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The Problem with Great Expectations

Dawn J BennettDawn J. Bennett, host of Financial Myth Busting, recently wrote an article titled, “The Problem with Great Expectations.”

According to Bennett, “For eight years, we have been spoon fed a narrative of increasing prosperity. The message has been carefully crafted by the executive branch, seasoned and served by a complicit media. And many of us have all too gladly accepted it.”

She continued, “The nonsensical market reacts to bad news by surging up, giving officials and pundits something to point at as ‘proof’ of their claims, despite the fact that fundamentals continue to weaken under massive debt and weak global demand. Money printing and central bank stimulus continues blowing air into this unsustainable bubble, though, and many have become complacent, ignoring the yawning abyss that we’re perched right on the edge of.”

Bennett explains this is the same narrative that wants us to believe President Trump has inherited a strong economy which will continue to ascend. This is certainly not the case.

“Trump is being set up to fail by the financial elites, the globalists that have been running the Obama administration’s economic policy and the Federal Reserve,” says Bennett. “Our Humpty-Dumpty economy is bound for a great fall, regardless of the current President’s best intentions, and the most deeply important question of the next four years is who is going to be putting the pieces back together, and how they do it.”

Bennett explains Trump talks about “draining the swamp,” and she believes there are four economic swamps that lie ahead between us and full recovery from the bad economic policy of the Obama Administration.

According to Bennett, these four swamps are:

  1. Our massive and uncontrolled national debt
  2. Our hidden fiscal gap
  3. Short-term debt maturity
  4. Suppressed double-digit inflation that is on the way

Like Bennett, many economists and financial experts believe a financial crash is imminent and even well underway.

“This is not the time to stay complacent and start humming ‘Happy Days Are Here Again,’” says Bennett. “It is, instead, time to gird your loins and make tough choices about how to protect your hard-earned wealth. Look at cash and precious metals, look for ways to preserve what you have during what seems certain to be a very rocky 2017 and beyond.”

High Time To Diminish Role Of ‘Economy-Killing’ EPA, Conversation With Dawn J. Bennett Reveals

A “collective consciousness” — and not the Environmental Protection Agency (EPA) — is responsible for the turnaround we’ve seen over the past few decades as pollution became the hot-button topic. In a conversation with Steve Milloy, author of the recently-published book, “Scare Pollution: Why and How To Fix the EPA,” radio host Dawn J. Bennett discusses the agency’s ills that began forming after its founding in 1970.

Milloy, publisher of the popular website “Junk Science,” joined Bennett on her radio program, “Financial Myth Busting,” for a conversation that focused on the failings of the EPA  and its role in the U.S. government today.

“Until the 1950s, ‘60s and ‘70s, no one really paid attention to the environment. All anyone cared about was, and rightly so, economic development,” Milloy said. “When we became wealthy enough that the environment started bothering us, well, we took action, and over the past 45 years, we cleaned up the environment. As a matter of fact, we cleaned it up a long time ago, it’s been clean for a while.”

In his conversation with Bennett, Milloy attributed the turnaround in thoughtless pollution, dumping and waste to our society’s “collective consciousness” that was no longer going to tolerate dirty air and dirty water.

“You need a lot of money to have a clean environment. You look around the world, the countries with the worst environments are the poorest countries. The first requirement for a clean environment is wealth. We had a lot of that, so it was really sort of a team effort,” he said.

Moreover, Milloy argues that the EPA as it currently exists is bloated and its role far too large within the federal government. In the four-plus decades since the entity was formed during the Nixon administration, Milloy said that individual states have taken over the bulk of environmental issues done at home.

“There still is a role for a federal EPA, but it’s a much smaller role. It has to do with interstate issues, maybe some international issues, and something that’s national like pesticide registration,” Milloy said. “But the fact is that most environmental protection is done by the states. We don’t need this massive, economy killing federal EPA.”

Dawn J. Bennett Says ‘It’s All Fake News’

Dawn J. Bennett recently wrote an article “It’s All Fake News” in which she discusses the rise of “fake news” and its implications on our political system and financial markets. According to Bennett, there’s been a recent outcry against fake news, especially considering its impact on the 2016 presidential election. These stories appear to be credible and legitimate but are actually fabricated and designed to go viral throughout the internet. Even Facebook has gone as far to say that they will “do something” about the spreading of fake news.

Bennett notes that exaggerations and lies have been present throughout the history of reporting. The recent Rolling Stones coverage of a gang-rape hoax at UV, Janet Cooke’s imaginary eight-year-old heroin addict, and the 1993 Dateline episode where a truck was set up to explode are all examples of exaggerated and fabricated stories. Then there was Walter Duranty’s reporting for the New York Times that helped Stalin’s Russia hide the Holodomor from the world.

