With shares of Altria up by nearly four percent yesterday on favorable tobacco-suit news, the Dow Industrials still managed to close down on the day. Go figure. Sage observers attributed the market’s skittishness to investors’ concern that a supposedly robust economy might kick inflation into a higher gear. Indeed, capacity utilization in November rose above 80 percent for the first time since August.  But is this sufficient to have caused jitters in the manic-depressive herd on Wall Street whose spirits rise and fall each day according to what that day’s news might faintly imply for monetary policy?

Get a grip, guys! Instead of worrying about how every mote of “good” economic news threatens to turn the Fed less stimulative, why not try to see the dark side of things. For instance, the scary stuff about capacity utilization could just as easily be seen as a ramping up of inventory by the likes of GM and Ford. If that’s the case, then both companies could be in bankruptcy within three years -- and wouldn’t that be a wake-up call for those stiffs at the Fed! Since the incoming chairman is already on his guard against deflation, a crisis in the auto sector could bring on – dare we say it? – sharply negative real rates.