Dear Value Seeker,

Sometimes words speak louder than actions.

Especially when it’s the Fed’s words.

Today, market watchers are on the lookout for clues about how the Fed is going to tackle deflation.

A rate cut of at least 0.5% is already in the can as far the pundits are concerned.

But with consumer prices plunging, investors expect the Fed to signal more emphasis on more unorthodox ways of ‘stimulating’ the economy.

According to MarketWatch, “The bottom line on Fed policy is supply of money. The Fed typically targets the price of money but, with the price so low, it will focus on increasing the quantity of money through its balance sheet.”

Not that the Fed hasn’t tried this already.

It has doubled the size of its balance sheet to over $2 trillion since September.

As Bud Conrad at Casey Research notes, “Mostly under the covers, [the Fed] added almost $1 trillion new credit to the financial world in about two months.”

Have you heard of the 22-day “Media Lag?”

One of our analysts has discovered a pretty amazing phenomenon in the markets:

It’s a “pocket of inefficiency” that allows you to intercept (and trade on) the news — BEFORE it appears in the Wall Street Journal, the Financial Times and Bloomberg…

Sounds crazy, I know.

This gentleman has even used it himself to generate returns as high as 425%. What’s the next story he’ll intercept?

For more info, click here.

But the Humpty Dumpty credit markets aren’t an easy fix.

Despite being flooded with new liquidity and government support, banks still aren’t lending.

When they do, Adam Lass at Taipan Publishing says the US will face a far more severe inflationary crisis.

This from Taipan Daily:

“Shortly, I expect the deflationary phase of this shell game to end … The banks will, for a short period of time, be able to buy up massive pieces of American industry and real estate with their newly powerful dollars.

“However, once these dollars actually “trickle down” into the larger economy (more like a flood actually), inflation will resume and the value of these dollars will once again shrink.”

Yes, dear reader, deflation is today’s economic bogeyman, but inflation is lurking in the wings.

In fact, as Keith Fitz-Gerald pointed out in a recent Money Morning article, “There has not been a recession in history that wasn’t followed by inflationary pressure.

“And that, in turn, suggests that investors would be wise to shore up their defenses now while everybody is looking the other way…at deflation.”

With this in mind, American commuters probably shouldn’t get too used to gas prices averaging just $1.66.

The tumbling price of fuel means oil companies are scaling back exploration projects at an alarming pace.

And this, says Merrill Lynch analyst Francisco Blanch, could cause serious supply problems in the future.

“If we reignite economic growth to a very fast level, we will have a shortage of energy again,” Blanch told Bloomberg.

We are not here to spread doom and gloom. (We promise!)

We simply want to help you protect your wealth from any financial risks coming down the line.

After all, you’re not going to hear these warnings from the government or the government’s mouthpiece, the mainstream financial press…

And with that, we move on to today’s picks.

Money Morning’s Martin Hutchinson says inflation worries will drive commodity prices soaring in 2009.

He also says emerging market demand for resources will not disappear, and supplies of metals and oil will remain tight.

These forces will also support higher commodity prices.

Martin recommends five stocks closely linked to commodity prices that should be in for a great 2009.

Andrew Snyder at Today’s Financial News says a weaker dollar, volatile stocks and inflation concerns will propel gold prices “dramatically higher.”

He has three picks to play this coming spike, including two dirt-cheap gold miners.

Before commodities take off again, Investment U’s David Fessler says those enjoying cheap prices at the gas pumps can turn these savings into big profits with the right investments.

He says beaten down car dealer Autonation (NYSE:AN) and oil refiner Valero Energy (NYSE:VLO) could get a short-term boost from low fuel prices.

Meanwhile, Money Map Report editor Horacio Marquez says retail cost-leaders such as Wal-Mart (NYSE:WMT) are thriving as recession grips the US economy.

WMT has posted strong sales growth amid a sector-wide slump.

The company is also busily expanding operations around the world.

For these reasons, Horacio says WMT should be a part of every defensive stock portfolio.

Happy hunting.

Will Bonner

Publisher,

Hidden Value

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