According to Bennett, there’s a systemic and systematic degradation in the quality of news we receive. In fact, there’s a willing collaboration between the mainstream media and government institutions to present manufactured news to the public.

For instance, “The media reports the relentlessly upbeat message of growth and recovery being spouted by the Fed and the White House, and we are left without facts, having to dig through questionable reports to find the real numbers,” says Bennett.

However, Bennett explains that we lie to ourselves also, and the post-election run up in stock prices and bond yields is an example of this.

“The election of Donald Trump resolved a long, ugly period of political uncertainty, and in relief the markets have surged, but corporate earnings have not,” says Bennett.  “The S&P 500 is trading at 27.9 times the corporate earnings of the last ten years, a level last seen just before the market crash of 1929. Energy companies have exorbitant p/e ratios, their stocks priced for $115 oil rather than the actual $55. The financial sector is full of problematic stocks that are likely to get a beatdown during earnings reporting season.”

She continues, ” Add to that the fact that many investors are delaying profit-taking for what they perceive to be tax reasons who will be stuck in the middle of the rush to sell, January 2017 seems set to be a bloodbath, the worst we’ve seen since last January’s selloff. And that doesn’t even take into account the effects of the Fed’s interest rate hike, which happened just before a quad witching day when stock index futures, stock index options, stock options and single stock futures expired on the same day last Friday.”

Bennett suggests we dig for the facts ourselves and be on the offensive against passively receiving news that could impact our lives and wellbeing.



Dawn J. Bennett Interviews Chris Whalen, Investment Banker and Author

Dawn J. Bennett, a certified management investment analyst and founder and CEO of Bennett Group Financial Services, recently interviewed Chris Whalen on her radio show Financial Myth Busting with Dawn J. Bennett. Chris Whalen is a senior managing director and head of research at Kroll Bond Rating Agency and has previously worked for several prominent financial firms, including Bear Stearns, Prudential Security and Tangent Capital Partners. Whalen is also the author of Inflated: How Money and Debt Built the American Dream (2011) and Financial Stability: Confidence and the Wealth of Nations (2014).

On Financial Myth Busting, Bennett and Whalen discuss what Donald Trump’s surprising victory means for the markets through the end of the year and how his views on monetary policy will affect the larger global economy.

With Trump set to take over the White House, all eyes are on the Federal Reserve, which avoided raising rates before the election. Bennett says she thinks the expectation is that Yellen now has no reason not to raise rates, and asks Whalen whether he thinks Yellen is likely to raise rates.

“Well, I think first and foremost you’ve got to look at the bond market,” Whalen said. “What the bond market tells you that since June when yield for the 10-year really reached their lows, yields have almost doubled. So the 10-year is headed to about 2.2 percent. I think it’s going to go higher. And that has to catch up with the market, Dawn, it’s what it comes down to. Mortgage rates are going up and bondage and linkage are coming back.”

He continued, “We had almost 10 years of kind of managed stability care of the central banks and now I think that people are looking at Trump’s spending program, cutting taxes, various other things and also I think the fact that politically the Fed cannot continue to monetize debt the way it was during quantitative easing when they were buying bonds and they basically got to hold them to maturity. I think that all of that is now putting the market back into the hands of investors who have been on the sidelines in terms of the direction of interest rates for years. I think you’re right. They are going to have to raise rates just to catch up with where the market is.”

Bennett says she thinks the country is in a jam, as Trump will have to contend with Obama’s massive debt burden that has built up over his eight-year term. Trump has to do this at a time when we are at this epic point of accommodative monetary policy. She asks Whalen what he thinks will happen when rates go up.

“Well, you know, the equity markets for the past few years have been substituting debt for equity and I think you’re going to see a lot of big corporate issuers slowly let that debt run off and they’re going to have to issue more stock,” Whalen said. “Now, the markets are hungry for stock. You haven’t had much in the way of quality issuance going back to the crisis. However, it’s going to put pressure on stock prices simply because IBM and many, many other big industrial companies—even companies like Apple, for example—were out buying back shares and issuing debt. That’s going to reverse itself. And I don’t see that as a catastrophe.”

He continued, “I think you’ve got to just be cognizant of the fact that bond yields are going to go up. The pricing on your portfolio may suffer as a result but hopefully you can sit with it, and at the same time I think you’re going to see a lot of companies desperately trying to rebalance their balance sheets in terms of the debt/equity mix. It got very lopsided over the last few years.”

