My letter last week on Fed Governor Bernanke's speech drew a great deal of comment from readers. I still read every one of your letters to me, even though I cannot answer them all.

Bill Gross of Pimco fame also weighed in on the implications of the speech this last week. Because I think this speech represents a defining moment for investors and our economy, we are going to touch upon points of it again, but from a different angle. I shall attempt to show why I disagree with some of the conclusions made by Gross.

Today we are going to examine a war going on in the central banks of the world. The central banks of the world continue to do what is necessary to make their respective nation's products attractive to the American consumer, doing the best they can to make their currencies cheap. There are increasing calls for the US to let the dollar fall as a weapon in the war against deflation. Both can't happen at the same time. You don't want to let your investments get caught in the crossfire. There will be casualties.

I am working later than usual on this letter, as thinking through the implications of a number of reports I have read this week is giving me some cause for concern. I am somewhat envious this evening of Roman soothsayers. I think it would be easier to analyze sheep entrails than the conflicting economic data coming out this week. At least we would have lamb chops afterward.

As I predicted several months ago, the dollar is beginning to show signs of real weakness against the euro and a host of other currencies. It has the potential to happen even faster than the gradual process I originally thought it would. But what does it mean for you and your investments? Today, we are going to look at some of the implications of a weaker dollar, whether or not it means inflation or, even worse, stagflation is in our future and what the implications of a weaker dollar will mean for the Muddle Through Economy. As promised last week, we will take a pass at what all this means for interest rates, as well, so we have lots to think about.

* I must correct an egregious typo in last week's letter. (And no, it was not my awkward use of prepositions.) I wrote: The economy will recover in the second quarter, and indeed it may be the 4th quarter before we see a turn-around. The software gremlins somehow removed the word NOT from that sentence. It should have read: The economy will *NOT* recover in the second quarter, and indeed it may be the 4th quarter before we see a turn-around.

Big difference, and I apologize for that confusion, and thank the many readers who pointed it out.

We are finally getting the bear market rally I have be writing about and hoping for. At least I think it is a bear market rally. Those who are buying this run must see something else in their data than I do. Let me bluntly state my case as to what you should do.