Wall Street just can't get enough red flags these days.

Almost everywhere investors turn, [selective] signs of inflationary pressures make it less likely the Federal Reserve will pause from two years of interest rate increases.

Stock investors have tied themselves in knots worrying about rising energy and commodity prices, fearing these will force the Fed to stay on the inflation warpath.

Nevermind the fact that THEY are the ones bidding up the price of commodities because THEY are awash in cash and they DO NOT trust the dollar (rightly so) - so they pour all their cash into commodities.

That aside, Wall Street's insatiable greed makes bondbuyers - who believe it or not are even more greedy - green with envy. Bondbuyers then demand that the Fed increase interest rates so that they can bleed some of those profits away from equity investors.

Isn't infighting wonderful? They deserve eachother. And if it ended there, it would be poetic justice. But, it doesn't. There is significant collateral damage among working Americans in this civil war among the greedy classes.

Because equity investors stand helpless before the Fed and bondbuyers, who reign supreme, they pick on the only people they CAN pick on - workers.

[L]abor costs -- the biggest cost of doing business -- have largely been on the back burner, as wage gains by U.S. workers remained relatively tame. Until now.

Aside from being utter bullsh*t - wages have been stagnate for years - the only reason they consider labor costs as the biggest cost of doing business is because, at least for now, human beings cannot be treated entirely like commodities.

For the first time since the recession about five years ago, U.S. wages are catching up with inflation as the unemployment rate stays low and the work week lengthens.

Uh, excuse me, braniac. But, if the work week is lengthening, that means workers earn more BECAUSE they work HARDER, not because 'wages rates are increasing.'

"At a 4.7 percent unemployment rate, U.S. workers do have the leverage to ask for higher wages or benefits, and that's part of the problem," said Marc Pado, Cantor Fitzgerald's chief U.S. market strategist.

Americans will do good to read that sentence over, and over, and OVER again.

The real terrorists are not cowering in the mountains of Tora Bora, but towering in the boardrooms of Wall Street and London.

Case in point: The latest monthly productivity report from the Labor Department showed hourly pay rose at a 5.7 percent annualized pace in the opening three months of 2006, more than double the 2.7 percent pace in the previous quarter.

First-quarter unit labor costs -- a key gauge of profit and price pressures monitored by the Fed for clues on wage inflation -- increased at a 2.5 percent annual pace, more than economists had predicted at the time.

What a crock of sh*t. Even if I believed these numbers - which I don't - they prove absolutely nothing since 5.7 percent annualized increase is not nearly enough to keep pace with the increased cost of living for Americans. Remember, their stinking inflation index EXCLUDES the price of food and energy!

Furthermore, employees are working longer each week than they have in nearly four years, a detail often viewed as a sign of labor scarcity and a signal of higher pay rates.

See. I told you. Workers are working harder than ever. But, that is neither a sign of labor scarcity nor a signal of higher pay rates, unless of course you're brain dead or you're trying to scorch the earth.

WAGES OBSTACLE FOR STOCKS? [!!!]

Analysts say mounting wage pressures are poised to squeeze corporate profits and create a new headwind for U.S. equities, which have enjoyed 16 consecutive quarters of double-digit earnings growth.

At greatest risk are small-cap companies, a sector that has defied repeated predictions of its demise, consistently outperforming larger peers for more than five years.

"As U.S. compensation costs rise this year, many small- and mid-cap firms will have little choice but to pay up, trimming revenue and profit margins," said Joseph Quinlan, chief market strategist at Banc of America Capital Management.

Others, who have sufficient bargaining power over their helpless employees, will continue to exert enormous pressure on them to work harder for the same or fewer benefits.

When the pool of available workers was large and wages stagnated, small caps didn't have a problem competing with big caps for new hires, but the relatively low unemployment now has given workers more bargaining power and put small companies at a disadvantage, he said.

Now, does that sound like America the beautiful to you?

Wakeup people, we're at WAR and the enemy's within.