edition of “The Maxims of Wall Street,” hot off the press.  Then we drove to a suburb of Cleveland and delivered 175 copies to Carver Financial Services, whose president Randy Carver is a big fan.  He’s a broker with Raymond James.  Randy plans to give them to his clients as a holiday gift.

Maxims

Kelley Drumm, marketing director at Carver Financial Services, and I admire new 10th anniversary edition of “Maxims”]

I can’t deliver every copy in person, but I will be mailing out copies this week and next, in time for Christmas and the holidays.

In fact, there’s still time to order your own copies — for yourself and your investor friends, neighbors, clients and favorite brokers.  Order as many copies as you would like — I offer a special discount when you order more than one copy — half off!

The new edition is special — it’s 282 pages.  I’ve added 200 quotes since the first edition came out in 2011.

 

Cheaper by the Dozen!

I’ve kept the same low price.  The new edition retails for $24.95, but if you buy from Skousen Books, the first copy is just $20, and all additional copies are only $10 each. If you order an entire box of 32 copies, the price is only $300, less than $10 each.

As Hetty Green, America’s first female millionaire, said, “When I see something cheap, I buy a lot of it.”

To order, go to www.skousenbooks.com.

I number and autograph every copy and pay the postage if mailed in the United States (shipping to Canada or other foreign destinations requires additional postage). If you have any special inscriptions, please email Ned at [email protected].

We ship every day.  Order your autographed copy today!  Go to www.skousenbooks.com.

And let me know if you want a special inscription as a gift to others.  I’ll be glad to oblige.

Here’s to a very merry Christmas and happy prosperous New Year.

With all good wishes, AEIOU,

Mark

Mark Skousen
Presidential Fellow, Chapman University
Newsletter:  www.markskousen.com
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Steve Forbes on the GO: I Make the Forbes 400 Richest Issue!

I’m mentioned on page 22 for my gross output (GO) model. (Sorry, I may be worth several million, but not several billion!)

Steve Forbes endorses my GO model, saying GO is a “far more comprehensive, realistic and enlightening picture than gross domestic product (GDP). It is like the difference between an X-ray and a CAT scan.” GO measures spending at all stages of production, including the all-important supply chain, and GDP only measures final output.

GO is a leading economic indicator. It has slowed considerably in 2019, suggesting a slowdown, not a recession.

Forbes

 

In his column, Forbes takes federal officials at the Bureau of Economic Analysis (BEA) to task for not releasing GO on a timely basis. He stated, “President Trump should immediately order the BEA to get off its duff and issue GO at the same time it does GDP.”

Indeed, I’m pleased to announce that Brian Moyer, the BEA director, informed me that the agency plans to release both GO and GDP at the same time by next September 2020… not unlike publicly traded companies issuing “top line” (sales) and “bottom line” (profits) reports every quarter. Economics finally has caught up to accounting and finance in the 21st century!

Steve Forbes’ column on GO is now available to read here.

For more information on GO, go to www.grossoutput.com.
Best wishes, AEIOU,
Presidential Fellow, Chapman University
www.mskousen.com

 

MY INTELLECTUAL ANCESTORS

BY MARK SKOUSEN
Presidential Fellow, Chapman University

“If I have seen a little further, it is by standing on the shoulders of giants.”
— Sir Isaac Newton

Dear readers,

I thought you’d get a kick out of this series of photos and quotes — looks like some of the great economic philosophers and writers rubbed off on me!

I’ll try not to get it go to my head…..I still get rejection letters from the American Economic Review!

Henry_Hazlit_tribute_1984

Courtesy:  Mises Institute

My paying tribute to Henry Hazlitt and his classic book, “Economics in One Lesson” in celebration of his 90th birthday (1984)

“Mark Skousen is America’s finest economist.  He has a genius for explaining complex issues in a clear way and connecting ideas.  He is the Henry Hazlitt of our time.”
– Steve Mariotti, President, National Foundation for Teaching Entrepreneurship (NFTE)

MAS_with_Friedrich Hayek_Austria_1985_01

Courtesy:  John Mauldin, 1985

Interviewing Friedrich Hayek in the Austrian alps in 1985

“Mark Skousen is America’s leading economic author because he roots his luminous books in the real world, in the grand tradition of the great Austrian economists.  He is the Hayek of our era.”
– George Gilder

MAS_with_Milton Friedman_San_Francisco_2006_01

Courtesy:  photo by Van Simmons

Meeting with Milton Friedman in his favorite San Francisco restaurant, 2006

“Mark Skousen has emerged as one of the clearest writers on all matters economic today, the next Milton Friedman!” 
– Michael Shermer, Scientific American

Mark Skousen’s article on Revista Procesos de Mercado (Review of Market Processes)

Revista Procesos de Mercado (Review of Market Processes) has just published Mark Skousen’s article, “Blocking Progress in Austrian Economics: A Rejoinder,” where he defends his work in gross output (GO) and responds to a recent critique by Walter Block.  See http://www.jesushuertadesoto.com/revista-procesos-de-mercado/vol-xiv-no2-2017/, pp. 153-172.