Bennett Group Financial

Dawn Bennett, Host of Radio Show "Financial Myth Busting," Writes Article, "Monkey Business"

 

Washington, DC -- (ReleaseWire) -- 04/01/2016 --February 8th marked the Chinese Lunar New Year, and as some of you will know, we entered the Year of the Monkey. Each year in the Chinese astrological cycle is also associated with one of the five Taoist elements that supposedly make up the world: Fire, Earth, Metal, Water, and Wood. As it happens, this year is the year of the Fire Monkey. Fire Monkey delights in volatility, mischief and chaos, according to experts in Chinese astrology.

Why am I talking about all this hocus pocus? Well, it may not be science, but it just happens to frame one of the major issues I see for the rest of 2016 in the equity markets: volatility. This Fire Monkey year is going to bring a great deal of volatility with it, and investors need to be aware and prepared. The S&P 500 has posted daily swings of 1 percent or more in more than half of all trading sessions so far this year. If things continue at that rate, 2016 is on track to be the most volatile year since 1938.

The S&P 500, despite poor earnings and profits, has regained much of what it lost since the lows of February 2016. It seems that a major driver in this, though, is corporate buybacks. According to a Bloomberg article from last week entitled "There's Only One Buyer Keeping S&P 500's Bull Market Alive," S&P 500 constituent companies are set to buy back as much as $165 billion in stocks during the first quarter, a sharp contrast to a near record withdrawal by clients of mutual and exchange traded funds. That withdrawal is already at around $40 billion so far this quarter. Is the buyback-inflated market sustainable? Likely not, especially as earnings continue to contract.

One thing to be particularly aware of is the so-called "blackout period" that will be beginning soon. Companies tend to stop or sharply reduce buybacks during the first month following the end of a quarter, as earnings are tallied and reported. Especially in a market where nearly everyone else is selling due to macro fears and concerns about oil and China, this blackout period can have an amplified effect on volatility. You can easily see this in the markets of the early part of this year, and it is more than reasonable to expect that late March and April will follow suit.

Liquidity is increasingly scarce, looming large as junk bond liquidation problems present the leading edge of a rapidly approaching wave, a harbinger of the bursting of the asset bubble that central banks have been artificially inflating since 2008 and 2009. It seems as if we are truly returning to the scene of the crime, but the damage that threatens will be far, far worse this time around. In 2008, government debt was $9.5 trillion, the Fed's balance sheet stood at $850 billion, and interest rates were over 4%. Today the debt is over $19 trillion, the Fed's balance sheet is $4.5 trillion, and interest rates are near zero. The Federal Reserve simply has no capacity to print more money or lower interest rates to soften the blow when the bubble bursts, and that leaves all of America, corporations and individuals alike, vulnerable to every challenge and crisis across the globe.

Another thing that hasn't changed: no one at the Fed seems to have any idea what's going on or what to do. On March 11th, the National Archives announced the initial release of records from the Financial Crisis Inquiry Commission, which was created in 2009 to investigate many aspects of the 2008 crisis. There are millions of pages of paper and electronic documents, along with an index or finding aid that itself runs to 1400 pages. Those records include Commission meeting minutes and routine business, but also extensive interviews with many of the key players in and out of Washington. Even a cursory review shows that almost everyone was seemingly mystified by what caused the crisis and what they could have done to prevent it, and it's clear that the situation now is no better. Indeed, if anything it's worse, because Yellen and her Federal Reserve seem to believe that their seven years of Quantitative Easing, money-printing, confabulation and cheerleading have really worked, instead of leaving us weakened and defenseless in the face of the next crisis.

So, be ready for the Fire Monkey. Volatility and vicious mischief lie ahead, and you need to prepare yourself to defend your wealth against it. Consider how to diversify, whether into precious metals or cash or other asset classes. And most of all, think for yourselves, because the experts and the talking heads and the politicians aren't looking out for you, so you have to look out for yourself.

For over a quarter century, the experienced advisors of Bennett Group Financial Services, LLC have been successfully guiding clients through the complexities of wealth management. Bennett Group Financial Services provides individual investors, corporations and foundations with holistic investment strategies using unique portfolio solutions across a breadth of asset classes. Our unique vision and insight into market trends makes Bennett Group Financial Services a much sought after expert resource with regular appearances on Fox News Channel, CNBC, Bloomberg TV, and MSNBC as well as being featured in Business Week, Fortune, The NY Times, The NY Sun, Washington Business Journal in addition to our highly regarded weekly talk radio program - Financial Mythbusting. Through attentive service and prudent, thoughtful advice, Bennett Group Financial Services, LLC strives to consistently provide its clients with the highest quality of guidance and personalized service available.

About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program 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 a as well as take podcasts on the road and forums for interaction.

She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett.