Tag Archives: economy

The Future of Asia Is Uncertain

According to Michael Auslin, Asia’s future is increasingly uncertain. Auslin, a resident scholar at the American Enterprise Institute and author of the End of the Asian Century: War, Stagnation, and the Risks to the World’s Most Dynamic Region, says Asia a fractured region threatened by stagnation and instability.

Auslin recently appeared on Financial Myth Busting with Dawn J. Bennett, where he further described his viewpoint.

“I think that the danger is that we have gotten ourselves into a mindset where China is a 12-foot tall monster that can do no wrong when the reality is that the golden era of China’s growth, as for almost all of Asia, is over,” he said. “They’ve had an incredible run for a long time, but what they didn’t do was resolve many of the fundamental structural problems in their economies, and so we’re seeing a slowdown throughout the region. The bigger danger is that we’re going to have to worry about a weak Asia and a weak China than we will about a strong one.”

According to Auslin, “one of the big problems has been the breakneck pace of economic growth really papered over so many of the deeper reforms that had to be undertaken.” For instance, many of the financial systems in Asia are very weak and facing massive debt. Asia’s not very good at things like innovation, research, and development, which America takes for granted. Additionally, the region is facing labor problems, including China due to their One Child policy. The government in many Asian countries is too involved, which makes entrepreneurship and innovation very difficult.

During his campaign trail, Trump argued that China is stealing American jobs. On the contrary, Auslin believes what China is stealing and will continue to steal is America’s trade secrets and intellectual policy. According to Auslin, a lot of American jobs are already gone. Some policies that Trump opposes, such as the Trans-Pacific Partnership, were actually designed to give the U.S. access to markets that had a lot of barriers against American goods, such as Japan. The TPP wasn’t going to see Japan steal American jobs, and those jobs left long ago, he said.

Auslin also explained that there are many differences between Japan and China. Compared to China, Japan was a much wealthier country when it hit its slowdown, he said, and this has allowed Japan to deal with it in better ways that did not cause a lot of despair to the population.

“There were high standards of living and there were already social mechanisms in place and entitlements and the like,” he said. “China doesn’t have that, and China being still a developing nation that’s fairly poor, it’s going to be harder, in fact, for China to deal with its slowdown than it was for Japan. In Japan, it’s been two and a half decades now, and they’ve really found a sort of modus vivendi, being able to deal with lower growth and yet maintain higher standards of living and the like, so I’m actually more bullish on Japan’s ability to weather a continuing slowdown and an aging population.”

Dawn J. Bennett: It’s All Fake News

Dawn J. Bennett, founder and CEO of Bennett Group Financial Services and host of Financial Myth Busting, recently wrote an article, “It’s All Fake News”. In her article, she discusses how there are stories that seem legitimate but were actually fabricated and specifically engineered to go viral and spread through the internet as real news. We’ve seen this particularly throughout the presidential election. Even Facebook has vowed to do something about the spreading of fake news— if that’s even possible.

According to Bennett, exaggerations, lies and setups have been common throughout the history of reporting. For instance, there was the recent Rolling Stone coverage of a gang-rape hoax at UVA; Janet Cooke’s imaginary eight year old heroin addict; the 1993 Dateline episode when a truck was rigged to explode when a presumed safety flaw failed to deliver the anticipated dramatic effect.

“Beyond these specific examples, the glaring fakes and the willful fabrications, there is an even deeper problem that we as citizens and investors must contend with: a systemic and systematic degradation of the quality of the news we receive, a willing collaboration between mainstream media and government institutions that provides all the ‘good news’ that can be manufactured,” said Bennett. “Cable news parrots the relentlessly upbeat message of recovery and growth 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.”

However, it’s not just the media that lies to us, said Bennett. We lie to ourselves too. Bennett uses the post-election increase in stock prices and bond yields as an example. She explained that Trump’s election resolved a long and ugly period of political uncertainly; relief in the markets has increased but corporate earnings have not. The S&P 500 is trading at 27.9 times the corporate earnings of the past 10 years— a level that was seen just before the market crash of 1929. The financial sector has a lot of problematic stocks that will likely get a beat-down during the earnings reporting season. In addition, many investors are postponing profit-taking for supposed tax reasons and will be stuck amidst a rush to sell, which could make the selloff the worst it’s been since last January. Then, there’s the Federal Reserve’s interest rate hike, which happened just before stock index futures, stock index options, stock options, and single stock futures expired.

“Are we living in a fake news, post-truth world, a post-reality economy?” asked Bennett. “When we can’t agree on basic facts or even that there are such things as facts, you have to ask yourself ‘How do we talk to each other?'”

