SC's Own Dr. Bruce Yandle Sees the Light

You may have noticed in the past, both on this show or speaking directly with Kendall and me, that we tend to be a bit harsh on economists.  Perhaps we should be a bit more forgiving of them because we too know how hard it is to throw your thoughts and predictions out to the world for open scrutiny.  However, often times our common sense approach conflicts with what we view as the trend economists often take towards getting stuck in their data, and then filtering that data through a "glass half empty" medium of explanation. 

So first I would like to thank Dr. Bruce Yandle for his latest The Economic Situation newsletter in which he presents us with a "glass half full" spin on the economy.  Dr. Yandle is Dean Emeritus of the College of Business & Behavioral Science at Clemson University.¹ In his June newsletter he has a large section in which he talks about the current unemployment situation here in America titled "The 91% Solution". 

Everyone has seen the great amount of attention that has been given to the unemployment rate in the news.  Unemployment continues to rise as companies continue to increase layoffs.  April's unemployment rate was 8.9%.  Dr. Yandle however flips this around and instead focuses on the 91% of those people wanting jobs, having jobs.  He speaks of the massive amount of output this 91% creates for the economy.  He furthermore shows that although the gap between the total number of workers and the trend level has increased these past few months, the total workforce actually increased in April from March's number.  

We at Anderson Griggs use this same common sense approach in our analysis of the companies we own and invest in and the markets.  The news puts a lot of weight on the earnings of companies during these busy earnings seasons.  Many of these news stories are quick to point out when a company's earnings are below the average analyst estimate.  Or the headlines are quick to point out that revenue is down.  As intelligent investors, we own the company.  And the most important factor to focus on is positive growth.  Perhaps the expectation was 15% earnings growth, but during the previous quarter Company X only grew earnings 10%.  This is still positive growth to us as owners!  The same goes for revenue and income such as Microsoft's second quarter decline at the end of 2008.  The only thing that was spoken of was the $167 million dollar miss from expectations.  No one focused on the $4.17 billion in profits the company made.  

So when you are watching the news about the latest economic reports or reading about the latest earnings releases don't leave off your quest for understanding at the headlines.  Remove yourself from reported data, gain some space to get a better perspective, and look at things with a common sense, intelligent investing approach.      

Justin Anderson 

¹    For more information about Dr. Yandle visit http://business.clemson.edu/about/about_Dean_Yandle.htm.  To find June 2009 The Economic Situation report or previous reports by Dr. Yandle visit http://www.strom.clemson.edu/teams/ced/esr.html.