Why shouldn't we trust what the GDP tells us about the U.S. economy? Find out what financial expert Dawn Bennett has to say.

1. The
Misleading
Nature of the
GDP

2. Can We Trust the
GDP?
Why is the United States' GDP number an unreliable indicator of
the health of our economy?
According to financial expert Dawn Bennett, founder and CEO
of Bennett Group Financial Services, the country’s GDP
number—specifically its 2014 2rd Quarter number—offers a
highly misleading message about the state of the economy
thanks to political influence and the manipulation of data.

3. About the GDP
What does the GDP measure?
• The GDP is a reflection of all of the money involved in imports and
exports over the course of three months, as well as the nation’s total
production of products.
• The GDP is calculated on a quarterly basis by the Bureau of Economic
Analysis (BEA). The U.S. has published a quarterly GDP number since
World War II.
• While the GDP serves as a valuable measure of economic health for
informative purposes, it also helps investors make smart decisions. When
investors can make smart decisions, the economy can continue to do well.

4. What Makes the GDP
Misleading?
• The BEA announced that in the 2nd Quarter of 2014, the GDP jumped
an impressive 4.6 percent from the 1st Quarter.
• This figured as the most significant increase in the GDP between
quarters since the end of 2011. However, the nation’s slowing
economy did not provide any reasonable evidence to support this
high figure.
• Bennett believes the 1st Quarter’s disappointing 2.1 percent decrease
in GDP was likely enough to prompt the government to inflate the 2nd
Quarter’s number. Bennett states a more accurate GDP 2nd Quarter
number is likely a negative 1.7 percent.

5. • Corporate insiders like company CEOs are selling their stocks at an
extremely high rate. We wonder: Why would these insiders decide
to quickly dispose of their stocks if the market was strong, as the
GDP says it is?
• As heads of company, these leaders know more about their future
growth than the government or market speculators.
• Approximately 7,000 of these insiders bought their own stocks in
the past year, while over 23,000 sold their own stocks.
• At the same time, the repurchasing of corporate stocks are occurring
at the highest rate since the year 2000. In short, company insiders are
selling the company stocks they individually own, but buying lots of
company stocks owned by the company to increase stock prices.
Insider Trading
Behavior

6. A Change to GDP
Calculations
In 2014 the U.S. also changed the way in which its quarterly
GDP number was calculated, which has resulted in a distorted
view of the nation’s actual productivity.
Previously, GDP was calculated by combining private
consumption, government spending, gross investments, and the
difference between export and import values.
GDP= C+G+I+(X-M)

7. New Calculations
Now, the government calculates the GDP with the inclusion of:
• Research and Development
• Art
• Film Royalties
• Books
• Theatre
• Music
The new calculation also considers things like real estate commission
and transactions to be a part of investment, even though they don’t make
up actual production.
This results in a GDP that is 3 percent larger than it would be otherwise.
The U.S. is the only country in the world that currently includes these
categories into their GDP calculations.

8. The Takeaway?
It’s time for investors to look more closely at stock market behaviors
and turn to other measures of economic health.
As Bennett notes, we’re currently sitting atop a speculative market
that has been inflated by misleading GDP figures, the excessive
printing of money as part of quantitative easing, and the Federal
Reserve’s unsound policies of high-frequency trading on the market.
While the economy may appear to be in good health, these indicators
are misleading and should be a signal to investors to make more
conservative choices in the coming months.