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

Interest rates aren't just some arbitrary number pulled out of the air by central bankers and credit card companies.

Why are S&P 500 companies holding onto cash instead of paying its investors through dividends?

Federal Reserve Chairman Ben Bernanke has once again managed to penalize responsible savers.

As soon as interest rates rise, money will slosh back into bonds - leaving these dividend funds high and dry. This investment strategy is a  a safe alternative to dividends for income investors.

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

Italy, Greece, Portugal and Spain are all in big trouble... Fortunately for you there's a great way to profit from their unfortunate mess.

Today is another big day in the market, and the bulls clearly have the momentum.

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.

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 "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.

In a speech yesterday, Fed Chief Ben Bernanke made two very important statements. First, he said that he believes the inflation we are experiencing due to higher commodity prices is temporary. Second, he said he could be wrong.

The specific quote goes like this:

“We have to monitor inflation and inflation expectations extremely closely because if my assumptions prove not to be correct, then we would certainly have to respond to that and ensure that we maintain price stability...”

I'm starting to feel like I don’t have enough zeroes on my calculator...

Let me see if I have all this straight: we have a record high Federal deficit, 9% unemployment, a housing market that still hasn't bottomed, a Federal Reserve that's hell-bent on spending our way out of a debt crisis, a banking system that won't lend but wants to pay dividends, a looming energy crisis, instability in the Middle East, soaring commodity prices, Europe has a never-ending debt crisis, China can't stop its own inflation, Japan is on the brink of nuclear meltdown, and Apple's iPhone reportedly couldn't handle the daylight savings time change.

In fact, I read that one user called her iPhone "stupid."

Ye gods.

We have noted here in Daily Profit that stock valuations have not gotten out of hand and, even though we are experiencing some correction/consolidation, the upside story has not played out yet.

Nomura Securities stirred things up recently by saying that oil prices would spike over $220 a barrel if unrest spread to Syria and Iran. Some investors are taking that bet.

Bloomberg reports that the open interest for June 200 call options for oil has gone from 1,500 to over 8,000. It might seem unlikely that oil will go over $200 in just 3 months. But if it does, these traders will make a lot of money.

The bigger issue is that prices are rising for just about everything, except houses. And as much as he might want to say otherwise, Ben Bernanke's monetary policy is part of the problem. Bernanke can say that any inflation will be temporary all he wants. The fact is, emerging markets, and possibly even Europe, are raising interest rates to fight inflation. And the Fed is still sticking to its easy money policies.

What happens when the Fed's QE2 ends? What happens when there is no choice but to raise interest rates?

Once again, China has raised reserve requirements for banks to slow down lending and, hopefully, slow inflation, too. China reports that inflation accelerated to 4.9% in January. Part of the reason is that drought has damaged China's grain production and food prices are up.

Chinese banks lent $158 billion in January. That was more than double the rate of lending in December. Apparently, lending typically surges in the early months of the year in China.

Pent up frustration over personal austerity gushed over during the holidays and resulted in strong sales numbers. It should be no big surprise that retail sales came in kind of weak for January. A little pullback in January was to be expected.

Also, don’t ignore the fact that gift card sales get counted when they are sold, not redeemed. I would also point out that many retailers are in the verge of hiking prices. Ralph Lauren (NYSE:RL), Levi’s, Steve Madden (Nasdaq:SHOO), and JC Penney (NYSE:JCP) have indicated that they will raise prices soon.

Now, Apple alone accounts for 20% of the Nasdaq 100 (the 100 largest stocks on the Nasdaq). Throw in Google (4.2%), Microsoft (3.6%) and Cisco 1.6%, and you're looking at 30% of the Nasdaq 100. Nearly one-third of the Nasdaq 100 was lower on Thursday, easily the most influential tech companies, and the Nasdaq managed a gain for the day.

The word "inflation" is appearing in the headlines more and more. For emerging markets, inflation is getting a bit scary. China is expected to show 5% inflation for the first two months of the year. That's clearly a big problem for China. And the situation is similar in other emerging economies, like Brazil and India.

Each of these three countries has raised interest rates to fight inflation. They will certainly have to do more. Especially China. China's currency is undervalued, kept that way by an artificially imposed exchange value known as a "peg." China pegs its yuan to the U.S. dollar.

