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8:30 AM EST Monday, June 5, 2006: Inflation? The Fed is obsessed by it. If inflation gets out of control it destroys economies. Today's worst inflation is in Zimbabwe. When I was there in 2002, I could get 200 Zim dollars for one American dollar. Four years later it's 300,000 Zim dollars for one American dollar. Zimbabwe's economy has collapsed. There is widespread unemployment -- 80% at last count. Fuel prices alone rose 50% last week alone. And I read that many firms have suspended trading, as they simply have no idea what to charge for goods.

America is not Zimbabwe. But we have inflation -- especially in commodities in general and oil in particular (it hit $73 a barrel today). There used to be inflation in real estate. But the Fed has nipped most of it. What investments will work best in an inflationary economy? In order:

1. Commodities.
2. Real estate.
3. Stocks.
4. Bonds
5. Money funds and cash.

Where goes stocks at present? Jeremy Siegel, author, finance professor, writes in today's Yahoo! Finance,

... I don't think a recession is on the horizon. Lower consumer spending will probably be offset in part by higher capital spending by firms. Companies are sitting on loads of cash and, with capacity utilization at the highest level in six years, they can easily justify higher capital expenditures.

What the stock market wants is some interest rate relief. After two years and 16 consecutive Fed funds rate increases, investors want to know where the end will be. Our new Fed Chairman, Ben Bernanke miscommunicated with the market by suggesting before the May meeting that the Fed would stop increasing rates even if the inflation threatened. His testimony held out hope that the end of tightening was here. But surging commodity prices forced the Fed to say that such a pause would be premature.

What does higher (interest) rates mean to the long-term investor? Nothing negative. In fact, I think that markets are healthier now than they were before the recent sinking spell. There was too much speculation in some stock markets - particularly the emerging markets that were on an unsustainable upward trajectory, just like commodities. The fear of higher interest rates has thoroughly doused these emerging markets.

I am going to hold to my January projection. From current levels, U.S. stocks will return between 6 and 7 percent per year after inflation (which means about 9% to 10% with 3% inflation figured in). And returns will be even higher if inflation can be brought under control without causing a significant downturn in the economy.

If commodity prices stay down, the Fed will indeed pause, and if so, I predict that the Dow Industrials will break through to all-time highs by year end. In retrospect, the recent downturn will be viewed as the pause that refreshed.

Dumb. Dumb. Dumb. Someone stole a laptop with the credit card numbers of 240,000 of Hotels.com's customers. The laptop was stolen from an Ernst & Young auditor. Why he had the database, why he had it on a laptop, why the idiot left it in a car ... all these are not explained. The only way you and I can protect against such unmitigated idiocy is to have one "expendable" credit card. Give it to idiot companies. When they screw up, cancel your card instantly. In fact, better yet, cancel it routinely once a year.

I wonder if Ernst & Young had Absolute Software’s protection service on its laptop? For more, click here.

Microsoft versus Adobe. Microsoft is about to come out with a PDF look-alike, called XPS. Using a free viewer from Microsoft, you'll be able to read a document and enlarge, but not change it. Correct? If you have Office, you'll be able to create XPS files out of PowerPoint, Excel, Word, etc., which you'll be able to send to people who only have the viewer. If I have Office, I’ll be able to annotate XPS files I receive – adding notes, bolding, underling, etc. but not change the underlying document – unless I’m given that permission. I don't think XPS will significantly hurt Adobe's profitability. Of course, XPS will not be compatible with PDF and vice versa. Shucks!

The ultimate gadget freak's list: This is PC World magazine's pick of the 100 best products of the year. I've marked the new ones in red that intrigue me the most. I've highlighted the ones I use. There's some neat stuff here.

The French Open Tennis is continuing. Set your TiVo or PVR.

The Deal with God -- Part 1
A Jewish grandma and her grandson are at the beach. He is playing in the water and she is standing on the shore not wanting to get her feet wet, when all of a sudden, a huge wave appears from nowhere and crashes directly onto the spot where the boy is wading.

The water recedes and the boy is no longer there. Swept away.

She raises her hands to the sky as she screams and cries, "Lord, how could you? Haven't I been a wonderful grandmother? Haven't I been a wonderful mother? Haven't I kept a kosher home? Haven't I given to B'nai B'rith? Haven't I given to Hadassah? Haven't I lit candles every Friday night? Haven't I tried my very best to live a life that you would be proud of?"

A voice booms from the sky, "Okay, okay!"

A few minutes later, another huge wave appears out of nowhere and crashes on the beach. As the water recedes, the boy is standing there, smiling and splashing around as if nothing had ever happened.

The voice booms again. "I have returned your grandson. Are you satisfied?"

She responds, "He had a hat."

The Deal with God -- Part 2
"With hurricanes, tornados, fires out of control, mud slides, flooding, severe thunderstorms tearing up the country from one end to another, and with the threat of bird flu and terrorist attacks, are your sure this is a good time to take God out of the Pledge of Allegiance?" -- Jay Leno.

Harry Newton

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads. Thus I cannot endorse any, though some look mighty interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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