Can LinkedIn Save the Commerce Dept.?

NEW YORK (TheStreet) -- The U.S wholesale inventories number reminds me of the quarterly earnings report from LinkedIn (LNKD). It's a good-news, bad-news story, which may not bode well for either the U.S. economy or the businesses which depend upon it.

The good news from today's report was that inventories rose less than expected in December. The bad news is that the government may be forced to reduce its fourth-quarter gross domestic product estimate. The U.S. wholesale inventories number is a major component of the nation's GDP, and cutting that number isn't exactly encouraging for the overall economy.

That's why the Commerce Department's report, that wholesale inventories increased 0.3% after an unrevised 0.5% gain in November, sounded like telling your CPA that your income dropped last year but you won't have to pay as much in taxes.

It's also like LinkedIn telling analysts and investors last Thursday that first-quarter revenue will be $455 to $460 million, when analysts on average had projected sales of $469.4 million.

The good news is that the company's stock is no longer priced at a forward one-year price-to-earnings ratio nearing 90. Currently with the shares of the company at around $203, the PE is only 80.

So my suggestion to the Commerce Department is that it reach out via the vast social-business network that LinkedIn has built and ask the millions of entrepreneurs and officers what's happening with their companies' business inventories. Are their products selling faster or accumulating dust in a warehouse or storage room?

The component of the latest U.S. wholesale inventories number that goes into the calculation of GDP is wholesale stocks (goods, physical products, materials to be sold), excluding autos. An increase of 0.3% in December doesn't sound like much, but its enough to motivate economists at JPMorgan and Barclays to anticipate that fourth-quarter GDP would be lowered by about 0.2 percentage points.

"We now believe real inventories increased around $119 billion in the fourth quarter," said Daniel Silver, an economist at JPMorgan in New York.

"Although this is still a pretty rapid pace of inventory accumulation, our revised estimate means that inventories could be a bit less of a drag on first-quarter growth than we had previously been anticipating."

In other words, it wasn't as bad as we had first dreaded.

The change in wholesale inventories from the third quarter evidently adds 0.42 percentage points to the fourth-quarter's 3.2% annualized growth rate, countering economists' predictions for a slower pace of restocking, which would have weighed on output.

If you're confused, you're in really good company, along with government and private economists.

The government should take a lesson from LinkedIn, whose main "inventory" is their vast network of connected people who work for real companies or for themselves. Shares of LinkedIn have more than quadrupled since its IPO back in 2011 as the chart below powerfully illustrates.

LNKD ChartLNKD data by YCharts

What's more important than a company's wholesale inventories? Its quarterly revenue per share growth, which is represented in the above chart by the orange line. Holy guacamole, LinkedIn has had spectacular results with that financial metric.

Yet Bloomberg reported that LinkedIn is "headed for its fifth straight quarter of decelerating sales growth. To expand its potential revenue base, LinkedIn is seeking to reach workers overseas, add mobile features and make acquisitions." Evidently that's a different number than quarterly revenue per share.

The company said last Thursday that it bought Bright Media, an analytics company that helps match candidates with the right employers, for about $120 million in cash and stock. This may potentially be good at lowering the true unemployment rate, which I suspect is quite a bit higher than the official government number.

Perhaps the Commerce Department could hire LinkedIn to use its newly purchased analytics company to make a wider, more careful analysis of real-world U.S. wholesale inventories. Why not include unsold automobiles, too?

The Fed and its new Chair Janet Yellen need to know the facts on inventories. Plus, a report last week showed a bigger trade deficit in December than the government had assumed in its estimate for fourth-quarter growth. Maybe now we know why the GDP number is falling.

For 2013, wholesale inventories increased almost 4%. Economists are holding out hope that the current level of inventory is not sustainable.

Hopefully the government will pull out all the stops to stimulate the economy in a way that addresses what business people in the U.S. are really experiencing. That means harnessing the power of companies like LinkedIn and even possibly stopping the Fed's bond-buying reductions.

At the time of publication the author had no positions in any companies mentioned in this article.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.


Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of

Courtenay holds a Master's of Science degree in Psychology from California Polytechnic State University, and is a former senior vice-president of Investments for two major brokerage firms. He's been a fiercely independent investment "investigator" and a consulting contributor to the investment publishing world for over 30 years. In addition to his role as an investment publisher and analyst, he serves as a marketing consultant to the investment media industries.

In his role as a financial writer and editor, he specializes in unique investment strategies, growth with income stocks, overlooked investment themes, tax-advantaged themes, risk management, technologies to capture gains and reduce losses, real estate related opportunities,effective wealth preservation techniques, and the use of ETFs for diversification and asset allocation. He also follows and frequently writes about technology, health sciences, energy and resource companies. Because of his training and background in Clinical Counseling and Psychology, he enjoys writing about investor behavior, the herd mentality, how to turn investment mistakes into investment breakthroughs and the stock market's behavioral trends and patterns.

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