Wasington, DC -- (ReleaseWire) -- 01/16/2015 --The last three years in the markets have been much like waking up every day in a Lewis Carroll novel, a mirror image of our world where the basic fundamentals have been replaced by a strange, hallucinogenic logic. It's as if the Mad Hatter, Alice and the Rabbit come at us all at once, complete with the Cheshire Cat's smile vanishing, because the federal government lives in a distorted world. Hedge funds are closing in droves, forty percent or more of broker-dealers have closed, because the market has gone through the looking glass. And unlike Lewis Carroll, this isn't even entertaining because in the end it will hurt us more than it helps us.

Here's an example. In mid-December, CNN aired a piece featuring a Drexel University engineering graduate who advocated making minimum payments on student loan debt and investing in the stock market, instead of paying down that debt. This sole credential of this bastion of personal financial advice was that he had graduated college, but there he was on CNN Money, giving his own idiosyncratic suggestion. That irresponsible segment is a clear indicator that the topsy-turvy, central bank driven wealth creation narrative has gone too far.

More substantially, though, the December jobs report was released last week. In his statement, President Obama said, "About a year ago, I promised that 2014 would be a breakthrough year for America. And this week, we got more evidence to back that up. In December, our businesses created 240,000 new jobs. The unemployment rate fell to 5.6%. That means that 2014 was the strongest year for job growth since the 1990s. In 2014, unemployment fell faster than it has in three decades. Over a 58-month streak, our businesses have created 11.2 million new jobs." That sounds really good, but it's another case of the Alice in Wonderland nonsense that the White House and media have been feeding investors and the public to mask the collapse in the US work force.

That 5.6% figure reflects "headline" employment rate, called U3 by the Bureau of Labor Statistics. That number includes people without jobs who have actively looked for work in the previous four weeks, but does not include "discouraged" workers, who have stopped looking for work because they believe there simply isn't any work out there for them. Taking into account the broadest measure of official unemployment statistics and adding in long-term discouraged workers who simply aren't even included in the count any more, the real number is closer to 23% rather than the 5.6% touted by the President and the media.

In fact, after a modest rebound in November, the labor force participation rate (that's the share of the population 16 years and older working or seeking work) is at its lowest point—62.7%--since December of 1977. The number of Americans not in the labor force soared by 451,000 in December, outpacing the 111,000 jobs added according to the household survey. This is the primary reason why the number of unemployed Americans dropped by 383,000, making the labor participation rate drop a 38-year low—which Obama didn't exactly bring up. 92.9 million Americans are not in the labor force.

Curioser and curioser, as Alice would say. And for those wondering, average hourly earnings in December plunged by -0.2% on expectations of a positive 0.2% increase. In December the number of workers employed in food services and drinking places, often sub-minimum wage waiter jobs and bartender jobs, jumped by 43,600, and that's the highest monthly increase since 2012, taking this economic series to an all-time record high of 10.848 million American workers, waiting tables and pouring drinks to make a living. That seems to be the only part of the economy that is recovering. According to the Bureau of Labor Statistics, the number of full time employees still hasn't caught up with pre-recession, 2008 levels, despite the fact that the adult population has grown by 14 million people since then.

What should we expect for jobs in 2015 and 2016? There's no economic crystal ball to say what's going to stimulate the jobs market. The current economic expansion has lasted 66 months, the 6th largest on record, but since most Americans aren't really benefiting, it seems more like a paper expansion than an actual one. The US economy is already approximately 10 million jobs in the hole, and given the cyclical nature of the economy, we're likely to head into a recession really soon. During the last recession, America shed nearly 9 million jobs. We're looking at a disaster—we need high-quality full-time jobs, and the private sector is not providing them. And from the government? A 60 billion dollar "free" community college plan.

Five of the largest economies in the world have fallen into recession and the US is on the edge of being the sixth. It's time to start paying attention again, since there are warning signs coming from other similar global economic powers. Much of Europe is already mired in depression-like conditions. Official unemployment numbers in some of the largest nations are eye-popping. Greece's unemployment is 26.4 percent, Spain's is 23.6, Portugal is at 13.1, Italy is at 12.6, Poland is at 11.5, and France is at 10.2 percent unemployment. The fundamentals scream that we're heading into a major correction.

Another looking-glass moment was provided by the Wall Street Journal this past week in a brave and risky report on the actual earnings of S&P 500 companies as well as a group of 40 companies that had initial public offerings in 2014. The WSJ looked at reported earnings and viewed them through the lens of Generally Accepted Accounting Principles (GAAP). By non-GAAP measures (tailor-made to omit certain costs of doing business, such as taxes, interest, and employee stock compensation), S&P 500 earnings per share were a positive 6%, and that is what other media reported. Following standard accounting practices, though, that figure should actually be -1.3%. This strongly suggests that all the euphoria about corporate profitability growth was due to add backs and accounting adjustments on one-time non-recurring expenses.

Further reporting showed that, according to consulting firm Audit Analytics, forty companies that had their initial public offerings in 2014 used such custom-made earnings measures to show profits, when they actually operated at a loss under GAAP, the highest number of such companies in several years. Investors need to start ignoring the Alice in Wonderland nonsense and start looking at indicators of real valuation, and when that happens, we will truly be heading into a serious correction.

Securities offered through Western International Securities, Inc., Member FINRA & SiPC. Bennett Group Financial & Western International Securities, Inc. are separate and unaffiliated companies.

All data is sourced through Bloomberg.

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 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 or dbennett@bennettgroupfinancial.com