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The Truth, As Your Wallet Gets Lighter Each Day

All time highs are being hit by many leading stocks as a result of the Federal Reserves efforts to prop the whole entire economy up by printing money thus crushing the Dollar. The artificial wealth effect continues to be the game plan by a Federal Reserve that thinks they can control the hyper inflation, once it rears its ugly head in a few years. History has shown us a Federal Reserve that has never been ahead of the curve in anything.  The signs are already starting to show up in food and energy.  Just today, PPI was reported at 0.4%.  This was extremely high and tells us that the average American will be spending more on food and energy in the near future, if they already are not.  The Federal Reserve says it wants inflation, but how much is enough and can they stop the snowball when it starts to get overdone?  With many Americans below the poverty line, is it ethical to inflate a currency thus lowering the amount that the currency can actually buy?  Is it ethical to inflate commodities like food and energy when many baby boomers are on fixed incomes for the rest of their lives?

While the Dollar is being pounded again, the markets are not soaring due to some negative economic data.  Usually, when the Dollar drops, the markets rip higher like they just won the Super Bowl.  The SPDR S&P 500 ETF (NYSE:SPY) is trading $117.84, -0.08 (-0.07%).

Some leading stocks continue to hit new all time highs. International Business Machines Corp. (NYSE:IBM) is one of them.  On August 31st, 2010, IBM was trading at $122.28. Today it hit a new all time high at $141.40. In just six weeks, IBM has gone up a shocking 15.63%.  The previous all time high was in 1999 at a price of $139.19.  IBM usually does well in a weak Dollar environment as they sell overseas and then convert foreign currencies back to U.S. Dollars.  This gives them a currency profit.  Having said this, I could not touch IBM with a ten foot pole until it pulls back a little and the Federal Reserve stops manipulating the currency.

Apple Inc. (NASDAQ:AAPL) is another stock hitting a new all time high today.  This stock crossed the grand $300.00 level yesterday and is adding to those gains.  The high of the day today was $302.47.  On August 27th, 2010, Apple was trading at $235.56.  With earnings looming, we will see if this massive move was legitimate.

As an intelligent investor, continue to remember the rules this 'new' market abides by.  Right now, the Federal Reserve is controlling the markets by dropping the Dollar.  In addition, it appears they are also in the markets literally propping certain stocks up from time to time.  The markets are extremely extended but should be shorted only in minor ways with tight stops.  Each short is fighting against a Federal Reserve that has trillions of Dollars at their disposal.  In other words, handle with care. 

Related: PowerShares DB US Dollar Index Bullish (NYSE:UUP), SPDR Gold Trust (ETF) (NYSE:GLD)

Gareth Soloway
Chief Market Strategist
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