Washington, DC -- (SBWIRE) -- 09/22/2014 -- Remember those games we played as children, “ring around the rosie,” “hide and seek,” “musical chairs,” and “blind man’s bluff?” Well, the U.S. financial markets are now a game of musical chairs says Dawn Bennett, CEO of Bennett Group Financial Services. In her latest missive to investors, she cautions them to not get caught in the market when the music stops. Investors will soon feel like they have been blindfolded and their portfolios tagged “out” when the next crisis hits says Bennett.
She points to Argentina’s default, Janet Yellen, jobs data, and all the lessons learned during what she calls a sizzling financial summer. These are an indication of things to come, in particular Argentina.
Argentina missed a deadline for paying interest on restructured government bonds and defaulted on its debt for the second time in 13 years. Standard & Poor's cut its credit rating from CCC, to C. The president of Argentina stunned its creditors with a scorched-earth cram-down plan in which all bonds and debt were stripped of their existing indenture and converted to local law bonds. This drastic move burns all bridges and destroys good will with the international creditor community, which likely leaves Argentina unable to access global markets for the foreseeable future.
Adding to the fire, Argentina's peso sank 1.5 percent the last week in August to $8.40 per dollar. This is the biggest drop since the government devalued the currency 15 percent in the week ending January 24th, 2014. Even in Argentina, black markets are abound, where Argentines go to avoid government limits on purchases of U.S. cur rency, and weakened the peso to a record low of $13.95. Can the U.S. learn from Argentina?
Is Federal Reserve Chair Janet Yellen even watching this to see the fallout and wondering if this is where the U.S. is going? Does she ever see anybody else's situation? The situation in Argentina is a lesson that the U.S. is careening down the same ruinous road as Argentina. It has lost exports: so have we; it has lost jobs; so have we; it h as record and burdening debt levels, and so do we. Argentina has been living beyond its means. So have we. The overall economic disarray is the same, just like in the U.S. It seems Argentina's luck is finally running out. What about ours?
Initially the Federal Reserve was playing a game of hide-and-seek with us since 2009. Look at the Chicago Mercantile Exchange’s 2012 10-K, it shows its customer base as institutional and individual investors, major corporations, manufacturers, producers, and governments. However in 2013, the Chicago Mercantile Exchange, published another 10-K, as they have to do every year, and the customer base looks exactly the same, except they added another name to the list, central banks. Central banks are now admitting to buying on the Chicago Mercantile Exchange.
As the U.S. government reported the w orst jobs number of 2014, U.S. stocks closed at record highs. Why even pretend that there is a stock market? If bad news is still good news, then that means the Federal Reserve and other central banks might as well disclose everything ahead of time, ahead of each trading day, to everyone. We should all know what they're buying, since they're rigging it. No one could understand why the markets were rising in '09 and '10 and '11 and '12 and '13, but it was because of the Federal Reserve. It was because central banks were actually buying into the S&P 500, buying into the Dow.
This is unprecedented. They've never done this, which means the game they are playing is no longer hide-and-seek. It's actually now out in the open. It’s more like musical chairs trying to ensure there is only one player left in this market, the Federal Reserve.
Having a permanently growing stock market is really a marvelous innovation, isn't it? It just takes all the worry out of investing. Financial professionals don’t even need to go into work every day, they can practically set their watch to the daily new all-time highs based on nothing but the Federal Reserve buying with absolutely no concern that the percentage of Americans in the last six years working a full-time job has gone down dramatically, and that the quality of American jobs is extremely poor today, and that the wealth of the typical American household has fallen precipitously.
Median household income has declined for five years in a row, and dependence on the U.S. government is at an all-time high. Even the rate of home ownership in the United States has declined for eight years in a row. But the stock market keeps going up. It's almost like Steven Spielberg is making a movie on the U.S. economy, and the special effects department, the Federal Reserve, is breaking new ground in visual effects for stock markets by erasing all the volatility and fluctuation. Removing all the risk. Rubbing out all the volatility.
The U.S. stock market movement up is not based on what it should be, such as the fundamentals of US companies. It's not based on the fundamentals of the United States economy. It's based on the fundamentals of the Federal Reserve. Because there is no need to spend time analyzing the investments in your portfolio with the best data available there's really not much to do except to try to convince the Federal Reserve to give us a daily heads-up on what we should buy. This would eliminate the need for what we thought was important in the past to succeed in investing, like market research, spending time with money managers, brokers, financial advisors, even using common sense. It doesn't matter anymore.
This is what financial nirvana looks like, except too bad it doesn't feel like that ecstasy to most Americans. Being a citizen of the United States at this point can be compared to playing the adult version of the game musical chairs. We are all so mesmerized by the voice of the Federal Reserve that we don’t see the chairs being removed from the game. Investors need to ask, the next time the music stops, and there is only one player left, who will it be?
All market data references are sourced to Bloomberg terminal database.
Bennett Group Financial Services LLC, based in Washington, D.C., is a comprehensive financial services firm committed to providing opportunities to clients’ as they seek long-term financial success. Its customized programs are designed with the potential to help grow, lower overall risk and conserve client assets by delivering a high level of personalized service and skill.
For more information, call 866-286-2268 or visit http://www.bennettgroupfinancial.com
Securities offered through Western International Securities Inc. (WIS), member FINRA/SIPC. BGFS and WIS are separate and unaffiliated entities.
About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program on called Financial Myth Busting http://www.financialmythbusting.com
She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included Rock Legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN as well as take podcasts on the road and forums for interaction.
The show is a great complement to Dawn’s monthly investing seminars that take place at Tysons Corner in McLean, VA, where she discusses in vesting.
She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett or firstname.lastname@example.org