The higher-than-expected CPI number today was attributed to a Chinese holiday, but should inflation in China persist their loose economic policy may also reverse course.

With a 10-year note that is yielding less than two percent, what is a fixed-income investor to do?

When these policies begin to crumble, it's not bankers and politicians who pay the price. It's people like you and me...

A new report from the Congressional Budget Office revealed that Social Security may go broke long before the Social Security Administration predicts.

Europe is smoldering like a fine cigar. It will take a while to burn to the end, but make no mistake, the whole Eurozone is burning.

In order to solve the mess that is the European financial system, a country will inevitably have to leave the Euro zone.

It just seems strange that central bankers would be hell-bent for leather to continually devalue their currencies.

Risk aversion has taken hold of the market as investors became fearful that Europe will implode and that China's economy will begin to slow down.

Stocks just ended their worst quarter since the financial crisis. The Nasdaq and S&P 500 each lost more than 12%.

Today I'd like to show you a chart which should explain everything you need to know about inflation, commodities and why prices for just about everything are rising today and are likely to rise still further tomorrow.

How much of your net worth should you allocate to each investment class? This frequently asked question lacks a definitive answer. Why? Because we all have a different set of life goals and live under different circumstances.

We know the government lies to us about inflation. In fact, investors take this lie as just another cost of doing business as a willing participant in the world's greatest economy.

But I'm willing to bet that most people simply have no idea about how long we've been lied to.

And since I try to keep these Friday editions of the Resource Prospector a little more entertaining or amusing, I thought I'd share a War Advertising Council ad from the WW2 era.

Everyone knows that the government fudges its inflation statistics.

The benefit is clear: the government understates inflation and is able to keep social security, Medicare and other inflation sensitive costs down. It also can then claim that its clearly inflationary policies are not resulting in inflation.

But, as with everything else the government does, the unintended consequences of their inflation fudging are beginning to show up.

To QE or to not QE? That is the question.

Whether 'tis nobler in the markets to suffer

The slings and arrows of outrageous inflation,

Or to take arms against a sea of deficits,

And through austerity, end them.

Recently, I sat in on a meeting with the top researchers, analysts and investment gurus here at Wyatt Investment Research. In one room sat many decades of investment experience, two MBAs in Finance, and each person with a specific skill-set that's unmatched anywhere outside of a multi-billion dollar i-bank or fund.

The market was killed again. I would like to say that I have never seen this intense selling pressure before, but I have, in 2008. Is this 2008?

I can hardly say the economy "feels" any better. And I am sure the millions of unemployed (some of who have been without work since 2008) would agree.

But folks, this is not 2008, or 2009. I am not going to argue with those who think the market goes lower; I do too. But the economy is not worse than 2008, corporate profits are not worse than 2008, and we do not have deflation...

I've said it before, but the debt ceiling is a red herring. The United States will default on its debts for the simple reason that they are too high to get rid of in any other way.

Whether it's an outright default for bond holders or the more likely default of inflationary policy, we'll see the US default on its debt, and all of the terrible things the politicians on either side of the aisle threaten us with will come to pass - regardless of what bill is passed or how high the debt ceiling gets raised.

The problem is that we're talking about an abstraction. The dollar does not exist. It's an idea. There's nothing backing it except for some guns and some printing presses.

If you're a gold investor and you had to look at just one piece of information to decide when to buy sell or hold. well, that would be a bad idea. There's no magic bullet to decide when to buy sell or hold, and even if there was it would likely be different for each person, because individuals have different investment needs.

So there's no one-size-fits all gold advice I can give you. Sorry about that.

But, if you're like me, and you're not a day-trader, you don't foresee any major life-changes in the near future that might require you to liquidate your gold at a moment's notice, and you'd like to know the single most important piece of information regarding when to buy, sell and hold your gold - then read on.

The market's bid to break its 6-week string of losses is back to square one. The EU promised to have a solution for Greece hammered out this month. It's clear now that Greece is going to do a polite default. That is, its debt will be restructured so that current bond holders take a haircut and receive new debt designed to give Greece a little breathing room.

But so far, they can't agree on how to structure the deal.

Practically no one is talking about it, but one of the most commonly used commodities nearly doubled in price between the middle of May 2010 to the middle of May this year.

Of course, Ben Bernanke will tell you that such price swings don’t necessarily hit the consumer – which would then trigger a boost in consumer price inflation.

But my wife pointed out that prices for this commodity are starting to now rise for the consumer.

Still groggy from a lack of sleep and not enough coffee, I hadn’t noticed an obvious sign that prices for this commodity are now hitting home.

Literally…

Back in November, I made some predictions about the then upcoming second round of Quantitative Easing, aka QE2.

In short, I predicted that QE2 would disappoint the market. As a consequence, I thought that most asset classes would trend lower as the dollar strengthened.

