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It is highly probably that “risk-off” has replaced “risk-on” in the financial markets. If this be the case, then a rerun of the Great Recession is in our near future.
Last February, we had the first clue that the long recovery and expansion may be coming to an end. I mentioned at that time that we possibly were witnessing a major top in the stock market. This turned out not to be the case as a new high was seen just before the recent sharp decline. In reality, it has now made somewhat of a double top.
The unprecedented debt bubble is deflating at the periphery and coming to the core. We are the core. Most believe that the central banks will again come to the rescue. I’m sure they will, but it is entirely possibly they may delay for some time before doing so. There appears to be an element within the Fed that realized prior actions of ease has only led to more market dislocation—even to the point of creating the most overvalued stock market in history. It’s a damned if you do, and damned if you don’t policy decision. We are truly at a crossroads. Count me concerned!
Information contained in these commentaries is based upon information obtained from sources both external and internal which we consider to be reliable, but the accuracy of the information and the recommendations contained herein cannot be guaranteed, nor do they constitute a solicitation for the purchase or sale of any securities mentioned herein. Information contained in this commentary may not be reproduced in any form without written permission from Donald S. Peters.