Recently CNN/Money posted an article called Who gets rich off $3 gas - who doesn't, which I thought I would bring to your attention. The rising cost of gasoline at the pump, now $4 in some places, is hurting many people on fixed incomes, like seniors and students, and those commuting long distances to work, or for work.

There is plenty of public fury to go around and while OPEC and the big oil companies get a lot of the blame, your local gasoline station owner has to face the heat close up and personal, even though on this food chain they benefit the least from rising prices.

The rescuing of the domestic financial markets (banks and Wall Street investment houses) by sacrificing treasury notes, exacerbating deficits, all the while lowering the prime rate and discount rate, have pushed oil prices higher, as oil producers to their chagrin, are paid in devalued dollars and are trying to maintain equilibrium.

In a column in Sunday's New York Times, newsletter guru Mark Hulbert makes the case that small-cap stocks are significantly overvalued, and that large caps are undervalued. His argument is based on expanding price/earnings multiple for small-cap stocks, while the average large-cap P/E is down to one third of what it was seven years ago. This, in part, explains the underperformance of stocks like Home Depot Inc. (NYSE:HD) and Wal-Mart Stores(NYSE:WMT), whose CEOs have taken some heat for their heavy compensation in the midst of a flat stock price. These companies have provided consistent earnings growth, but the multiples have contracted to the point where the stock has remained relatively flat.

But are these companies on the verge of reward, or at least avoiding the downturn that Hulbert seems to be predicting for small-caps? I wonder. The piece does not provide any data on this going back earlier than 2000. In his book The Only Three Questions that Count, Ken Fisher made the case that the price/earnings ratio of the market is not an accurate predictor of whether stocks will move up or down. In fact, stocks seem to move higher when they exhibit high P/E ratios. I wonder if this phenomenon would hold true for the spread in the P/Es between small-caps and large-caps.

Before you go off and dump your small-caps to buy General Electric Co. (NYSE:GE) and Exxon Mobile Corp.(NYSE:XOM), remember this: While small-caps may underperform large-caps as a whole, the predictive value of this for any one stock is almost nonexistent; there will be underperformers and out-performers in both categories. I believe that investors will find the most success with stock picking in small-caps and micro-caps, where research is more likely to pay off (with large-caps, everything is often already factored into the price).

Analysis provided by Paul Foster of Theflyonthewall.com:

U.S. stocks rallied today on lower interest rates and optimistic EPS from The Home Depot, Inc. (NYSE:HD), Target Corporation (NYSE:TGT) and Wal-Mart Stores, Inc. (NYSE:WMT). The S&P 500 was up 0.64%, NASDAQ 100 is up 0.99%, The Dow up .68% and the 10 year bond rate declined to 4.568%. The CBOE VIX was down .36 to 10.49.

ExxonMobil Corporation (NYSE:XOM) option implied volatility decreases as ExxonMobile trades near Record Highs. ExxonMobile is recently at $74.38. Crude oil is at $58.44 down 0.24%. ExxonMobile option implied volatility of 19 is near its 26-week average according to Track Data, suggesting non-directional price fluctuations.

Dell Inc. (NASDAQ:DELL) November straddle priced for $1.60 move into 11/16 earnings per share and outlook. Dell Inc. is expected to report EPS on 11/16. AMTR says "we anticipate essentially in-line revenue and slightly better EPS as we believe DELL's operating margins likely bottomed last quarter as the company focuses on profitably offset by investments to improve customer service." DELL over-all option implied volatility of 32 is near its 26-week average according to Track Data, suggesting non-directional share price risk.

Sears Holding Corporation (NASDAQ:SHLD) November straddle is priced for $9.30 move into 11/16 earnings per share and outlook. Sears will announce its 3rd quarter EPS on 11/16. BEST says "strict inventory management should benefit the gross margin." BEST has a 'outperform' rating with a year-end price target of $182 on SHLD. SHLD call option volume of 17,388 contracts compares to put volume of 10,132 contracts. SHLD over all option implied volatility is at 35 is near its 26-week average according to Track Data. Near term option prices indicate near term risk; outer month option prices indicate non-directional price risks.

Option volume leaders today were Apple Computer, Inc. (NASDAQ:AAPL), Google Inc. (NASDAQ:GOOG), The Home Depot, Inc. (NYSE:HD), and Amazon.com, Inc. (NASDAQ:AMZN).