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For the next few weeks at least, the sun seems destined to shine on the stock market. Not only has Hurricane Gustav turned out to be far less devastating than Katrina, but the credit crisis seems to be reaching a conclusion. And if that weren't enough, oil prices have shrugged off Russia's aggression in Georgia – or perhaps they are just in a temporary state of shock and denial. Regardless, all these factors have lessened the downside risk in stock prices, for now.

In the big economic picture, one eye-catching statistic is the fact that the number of houses under construction has now fallen below the number of new home sales. This implies that today's excess inventory could start to shrink, improving the supply/demand situation, and supporting house prices.Read more...

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Official, core inflation continues to look rosy and supportive of stocks. Last week we asked the question, “When will the Fed acknowledge that non-core items, food and energy, are definite contributors to inflation?” The answer matters, because such an acknowledgement could be the trigger that sends the market into a trading range.

Right now, the Fed is getting off easy because they only pay heed to core inflation. And core inflation has been well behaved. However, if you add in food and energy, total inflation is running at around 5.5%, which is disturbingly high and certainly takes all the appeal out of buying bonds.

For that reason, we expect the small current rally in bonds will be over soon and that bond prices will be heading lower. We are not chasing this bond rally, and we will not be buying bonds anytime soon.Read more...

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Last week I talked about two popular beliefs, one touted by Wall Street, the other by environmentalists. One of these beliefs we know is a delusion. The other we’re still undecided on. But from them, we draw two conclusions that could help you make a lot of money over the next few years:

1) Think for yourself, and never blindly trust authority.

2) Invest in oil and alternative energies.

Today, as I promised, I’m going to tell you about another popular delusion. One that you may also find profitable …

“OVERWEIGHT PEOPLE LIVE LONGER” (TELL THAT TO YOUR SPOUSE!)

Another area in which society may be deluding itself concerns obesity. Recently, the Journal of the American Medical Association (one of the most prestigious medical publications) printed a study suggesting that, contrary to popular belief, it may be healthier to be overweight than thin.  Read more...