View the full interview here, and catch Financial Myth Busting every Sunday at 10:00 a.m. on WMAL AM 630.

Deutsche Bank: Should We Be Worried?

It’s well known by now that Deutsche Bank is in trouble. From its rising legal costs, to its eroding returns in a low growth environment, there’s a real possibility that the bank could fail. This should be worrisome for all of us. Deutsche Bank, which has operations in over 70 countries and more than 100,000 worldwide, has a high-risk culture and deep connection with other institutions. If it were to fail, it would have a more profound effect than Lehman Brothers, according to financial analyst Dawn J. Bennett.  The bank’s assets are an estimated $1.7 trillion, which equates to about half of Germany’s GDP from a balance sheet perspective.

A key indicator of the bank’s distress is its stocks are now trading at about $14 a share— a significant low compared to its $29 peak in the past year and its all-time high of about $160 in 2007. As the worry increases, the bank will suffer a crisis of confidence. As a result, investors could start to pull their investments from the bank, with depositors pulling out their money.

If it gets to that point, would the German government or European Central Bank bail them out? German Chancellor Angela Merkel has said publically said she won’t bail out or bail in the bank.

“If she [Merkel] actually means that, despite the I.M.F.’s belief that, since Deutsche Bank is of ‘systemic importance,’ authorities will carefully monitor (and supposedly act upon) the situation, then the fallout could be huge,” says Dawn J. Bennett. “And she has every reason to mean it. Germany, which has insisted that Italy and other countries in the ECB accept tough conditions in dealing with their problems, can ill-afford being seen as soft on their own flagship bank.”

As things worsen, the bank is left with very little options.  According to Bennett, “One is to sell their equity in order to provide much-needed liquidity. Another is to approach the European Central Bank (ECB) for a liquidity bridge, an option that has been advocated against by Merkel and denied by the ECB in the case of Greek and Italian banks. A third is that they could eliminate billions in unsecured claims and deposits, which could lead to a full-blown, systemic bank run as depositors everywhere rush to withdraw their savings. No good options here.”

In addition to Bennett’s analysis, a recent study found that the stock market’s valuation of the bank is much less than the company’s valuation. The stock market gives the bank a valuation of around $15 billion, which was generated by multiplying the number of shares by the stock’s price. However, the company says its net worth is $68 billion— four times greater. This shows that Deutsche Bank may be too optimistic about its future revenue, losses and costs.

Apple Hit with $14.5 Billion EU Tax Penalty

Back in August, the European Commission ruled Apple owed $14.5 billion in unpaid taxes to Ireland, the largest tax penalty for a U.S. tech company. According to the Competition Commissioner Margrethe Vestager, who has made tax avoidance a chief focus, Apple made illegal deals with the Irish government that enabled the company to pay virtually nothing on its operations in Europe. Apple’s arrangements with Ireland allowed the tech giant to sidestep taxes by fueling most of its non-US sales and profits through an artificial head office with no employees, no premises, and no real activities.

In doing so, Apply paid just 50 euros per million euros in profit in 2014. The European Commission ruled that Ireland collect 10 years’ worth of back taxes from Apple, equating to 13 billion euros or $14.5 billion, plus interest.

John Browne, a notable tax consultant and former member of British Parliament, discussed the implications of this ruling during his interview with Dawn J. Bennett on Financial Myth Busting with Dawn J. Bennett.

According to John Browne, “The ruling is threatening first of all the reputation of Ireland as a low tax nation. Secondly, the ability of these companies that have come there for the low tax to generate very high paying jobs, most of them in high-tech industry, and therefore contributing very much to Ireland’s economic growth and prosperity. And thirdly, challenging the freedom of a nation to set its own tax rates.”

He continued, “We’ve all got to wait for this Court’s decision to even have a view on that, but if the Court decides in favor of the unelected European Commission, I think it will be awfully tempting for Ireland to join Great Britain in exiting the European Union and coming back much closer to Britain, outside the EU.”

Browne explained that if the Court finds in favor of the Commission, then companies like Google, Amazon, Starbucks or Microsoft will all be on the line.

“A lot of these companies that have gone to Ireland to benefit from not only the low tax rates of Ireland, but three other things that Ireland offers that the rest of Europe is not so easy to offer,” Browne said.  “One is they speak English; the second is they use English law, which is the same as American law because it was developed from English law, rather than the Napoleonic Code; and thirdly, they have close relationships with the United States and all the former UK Commonwealth and colonial countries like Canada, Australia, South Africa, and most importantly perhaps, India, which is a rising economic superpower.”

To view John Browne’s complete interview with Dawn J. Bennett, click here.