I hoped that such an action would occur, because I believed, and still believe, that the commodity market still has plenty of upside, but that such a disappointment would create a stellar buying opportunity to load up on my favorite commodities.

I was wrong, of course. Bernanke’s announcement of $600 billion only encouraged the markets higher.

Everything’s more expensive now – which is exactly the type of market movement that’s highly unlikely if not completely impossible under normal circumstances. Normally, if widget X goes up in price, commodity Y and wage Z will fall. Normally, prices don’t all rise at once…

Paper money system default appears at first glance to be an unhappy accident of progressive governments biting off more debt than they can chew.

And while there’s certainly plenty of blame to go around for progressives, conservatives, RINOs, DINOs and moderates alike – if you take notice of who benefits from the devaluation of paper currencies, you arrive at a different conclusion.

You’d think that progressive candidates would spend money in an effort to end poverty. That would get them elected for life by the formerly impoverished.

Similarly, you’d expect the end-goal for hawkish conservative legislators would be world peace. Nothing would be a bigger victory for the world’s greatest military.

But despite decades of entitlement programs at home and billions of dollars spent annually on intermittently bombing and paying our enemies into submission abroad – we still have more poor people in this country than we know what to do with, and our list of enemies only grows longer every year, not shorter.

So if these programs have failed, then who or what is the real beneficiary of inflationary policy-cum-deficit spending?

For the record, I actually am not a big fan of Monsanto on a personal level. As much as any other publicly traded company, Monsanto personifies the kind of big, bad corporation that’s in bed with big Government to the detriment of individuals and small business people.

This type of firm works hand-in-glove with the many and sundry regulatory bodies in this country to make it near-impossible for the little guy to get ahead. In effect, companies like Monsanto are a state-sponsored monopoly. If you’re familiar with Nobel prize winning economist George Stigler and his work, you’ve heard of “regulatory capture.”

Monsanto, and other huge companies in this country all benefit from regulatory capture – which in essence just means that regulatory bodies become dominated and controlled by the very sectors and firms that they’re intended to regulate.

Think: Dept. of the Interior employees sleeping, partying and drinking with oil company employees.

And it makes sense that companies like Monsanto would eventually come to control the regulators. If you’re a regulator, keeping a company like Monsanto in business means job security. You’re directly incentivized not to keep a close eye on the business operations, but rather, to make sure those business operations are protected, thriving and unthreatened.

Suffice to say that though the last two weeks appeared to have been some of the most interesting and tumultuous, with silver and oil prices getting rocked, and sovereign debt issues raising their head again in Europe, as well as the continuing sagas of War and debt here in the United States – I can confidently say that all of the major themes I talk about in this letter are still in place.

It’s been more of the same.

It’s important to re-evaluate your investment thesis on an ongoing basis. When the facts change, you should be prepared to change your investment strategy.

I buy gold and silver, oil and coal, natural gas and potash – not because I have any special affinity for commodities, but rather, because it makes sense to invest in these things.

Why does it make sense to invest in commodities?

Nearly a month ago, after the last Fed meeting, we started to discuss the likelihood that the U.S. economic recovery was slowing down. After all, the Fed had just lowered its GDP forecast for 2011 and acknowledged that inflation was picking up as a result of QE2.

 

The S&P 500 was above 1,360 at the time.

The market declined yesterday, but only technology showed clear weakness. The fall from the other indices was a byproduct of the decline in tech stocks. Despite the big drop in technology, and the

Does anyone care about the housing market anymore? This morning's new housing starts number for April was awful; 11% lower than March and well below the expected number. The housing market is truly in the dumps.

The U.S. homebuilder's sentiment index has a mid-point of 50. Any reading below 50 is considered poor. For April, the index registered 16 -- for the second month in a row.

When Fed Chief Ben Bernanke told us that he believed inflation was “transitory”, he was saying that commodity prices were higher due to Fed monetary policy.

 

When Bernanke went on to say that he would let QE2 end and not immediately fire up the QE3 engine, because the risks of further inflation were not being offset by gains in employment.

 

Put simply, Bernanke said inflation was all (or at least mostly) his fault.

The market activity was fairly tame last week. Volume was decent, but price movement was nonexistent. In fact, SPX stayed perfectly within its break out borders of 1355 and 1332. But this week should

More and more, strategists, commentators and investors are coming to the same conclusion: it's all about the U.S. dollar. When the dollar rallies, stocks and commodities sell off. When the dollar falls, then our favorite assets can rally.

 

It almost doesn't matter what the time-frame is. Evidence is mounting that even hourly moves for stock prices get their direction from the dollar's latest move.

Will inflation push the Fed to move earlier than it wants to? Or will a weakening economy encourage the Fed that more stimulus is needed?

