Inflation. Everybody agrees it's coming back. Make that roaring back. No one says otherwise. After all, the government is spending money like it's someone else's (it is ... ours). With extreme stimulus, surely inflation will have to be a problem, commodity prices have to rise, real estate has to go up, too much money will chase too few goods and services. That's the classic definition of inflation.

It's obvious what investors have to do: they have to buy inflation-proof investments, such as gold, commodities and real estate. Maybe it's too obvious. Maybe if everyone else is buying those things, there's reason to pause and reconsider.

On Monday the Dow Jones Industrial Average dropped more than 200 points before closing a little better. No real reason for it. Pundits suggested the drop in commodity prices (oil and gold were down a little, not enough to comment on) were the reason for the dip, suggesting the economy may not be as robust nor inflation as big a problem as thought on the Friday before.

But here's the real scoop: the market has rallied well beyond a level where economic numbers justify.

Your mission, should you decide to accept it, Mr. Phelps, is to boost the economy and increase employment but not allow inflation to run rampant. As usual, the secretary will disavow any knowledge of your actions should you fail. This message will self-destruct in five seconds. Good luck, Mr. Phelps. Or should that be Mr. Bernanke?

That, in a nut shell, is the fine line the Fed must walk. It has to get the economy going and more people back to work, mostly by pumping money into the economy. But it can't put too much money into the system or inflation will run rampant. Right now, the presses are running 24/7, and the money is flying out the Treasury's and Fed's windows, seemingly to almost anyone walking underneath them. The stimulus package is in full swing. But what signs are there that it's working?

Ford (NYSE: F) is the last of the "Big" Three standing on its own two feet. Chrysler and General Motors (OTC: GMGMQ) are on crutches supplied by the federal government. While they're both still upright, those crutches are mighty expensive (the government will own 60% of GM when it emerges from bankruptcy).

Speaking of bankruptcy, Chrysler is already on the other side and now a partner with Fiat. That was perhaps the fastest legal action ever seen. Usually bankruptcy takes between 18 months to two years before a new company emerges.

IPO. Initial public offering. Or as they used to be known among the Wall Street cynics: "It's probably overpriced." Not any more. Nothing that is too expensive will fly these days. In fact, if it's not a bargain, don't bother to talk with the bankers. Investors want history, especially ones with increasing sales and profits.

The year 2009 has already produced more IPOs than all of 2008. Sound impressive? Here are the numbers: this year there have been seven. So there aren't a lot of companies going public right now, but still, there are some. And most of them are doing well.

Banks need it. Home builders need it. Car companies need it. More banks need it. "It" is capital. Also known as equity. In reality, it's money. Banks need lots of it.

As we all know, there is a finite amount of everything. There is only so much money available for investing. The large banks have been at the trough and dipped, pulled out billions (names like Goldman Sachs (NYSE: GS), Bank of America (NYSE: BAC), Wells Fargo & Co. (NYSE: WFC). That was over the last few weeks. Stock was issued. Money flowed in. Things looked pretty good.

The stock market, as measured by the Dow Jones Industrial Average, sharply rebounded from its low of 6440 in March of this year. Currently, as this is written, the notable index is hovering around 8400. That's an increase of 30%. Not bad for two months of trading. While the average is made up of only 30 stocks, those 30 stocks are some of the best. There are also some real losers, such as General Motors (NYSE: GM) and Citigroup (NYSE: C). But for the most part, the index contains the strongest industries with some of the strongest stocks. With that kind of recovery already in place, is it too late to buy stocks or is this just the start of a major rally?

What makes a good speculative stock? A great story? A low price? No and no. Stories are fun, but they're no way to invest. A low price doesn't mean anything if there isn't a company with assets or earnings.

My idea of a good speculation is a turnaround situation or a company with high book value selling at a price well below it. Here are five stocks that fit in these two categories.

Here's the definition of socialism:

1. a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole.
2. procedure or practice in accordance with this theory.
3. (in Marxist theory) the stage following capitalism in the transition of a society to communism, characterized by the imperfect implementation of collectivist principles. (from dictionary.com)

Here's what's going on in the U.S. economy: the government is currently dictating terms to the auto and financial industries in return for much needed money to save companies from their past mistakes. Seems only fair. Any time anyone or anything accepts money, there are obligations that go with it, whether they're in the form of interest payments or equity. That's as it should be. The question is: how much control does the government need to have once the terms are in place?

If you follow the bank stocks, you noticed the latest earnings were very good. Bank of America (NYSE: BAC) showed earnings that almost tripled. Citigroup (NYSE: C) lost 18 cents a share, but that was much better than the 34 cent loss analysts expected, and way better than the $2.44 it lost in the last quarter of 2008. Wells Fargo & Co. (NYSE: WFC) pre-announced it would have great earnings. Then delivered record results. But all of these stocks are well off their recent highs. Why is that?

It has to do with the quality of earnings. In other words, what was the source of this new-found land of profitability or in the case of Citi, lower loss? Investors like ongoing, predictable earnings. In the case of banks, that means loans such as mortgages or credit cards to worthy borrowers. But that isn't where banks got their profits this quarter. Instead, they came from investment banking and trading.

The founders of Goldman Sachs (NYSE: GS) can stop rolling over in their graves. Management is about to bring the firm back to its rightful place on Wall Street. With a $5 billion equity offering, the esteemed firm is going to pay the government back the money from the TARP and get on with being the biggest, baddest firm on the Street. Enough of the handcuffs. It wants to get back in the capital markets ring and knock everybody else out.

Goldman Sachs as a bank? Just wasn't in their entrepreneurial blood. They could no more cater to the whims of regulators than a Ferrari can be used as a school bus. These guys are risk takers and big rewarders. They do their homework, make big bets, and reap the profits, if there are any, or lose millions. And when they're right, they want the money. As a bank and TARP recipient, there were rules about risk and limits on pay. That really chafed.

Most CEOs expect things to get worse. Chief Executive Officers of major U.S. corporations were more pessimistic than three months ago about their business and the economy over the next six months, the Business Roundtable reported last Tuesday. The CEO confidence index fell to negative 5.0 in the first quarter from 16.8 in the fourth quarter. It was at 79.5 a year ago. The CEOs expect the economy to contract 1.9% in 2009. Over the next six months, about two-thirds of CEOs expect lower sales, lower capital spending and fewer jobs at their company. About a quarter expect sales to rise in the next six months, while less than 10% expect to increase hiring or capital spending.

There are always a lot of emotions involved with investing. Most of the time they're fear or greed. Recently it's been outright terror. That's because large amounts of money have been lost. Most indexes for stocks were down between 40% and 50% in 2008.

In the month of March, we saw a very nice rally. There's Spring and hope in the air. But here's the reality: the market is still down 13.3% for the quarter, its sixth straight quarter of losses. The Dow last fell in six consecutive quarters in the period ending on June 30, 1970. It was the worst first quarter in percentage terms since 1939, when the average fell 14.81%. One robin does not make Spring. One month does not make a rally.