When is inflation too low?  Fed Chairman Ben Bernanke believes that time is now.  The nation's top central banker revealed his plans to bring back some level of inflation, a move that may confuse many Americans.  Bernanke feels that some consumers are delaying major purchases on the belief that prices may fall in the near term to lower levels.  His carefully picked comments from last week were likely designed to encourage Americans to spend and borrow money now, not later when higher inflation may have pushed prices higher.  Just exactly how the Federal Reserve intends to accomplish all this is still under wraps.  The Fed next meets in 2 weeks (source: Federal Reserve).   

The S&P 500 reached its highest level in 5 ½ months last week, finishing trading on Friday (10/15/10) at 1176, up +7.2% YTD (total return) and up +3.1% since the beginning of October.  This comes on the heels of September's +8.9% advance, the index's 5^th best monthly gain since 1990.  The top performing quarter for the S&P 500 in the last 20 years (i.e., 1990-2009) has been the 4th quarter (October-November-December), up +4.6% (total return) on average (source: BTN Research).           

Global currency conflicts are impacting more than just the USA and China.  Many other foreign countries that depend upon exports (including Thailand, Australia, Singapore and South Korea) have seen their local currency rise as interest rates in the USA have fallen to record low levels.  A rising currency in an export-driven economy is a recipe for disaster (source: BTN Research).