Stagflation Slap in the Face

With bond insurer resolution in progress, the market has enjoyed a short relief rally over the past two days, but that looks to get a stagflation slap in the face in the near future. Oil prices closed at a new record high of $100.88 per barrel on the New York Mercantile Exchange Tuesday and traded higher overnight in overseas activity. Gold also looks clearly headed to break the $1,000 per ounce mark, as it rose to an all-time high in Asian trading this morning. Gold for immediate delivery was trading above $963 an ounce last we checked.

It's clear Ben Bernanke faces an especially difficult term as Fed Chairman. In the next chapter of this horror flick of his, inflation risk should temper the enthusiasm that eventually fuels the rally that precedes economic recovery. And if it doesn't, then the first 50 point rate hike by the Fed Chief outta scare the bejeavers out of it. Keep that in mind when your early cyclicals are up 20% and your profits are still on the table. Ben addresses the House Financial Services Committee today up on the hill, and the newspaper reading Congressmen are very likely to ask him about stagflation and inflation, two subjects the stock market would rather ignore for now.