Is Another Global Depression on the Horizon?

Dawn J. Bennett, founder and CEO of Bennett Group Financial Services, recently interviewed Richard Duncan, an author and financial analyst, on her talk show Financial Myth Busting with Dawn J. Bennett. Duncan specializes in fiat currencies and macro policy and has written many books, including The Breakdown of the Paper Money Economy, The Corruption of Capitalism, and the Dollar Crisis: Causes, Consequences, Cures.

In his video newsletter “Macro Watch”, Duncan recently reported that the global economy is in $300 trillion in debt, after the global economy moved to a debt fueled-growth strategy over the last three decades. Duncan explains this statement further during his interview with Dawn J. Bennett.

According to Duncan, the economic system has changed in fundamental ways from 1968 and 1971, when dollars stopped being back by gold. The economic system changed from capitalism to what he calls “creditism”. How this economic system operated is businessmen would invest; some would make a profit, save the profit and accumulate capital, and repeat the process. The system was driven by investment and saving. Today, the system works in an entirely different, explained Duncan.

“Our system is driven by credit creation, and consumption, and more credit creation, and more consumption,” he said. “That has generated fabulous economic growth, at least up until 2008. It ushered in the age of globalization, and it created the prosperity that we’ve enjoyed all of our lives, really up until 2008. The problem with that is that in 2008 we reached the point where the private sector, the average Americans, just couldn’t continue taking on any more debt. At that point they started defaulting, and this global credit bubble that resulted from creditism started to implode.”

Duncan is predicting this will lead to economic collapse. According to Duncan, the U.S. government has been managing the U.S. economy at least since World War II, so for about 76 years now, and have not been doing a very good job.

“We’ve reached the point now where this creditism can’t continue to create economic growth because the private sector is too heavily in debt,” he said. “If the government sector doesn’t continue borrowing and spending to drive the economy then there is a very real danger that we will collapse into a catastrophic global great depression again.”

For Dawn Bennett’s complete interview with Richard Duncan, click here.

Social Volatility & the Increasingly Hollow Economy

Dawn J. Bennett, host of Financial Myth Busting with Dawn J. Bennett, recently wrote an article titled, “The Center Cannot Hold,” in which she discusses the connection between social unrest and the increasingly hollow economy we face.

In early July, the nation experienced a wave of senseless violence that left Americans in shock and disbelief. Two unarmed black men were fatally shot by police, which sparked protests across the country. The horror continued when a military veteran shot and killed five police officers and injured seven more during what began as a peaceful protest.

“I believe there is a connection between this societal volatility and our increasingly hollow economy,” said Dawn J. Bennett. “Wage stagnation, income inequality, economic insecurity… all of these play a part in creating the current combustible atmosphere.”

According to Bennett, the U.S. is already in a recession by so many measures. For instance, labor market conditions, the corporate bond market, and inventory accumulation are all recessionary. Not to mention, corporations are more leveraged now than they were in 2007, and though stock markets are hovering around record-highs, earnings have fallen to 2011/2012 levels. Meanwhile, “safe haven” investments increase, which shows the division in how the markets are being viewed.

“Zero or negative interest rates, combined with huge amounts of cash being pumped into the markets, led us into an extreme fantasy land, causing a speculative frenzy,” said Bennett. “However, the central bank tide that has raised all the boats of our markets feels not only like it’s about to recede, but even completely dry up and leave the boats sitting on sand.”

It’s human nature for Americans to turn to someone to place the blame on for this social and economic situation we’re in. But, who’s the real villain here?

“The first people we should point fingers at is… us,” said Bennett. “We claim to be victims, saying that we had no part in landing ourselves in this quagmire, but we need to accept personal responsibility, analyze our own role. If we made better choices in life and the voting booth, if we paid better attention, were more rational and wise and prudent and thoughtful, we wouldn’t be in this mess.”

She continued, “In the end, we cannot rely on Yellen, Obama, Clinton, Trump, or anyone else. Only we can make the changes in our lives and government that must be made if we are to once again look forward to a bright American future.”

Dawn J. Bennett’s Exclusive Interview with Niger Innis, Political Consultant & Commentator

Dawn J. Bennett, Host of Financial Myth Busting with Dawn J. Bennett, recently interviewed Niger Innis, an MSNBC commentator and political consultant. Innis is the national spokesperson for the Congress of Racial Equality (CORE), an organization committed to confronting and banishing apartheid in America, as well as fighting for Americans of all races. He also leads Tea Party Forward, one of the largest national Tea Party groups in the country. In his interview with Dawn J. Bennett, Innis discusses the upcoming presidential election and Black Lives Matter.

