Inflation?

The DOW is struggling to stay at 8,000 as corporate profits are reported for the last quarter. The profits are far below last year, but generally in line with analyst expectations, which many call a good thing. The logic goes like this, "If we hit the analyst expectations, then we must be doing good." Unfortunately, the analysts expect things to be terrible. So I don't see how hitting their expectations is a sign of anything positive.

It seems that the media, and stock traders, and those with stock accounts hurting from the recent down trend are all anxious to return to the old buy-and-hold mentality. Stories are being written about "Missing the Rebound" and "Recovery Quicker Than Expected". People just want to go back to the good ol' days. But it's not that easy.

We are at a very vulnerable spot. If oil goes up, we get screwed. If a major failure surprises us, we get screwed. If inflation starts to run up, we get screwed. And out of all of these very possible events, it is inflation that worries me the most.

Ballooning national debt has the terrible side effect of encouraging the government to print more money. This printing expands the total amount of money in the market, without expanding the value of the market, so every dollar is now worth less. When money is worth less, people need more of their income to spend on the basics, and non-essentials get skipped.

Is it a sure thing that the market tests the lows and falls apart? No. But does it make any sense to say that the worst is behind us? No. We're in the wait and see period. The time when we all hold our breath and try to keep the next domino from falling.