She continued, “My answer is as it so often is: we must dig for the facts ourselves, be on the offensive against passively receiving news that could truly impact our lives and well-being from our social media feeds, the mainstream media, and even the government and our elected officials. This is not only essential to protect ourselves, but is a basic act of patriotism, of caring for our neighbors and our society.”

What Does Brexit Mean for Texit?

By now, everyone is familiar with Brexit, Britain’s decision to leave the European Union. In wake of this decision, Britain has given momentum to the movement supporting Texas’ succession from the United States. This movement is driven by a lot of similar issues that resulted in Brexit, including feelings of intrusive federal government, a weak job market and stagnant wages, and dissatisfaction with the current political and economic landscape. During the Brexit vote, the hashtag #Texit blew up. It was present in nearly 2,000 tweets between 7:00 and 8:00 a.m. London time (1:00 a.m. in Dallas).

Many people may be thinking, “That’s absurd! Texas can’t secede!” But, in her recent article “Opting Out”, financial expert Dawn J. Bennett points out its possibility and the circumstances that are causing this push for secession. She notes that Texas has the 12th largest economy in the world, just behind Canada and ahead of Australia and South Korea. Texas has a GDP of nearly $1.7 trillion and grosses just as much in exports a year as Switzerland.

The Context For Texit

After the Brexit vote, global markets took a hit, mostly in developed economies. Bennett explains, “In currency trading, the pound lost more than 10 percent against the dollar at one point. Gold screamed up. Friday was also an indication from a trading perspective that the plunge protection team or the Federal Reserve, whoever is currently attempting to control the markets, has lost a bit of that control. When trading is that heavy, it’s just too hard to artificially keep things buoyant. ”

Another reason for the upsurge in talk about for Texas’ succession is our negative economic data points, which people are catching onto. Consumers are more bearish about expectations for the economy.  American-made durable goods orders dropped recently dropped 2.2%, and core capital orders sank. Around 2 billion dollar bonds in Puerto Rico and coming due, and it’s been said that they need help or else will default on their obligations. They’re lobbying in Washington for Congressional approval of a bill intended to help them pay them.   Additionally capital is rapidly shifting. Fortunes are being made and lost. While opportunities are present, they appear and then vanish quickly.

Bennett recommends examining these issues in context of your own personal situation. “How do you weight protection and liquidity in your portfolio? What do you need to do to prosper in this type of environment, or even just hold on to what you have now? I believe that you need to be hyper-focused on and skeptical of certain asset classes that suffer illiquidity gaps even during good times, like micro-cap and small-cap stocks.”

She continued, “This should be an opportunity for our leaders and central banks, and even our political candidates. Instead of grandstanding, or hiding their heads in the sand or over-stimulating by printing money, this could be an opportunity to be open and share, to address the omnipresent sense of betrayal and mistrust of politicians and economists. To speak honestly, and listen carefully. Because if they don’t start, more and more of us will simply choose to opt out.”

 

Does Hosting the World Cup Help or Hurt the Host Country?

Founder and CEO of Bennett Group Financial, Dawn Bennett, recently reviewed the FIFA World Cup and whether or not it’s worth hosting.  Her review of the benefits the World Cup brings to a country is not hopeful.  According to her, the Brazilian economy is going to be facing trouble once the World Cup is over.  The problem she explains is FIFA doesn’t care at all for the host country’s economy or the costs required for hosting the tournament.  FIFA will pocket a cool $2 billion in profit, but the Brazilian economy won’t see a penny of those profits.  Meanwhile Brazil will have wound up spending well over $318 million just for the stadium that was built for the finals.  Did anyone mention that the stadium isn’t even accessible by road.

Unfortunately for Brazilians, instead of paying attention to the upcoming presidential election in October, their attention will be trained on the World Cup, which means voting for important issues will be out of the media for a long time.  This is dangerous for Brazil because they have had a growing number of financial issues, the same as America.  They are facing high unemployment, dwindling growth, above-target inflation and more.  These are all issues that America is facing as well and is hurting our economy says Dawn J Bennett.  Furthermore, Brazil’s inflation is tumbling further and further out of control.  It rose at a rate of .46 percent in May alone, causing fear with economists and causing them to downgrade the country’s growth forecast.

The US is seeing a similar problem as well, as it continues to grow at a rate of negative 1% GDP says Bennett.  The problem with both economies as Bennett sees it, is they’ve tried to ignore the basic laws of math.  The governments are trying to prop their currencies up to make them look better.  When you look at the skewed reality though of weak economic growth, record-high valuations, incredibly high stock earnings, poor consumer confidence, lack of retail buying and other more you see an economy that is completely unbalanced.

These continued discrepancies should be setting off warning bells for investors.  They should be as vulnerable as the correction of 2008, but with stocks continuing to rocket forward despite stagnant wages, lack of consumer spending and other issues, something isn’t adding up.