I am very curious to see how investors will react to the possibility that QE2 may be ending. The policy is set to conclude in June, anyway. And I would suspect that the Fed will continue until then, regardless of growth.

We got the latest non-farm payroll numbers this morning. And frankly, the numbers raise more questions than they answer.

After the ADP private payroll showed 187,000 jobs added to payrolls. The government number came in at a measly 36,000. But amazingly, the unemployment rate dropped to 9%.

The bears' futile attempts to take stock prices lower have been good sport to watch. The first level of support on the S&P 500 is 1,280. The S&P 500 has closed above that level every day since January 12. That's 8 straight days.

Even last week, when it looked like a correction was looming -- after stocks sold-off on the good news from Apple (Nasdaq:AAPL) and IBM (NYSE:IBM) -- the S&P 500 fell all the way to 1,271. But it didn't close there.

Yesterday, both the U.S. dollar and stock prices moved lower. That’s pretty unusual. Also yesterday, Intel (Nasdaq:INTC) posted an absolutely blowout quarter. This morning, in pre-market, the stock is up just a nickel.

Now, Intel has sold off on positive earnings reports over the last few quarters. But this time, Intel beat all expectations. Earnings were up 48% over last year. And yet the stock appears unable to move higher. I will call that unusual, as well.

So if the U.S. dollar is weak, it’s usually a good idea to see what else is going on in the world, rather than assume the dollar is trading on U.S. data alone.

Bloomberg is reports that holiday retail sales jumped 5.5%, the biggest gain in 5 years. Macy's (NYSE:M) and Abercrombie & Fitch (NYSE:ANF) were among the big winners, but it seems as though all the upside has already been had in the retail stocks. My favorite, Kohl's (NYSE:KSS), has done anything since its mid-November jump.

It should be clear from the retail sales numbers that Americans have gotten more comfortable with the U.S. economic recovery. While we certainly can't say the economy is hitting on all cylinders, it has stabilized and growth forecasts are on the rise.

What are you willing to bet on the likelihood that interest rates will stay low for the next year?

My supervisor raised this exact issue this morning. We were having a conversation about one of the investments we may recommend in an income newsletter we’ll be launching later this month.

Strong words for sure. If he’s right, this security will continue to pay solid 3.5% yields with the strong potential for capital gains.

If he’s wrong...well, the price of this investment could quickly and easily drop 50% or more. In light of the fact that this investment stands to benefit when interest rates drop, and that interest rates are already at rock-bottom levels, it seems like it might not be a good idea to buy it right now.

We got some very interesting inflation data yesterday. In the U.S., the Producer Price Index (PPI) rose 0.4% in October, when expectations were for a 0.8% increase.

But if you strip out energy and food prices, the so-called "Core PPI" actually fell 0.6%. Computer and car prices were cited as the main source of pricing weakness.

We know this weak pricing environment is exactly why the Fed started a new round of Treasury purchases, known as QE2. It's the second time the Fed has engaged in quantitative easing.

Volatility is good for investors who have patience and a concrete plan to take advantage of it.

At the risk of pointing out the obvious, volatility simply refers to a security's standard deviation of returns - in other words how much variation there is from the average. It's also helpful to consider a securities' volatility relative to the market, and we have a handy metric for this called "beta."

On Yahoo! Finance, for instance, you can find a company's beta by clicking on the "key statistics" tab along the left side of the screen. I've cut and paste some screen-grabs from ExxonMobil (NYSE: XOM) to show you how to find beta.

I'm using Exxon as an example - but you can find almost any company's beta using the same process. (Some companies on foreign exchanges as well as ETFs won't have a beta listed - depending on the stock portal you're using.)

It's likely just a coincidence… but it appears that some folks in Japan might have had some inside knowledge about the central bank's decision last night to lower rates.

If you're at all familiar with my investment thesis - you know that I believe artificially low interest rates and other inflationary measures from central banks will have a bullish effect on commodities of all stripes, especially and including precious metals.

It's a simple thesis: precious metals famously offer no yield, but when central banks lower the cost of borrowing money to artificial levels, and inflate the currency, precious metals hold their ground. It's only when central bank debt securities offer better than the going rate of inflation (or the perceived threat of inflation) that gold and silver lose their luster with the investing public at large.

