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May 16, 2001

Gas Prices Will Pump Up Inflation Fears

Wall Street's spinmeisters are out in full force today, trying to downplay inflation fears -- but nobody can mask the fact that gas prices have balooned 5% in a single month, and energy prices had the biggest gain since the dead of winter in January!

Americans can't ignore the huge chunk of cash that rising gasoline and other energy prices take out of their wallets each month. And, at the rate gas prices are skyrocketing, consumers aren't going to be able to afford to keep shopping.

Retail sales are already showing signs of weakness. To lure shoppers into their stores, retailers slashed clothing prices by 1.3% in April -- the biggest drop in 52 years! That may be good news for consumers, but it means lower profits and disappointing earnings reports for shareholders. Plus, as consumer spending slows under the stress of unemployment and high gas prices, retail stocks will fall through the floor.

As we have seen in the past, higher energy prices will also squeeze profits. The rise in oil and gas prices last year was the first domino to knock down company earnings. This year, higher energy prices will continue to pound stocks further into the ground.

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