Written By : Robert Stacy McCain

In a private e-mail exchange, one very shrewd financial analyst used the phrase “the current weirdness” to describe the economic moment we’re in. “[T]he overall story in the media is wrong, which isn’t unusual,” said my correspondent. The problem is that our situation is so unprecedented, even the most astute observers are somewhat mystified.

What provoked the “current weirdness” remark was something I wrote about the possible influence of hidden inflation in the financial markets:

This chart, from CNN/Money, shows how crude oil prices have increased 49% since March. Interestingly enough, rising petroleum prices mirror a rise in the stock market during roughly the same period. The Dow Jones Industrial Average, which closed at 6,547.05 on March 9, closed Monday at 8,764.49 — a 34% increase.
If analysts worry that rising oil prices could jeopardize recovery, why would this spike in petroleum coincide with a rising stock market? One possibility: Inflation. . . .
The Dow gains of the past three months may also be a product of inflationary pressures — the price of stocks going up because the dollar is worth less. And maybe this explains those uncountable jobs “saved or created” while unemployment keeps going up.
Treasury Secretary Timothy Geithner says “the global storm is receding.” Expect a new storm if investors become convinced that inflation is fueling a Ponzi recovery.

Please read the whole thing. If even shrewd analysts are puzzled by “the current weirdness,” the rest of us need to be paying attention.

(Cross-posted at The Other McCain.)

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