The Presidential Race

Innis says it’s a “very real possibility” that Donald Trump could be the next president. “We’re [Tea Party Forward] not quite sure just yet about Donald Trump, we’re all supporting him now, now that Ted Cruz has dropped out, and we certainly prefer Donald Trump over Hillary Clinton, but we’re certainly not sure if Donald Trump is going to be a Constitutional Conservative or could he very well be a big government Conservative.”

He continued, “So that even if he makes the choices that we would like, how he executes those choices, through executive orders or through running roughshod over Congress and not recognizing the separation of powers, is something that would concern us, that wouldn’t concern us as much with a Constitutional Conservative like Ted Cruz. On the flipside though, what thrills the Tea Party about Donald Trump is his ability to confound the media, his ability to not only circumvent the media, the establishment media, but to actually shape and confront the media and get them to talk, to say his talking points as opposed to him playing from their song sheet.”

Innis believes Trump can appeal to the black community.

“I think his talk of building a wall, the economic American nationalism that he promotes, it’s something that would appeal greatly to a number of black Americans,” he says. “Particularly, we hear in this election and we see it and we often say that it’s a reflection of angry white males—Trump’s popularity. But the little hidden story is that is not talked about as much is that there are a lot of black males and Latino males that are angry too, that are unemployed or underemployed and want an opportunity to earn a living and be breadwinners for their family.”

Black Lives Matter

On the subject of Black Lives Matter, Innis believes their protests are not helping racial minorities, primarily because they’re “hardly reflective of the black agenda”.

He notes, “There was a poll taken by Gallup during the height of the Black Lives Matter movement and spotlight on them in the August of 2015, this was post-Ferguson. And in that poll, it asked the question to all Americans, but in particular the blacks, it asked: do you think that there are too many police in the community, not enough police in the community, or just enough. When you combine those that believe that there were just enough, just the right amount of police in the community, or not enough in the community, that number was 89%.”

He continued, “Those that thought that there were too many police in the community, that you would think would be reflective of the Black Lives Matter ideology, was 10 percent. So, it was nine to one in the black community of those who felt that we want as many cops that we have in the community right now, or we want more cops in the community.”

To view Dawn J. Bennett’s complete interview with Niger Innis, click here.

Forever Blowing Bubbles

Are you familiar with the classic song, “Forever Blowing Bubbles?” Though the start of the first verse— I’m scheming schemes, I’m building castles— sounds optimistic, we later learn the fate of the singer’s dreams: “I’m forever blowing bubbles, Pretty bubbles in the air, They fly so high, Nearly reach the sky, Then like my dreams, They fade and die.” According to financial analyst Dawn J. Bennett, this classic just as well be the theme song for central bank-driven monetary policy and market manipulation. But, unlike the fading dreams, the asset bubbles won’t fade; they’ll explode with significant collateral damage.

Recently, many warning signs have emerged to support the idea that trouble looms ahead. And, many key players in the financial market agree. Billionaire hedge fund manager Mark Spitznagel told the Financial Times, “Markets don’t have a purpose anymore— they just reflect whatever central planners want them to.” He continued, “This is the greatest monetary experience in history. Why wouldn’t it lead to the biggest collapse?”

In the same article, Nassim Taleb, Universa advisor and best-selling author or Fooled by Randomness and The Black Swan, explained, “Being protected from fragility in the financial system is a necessity rather than an option.” And, Spitznagel and Taleb aren’t the only ones with this viewpoint.

According to Dawn J. Bennett, “The Bank of Japan, acknowledging the violence being done to the yen by years of quantitative easing, said recently that they are setting aside money to prepare for losses on their huge holdings of Japanese government bonds which were put together and purchased through their printing of fiat currency once they are finally forced to stop monetary easing.”

She continued, “Easing is a vortex that has sucked in the central banks over the last eight years, forcing them to continue blowing bubbles to follow bubbles to follow bubbles. Indeed, there have been calls even for our own Federal Reserve to go beyond QE to “helicopter money,” essentially going beyond interest rate manipulation and money printing by injecting “permanent” money directly into private sector. Could this be why China is establishing a yuan-denominated gold benchmark for trading, in order to start backing their currency with real assets instead of academic theories?”

Bennett notes that the U.S. is close to one of the largest bubbles— the U.S. derivatives market that is valued at over $1 quadrillion dollars by some accounts. This is 20 times more than the value of the entire world economy and the biggest bubble in history.

“It’s sheer gambling, including not just equities but physical commodities,” says Bennett. “The legality is questionable in many cases, but the problem is definitely real and indisputable.”