Conservatives are crowing about the weak GDP number. The "Obama recovery" the media keep touting is looking more and more like a fraud, according to Investor's Business Daily.
Really? Not really.
What actually happened is that government spending fell at an annual rate of 3.1%. The private economy actually grew at a 3.4% rate, pretty much in line with what you can expect coming out of a recession - twice the average growth rate since 2000.
Forget politics for a moment. There is a recession. But the recession is happening where conservatives want it to happen.
It's happening in government.
Washington D.C., in short, is entering a recession.
Again, no politics. How do you play this trend, which looks certain to continue regardless of how this year's elections go.
One way is to stay bearish on any stocks that do a substantial part of their business with government, like Computer Sciences Corp. (NYSE:CSC). CSC fell off a cliff starting in 2011, and is now trading for less than half the $54/share it was worth in February 2011.
Not to say CSC has done anything wrong. The company is a leader in the federal government's move to "cloud" computing. It recognized its problems by bringing in turnaround expert Mike Lawrie as CEO.
The stock gained 20% on Lawrie's hiring, and I interviewed him several times as part of my open source beat at ZDNet, when he was running Misys. But this is not a problem one man can solve, unless he can pull a buyer for his company from a back pocket. HP (NYSE:HPQ)? Dell (NASDAQ:DELL)? IBM (NYSE:IBM), maybe?
So my investment advice is that you should avoid the contractors in general for now. The less a company is linked to government spending, the better it is as a potential investment. Make that your first cut in examining new stock purchases this year, and you are unlikely to go wrong.
Disclosure: I am long IBM.