Obviously, these questions are polar opposites. But it seems that these are the only choices of action for the Fed, assuming it wants to take action. It's more likely, however, that the Fed wants to see how the economy responds to the end of QE2. And I'll admit, I'm curious about that, too...

The market ripped higher yesterday. Volume was average during the ascent which was led again by commodities and technology. The gain from the technology sector was especially good to see yesterday.

The market recovered modestly yesterday, on extremely low volume. The increase was assisted by commodity stocks, the most notable of which were oil stocks. But technology and small caps made strong

The market declined last week, which is it's first decline of over 1% in some time. Volume picked up, but not in a significant manor. The turn in the market happened to coincide with a turn in the

The market actually closed lower again yesterday. At this rate, the market may even close down for the week, which is an uncommon event. Volume also picked up yesterday, which given the weak close,

The market actually closed lower again yesterday. Although neither volume nor the percent of decline was substantial, SPX has struggled mightily against 1377 resistance. Additionally, which I also

The "slowing growth" theme we've been discussing has now worked its way into the headlines. Today's ADP report that the private sector added a less than expected 179,000 jobs in April is being billed as a sign that the recovery is not moving as fast as we'd like.

Today's oil inventory report is also being interpreted as measure of slowing growth. Crude inventories rose 3.2 million barrels last week, higher than expected.

The market climbed higher at the open yesterday, but indices could not hold that gain by the end of the day. Monday's session was actually more bearish than it looked as small caps and energy stocks

It was somewhat lost in the shuffle in Wednesday. Investors were so stunned at Fed Chief Ben Bernanke's admission that commodity inflation might accelerate over the next few months before the Fed is forced to act on interest rates, they missed the part where the Fed lowered its 2011 GDP growth estimates from a range between 3.4% -- 3.9% to 3.1%.

For anyone pinning his or her hopes on 3.9%, that's got to be disappointing.

But after yesterday's first read of Q1 2011 GDP growth -- a measly 1.8% -- investors are likely to take another look at the total message delivered by the Fed.

All eyes were on the Fed yesterday as Ben Bernanke gave the first ever press conference by a Fed Chief following an FOMC meeting. And I have to say that Bernanke was remarkably candid as he was peppered with questions about inflation, quantitative easing and interest rates.

 

Bernanke did a verbal tango that could put him on Dancing with the Stars. Yes, he pumped the system with boatloads of cash in a Treasury-buying spree known as QE2. But he also admitted yesterday that such stimulus does carry inflation risks, and those risks may not offset the potential gains in employment.

The market blasted higher yesterday and confirmed the break out past 1335 from earlier in the week. Yesterday’s move came after Ben Bernanke once again announced low interest rates for an extended

The market blasted higher yesterday and took out 1335 resistance. Volume levels were also high for most of the session, which is a great change of pace from Monday when volume was incredibly low.

The market action was mild yesterday. The indices were negative for most of the day, but in the final hour most managed to either close with a small gain or back to even. Volume was pitifully low as

The market jacked higher yesterday. The indices were boosted by superb earnings results, mostly technology earnings from stalwarts like Intel (Nasdaq: INTC) IBM (NYSE: IBM) and VMware (Nasdaq: VMW)

The market began to gather steam yesterday to make a run towards 1335 resistance. Volume was suitable during the climb higher and energy stocks led the way. However, the indices appeared somewhat

I have to say, though I’ve predicted much higher silver prices over the past year or so, I honestly was not prepared for anything like what we’ve seen so far.

For the record – and maybe to further cement my status as a hyperinflationist – I’m in the camp of prognosticators who believe we’ll see $100+ silver within the next few years. As I wrote last November, silver (and gold) are due to run higher for the simple reason that:

“Paper currency around the world all suffers from the same chronic, debilitating disease: it has no intrinsic value. Eventually, all currencies will go to zero. In such an event, it won’t matter how many dollars it will cost to buy an ounce of silver. You’ll simply want to hold silver.”

If silver prices keep skyrocketing like they have been over the past 6 months, we’ll see $100 silver within a year, and I’d be surprised if silver didn’t break $50 by this time next year.

Ask 100 people on the street to define inflation, and 99 of them will tell you it’s when prices increase.

Of course the Federal Government’s Bureau of Labor and Statistics will tell you the same thing:

“Inflation can be defined as the overall general upward price movement of goods and services in an economy.”

Notice that the BLS doesn’t say that inflation IS defined as such and such. They say it can be defined as such and such.

As an ardent student of the English language and turn of phrase, it speaks volumes about the Federal Government and the BLS and how they really view inflation when they use such imprecise language on their official website.

Inflation certainly CAN BE defined as a general rise in the price of goods and services – but it shouldn’t be!

The market sank barely less than 1% in a choppy environment last week. Volume was also surprisingly low considering it was both options expiration week and the start of earnings season. Although