Red Rock Secured/Sean Kelly
Another Stagnation Decade?

A lot went on in the 1970s. Like disco, Watergate, and the Russians invading Afghanistan.

Some memories of the 70s are better forgotten. Like avocado-color appliances, shag carpeting and pet rocks.

But one thing stands out on the economic front. Something that current events keep calling to mind. Something that could be about to plague us again.

The 1970s were the “Stagflation Decade.”

Stagflation can be described as the worst of two worlds. It is a combination of weak or no economic growth—a stagnate economy, coupled with rising prices—inflation.

We are deep into the stagnate part already: jobs destroyed, layoffs, downsizing, unemployment. Not to mention debtors who can’t pay their creditors. Think commercial real estate developers whose tenants are closing down and walking away. The real estate owners in turn can’t pay the banks or pension funds what they own. And so it goes, cascading downstream.

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CNBC/Stephanie Landsman
Most painful pullback since March is here, market researcher Jim Bianco warns

It may be premature to start bargain shopping for stocks.

According to Wall Street forecaster James Bianco, the market is likely in the throes of a 10% to 15% downturn.

“We made a lower low on Friday. We’ve made a lower low today. So, this market is showing weakness after the sell-off — something we haven’t seen since March,” the Bianco Research president told CNBC’s “Trading Nation” on Tuesday. “That’s why I think it’s a little bit early to maybe jump into the market.”

Bianco cites questions “frenzy” of speculative activity in the options market, overbought conditions and uncertainty over the fate of a second virus air package as catalysts for the sell-off.

“We’re in September. The stimulus seems to be questionable [and] who knows if we’re going to get bailouts,” he said. “This is an overvalued market that has a lot of excess.”

The Nasdaq is officially in correction territory. It’s off 10% from its record high hit last Wednesday. Bianco sees little relief in sight for the tech-heavy index — as well as for the broader markets. He believes there’s a good chance the market highs are in for the year.

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Kitco/Neils Christensen
Rising inflation will push silver prices to all-time highs at $50 – Mitsubishi

It’s not just gold investors who should be paying attention to potential rising inflation pressures as one market analyst notes that silver could rise to all-time highs as real interest rates push further into negative territory.

In a report published Monday, Jonathan Butler, precious metals analysts and head of business development at Mitsubishi, said that silver prices rallied 14% in August as rising inflation pressures pushed real interest rates to below negative 1%.

“In the period since real interest rates went negative at the start of the pandemic in March, silver prices have risen from $14 to highs of $29.86 – an increase of 113%,” he said.

Gold, last month, rallied as much as 4% as prices hitting all-time highs above $2,000 an ounce. Although silver and gold are off their August high, silver is finding some initial support around $26 an ounce; at the same time, gold is seeing initial support around $1,920 an ounce.

Although silver has significantly outperformed gold in the last few months, Butler said that it is still relatively cheap by historical standards. The gold/silver is currently hovering around 72.5, meaning it takes nearly 73 ounces of silver to equal the value of one ounce of gold points; Butler noted that the historical average for the ratio is around 59 points.

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CNN Business/Matt Egan
Oil prices are collapsing after Saudi Arabia sends ominous signal

Demand fears are once again rippling through the oil patch.

US oil prices plunged 7% Tuesday to $36.76 a barrel. It was crude’s worst day and lowest closing price in nearly three months.

The fierce selling in the energy market is being driven largely by rising concern about how much crude the fragile world economy needs. With Labor Day in the rearview mirror, summer driving season in the United States is over. Jet fuel demand remains extremely weak because many people don’t want to fly during the pandemic. And no one knows for sure how long it will take to recover.

The selloff comes after Saudi Arabia, the de facto leader of OPEC, slashed its official selling price to Asia and the United States, Bloomberg News reported. It’s never a good sign when the world’s leading oil exporter feels compelled to cut prices to draw buyers.

“That is a double-blinking warning sign,” said Yawger. “OPEC kind of panicked today by putting out a bad signal to the energy community.”

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