I hope you all had an enjoyable long weekend. I also hope you enjoyed the”subscriber’s only” market analysis video that TradeMaster Daily Stock Alerts Jason Cimpl shared with us on Friday.  

Every Friday, Jason makes a video for his TradeMaster members where he shares his top-notch chart analysis and provides a forecast for the coming week that includes everything from the”big picture” view to specific entry points on his top stock recommendations.

Jason has identified virtually all of the important turning points for a variety of assets over the last year. His TradeMaster readers made money when natural gas prices bottomed in October of 2009. They were ready when the U.S. dollar bottomed in December 2009. They caught big moves in oil and were perfectly positioned for the tech stock breakout that started in March 2010. They even made money when the stock market sold off on the European debt news.

Investors were too busy watching stocks get pounded yesterday to notice a bit of good news. Factory orders rose 1.3%. That was more than twice what economists were expecting.   

That prompted Pierpont Securities chief economist Stephen Stanley to say “Manufacturing is unambiguously the strongest part of the economy…” He’s not kidding.   

 Weed out the 67% decline in domestic aircraft orders and you get a 3.1% jump in factory orders. That’s the biggest gain since 2005.

If the stock market has you scratching your head, don’t worry. You’re not alone. 

I’ve been half-jokingly calling the stock market “bulletproof” for the last couple of weeks. And it’s because stock prices just keep marching higher. It’s like there’s no bad news that could possibly bring it down.   

Last week, we had a volcano eruption that grounded European flights and cost those airlines at least $2 billion. Then Goldman Sachs was accused of fraud by the SEC, which makes a financial reform bill that could affect the entire banking industry’s profits, and the net result for stock was a one-day decline.   

What does money cost? According to the Wall Street Journal, each new $100 bill set to be introduced into circulation on February 10, 2011 will cost the Treasury 11.8 cents to produce. Complete with holograms, security fibers, bells, whistles, kazoos and probably a computer chip or two, poor old Ben Franklin is starting to look a little perturbed with all of the baubles encroaching his paper real estate.

So it costs about 12 cents for the Treasury to make $100, but what does it cost to buy it? That’s what the interest rate is: the cost of money. Interest payments you make on money loaned to you is the price you pay for borrowing. Nothing’s free, especially not money.

When the price of money gets higher, it signals a weakness in the forward purchasing power of the underlying currency. The best way to protect yourself from a weakening currency is to buy commodities. More on that in a second…

Marketplace interest rate increases at banks, for mortgages, as well as for corporate bonds always follow rises in Treasury bond rates.

If long term bond rates rise, it means that folks who lend money to our government are demanding higher returns on their principle.

Oil is holding above $86 a barrel. And yet analysts still cling to the notion that oil should be driven by the U.S. economy.   

Here’s a quote from a report from Frankfurt’s Commerzbank:  We think that the oil price increase is only of temporary nature, since it is driven by liquidity rather than by fundamental factors…The recent increase in correlation between oil prices and equity markets, which has now reached unprecedentedly high levels underscores our view.   

I’m not sure how Commerzbank comes to the conclusion that oil prices are somehow not connected to fundamentals, but, instead, are connected to the stock market. But this stance is highly suspect. 

This morning, I find myself wondering how long investors can continue to support cash raising activities. That’s probably not the best way to pose the question. Perhaps after I set the stage, the question will make more sense. 

Yesterday, Greece started selling 7-year bonds to raise cash to cover its debt issues. The yield was to be 6%. But then, Greece got greedy and tried to drop some 12-year notes on the market.  

Now, Greece was warned not to try and add supply to its offering because the market wasn’t ready for it. So I don’t know what Greece was thinking when it decided to ignore this advice and float the 12-year notes. But Greece will pay the price. Nobody wanted the 12-year notes. Investors only bought about half of what was offered. That drove the yield on the 7-year notes to 6.3%. 

Stocks were following the game plan nicely yesterday. The dollar was down against the euro, and stocks and commodities were rallying nicely.  

It all fell apart when European Central Bank president Jean-Claude Trichet called the inclusion of the IMF in the Greek bailout plan “very bad.”   

I see his point – this was a great opportunity for Europe to come together and handle the Greek debt matter in-house. Of course, we know Germany was resisting. And in the end, Germany got its way.