Ouch! When it comes to inflation, I figure all those experts who say it’s low (supposedly hovering around 2%) and view it as a nonevent must be living in Lalaland.

Speaking for myself, I’m inundated by inflation. Granted, the Producer Price Index in March came in at 0.5%, the slowest pace in four months. But then again, the Consumer Price Index in March topped consensus estimates with a 0.4% reading. In any event, over the past six months higher prices have been beating me up all over the place. For example:

* A large container of popcorn at the local theater has climbed to $3.75 from $3, a rise of 25%.

* A slice of pizza with mushrooms at the local pizza joint has jumped to $2 from $1.50 (33%).

* Super unleaded gas at the Mobil station has risen to $3.19 from $2.70 a gallon (18%).

* Having a shirt cleaned and pressed at the laundry has gone up to $2.35 from $1.75 (34%).

* My monthly Time Warner cable TV bill has risen to $100.18 from $81.21 (23%).

* A glass of Chianti at a local Italian eatery has ballooned to $10 from $7 (43%).

These half-dozen price hikes amount to an average increase per product and service of nearly 30%, more than 14-fold the supposed inflation rate.

Probably without too much thought, I could easily add another 20 examples (such as my electricity, maintenance, and medical bills and the cost of a taxi and mailing a letter) – and I’m certain you could, too. In any event, the message is clear: Government statistics notwithstanding, inflation, as a cost of everyday living, is going through the roof.

At the same time, though, a decidedly contrary message – inflation is contained! – is what we repeatedly hear and read from one Federal Reserve governor and one economist after another.

To which Michael Larson, associate editor of the monthly newsletter, Safe Money Report in Jupiter, Fla., responds: “Baloney! What are they smoking?” His view: The Fed is losing the inflation battle, far higher interest rates lie ahead, and investors should look to profit from this rising trend.

Arguing his inflation case, Mr. Larson notes that anyone with a quote screen can watch the monster rallies in oil, zinc, copper, aluminum, gold, and sugar. And anyone who pays the bills, he adds, can see the surging cost of electricity, college tuition, and groceries. Likewise, he points out, no one at the Fed could possibly miss the fact that money supply is ballooning out of control.

“Yet,” Mr. Larson goes on, “we’re supposed to believe inflation is ‘well-contained,’ long-term bonds are safe … and the whopper – we’re expected to believe the Fed is ‘just about done’ hiking interest rates.” In effect, he strongly challenges Wall Street’s belief that the Fed is likely near the end of its current credit-tightening cycle, as suggested by the recently released notes of the Fed’s March meeting.

To capitalize on his interest rate and inflation concerns, he recommends a number of basically riskier investments, among them two funds that are bets on declining bond prices and the put options (a bet on falling stock prices) of two companies heavily involved in the housing industry.

One fund is the Rydex Juno Bond: This “inverse” bond fund goes up in value when long-term bond prices fall. It’s designed to rise 10% for every 10% drop in the price of long-term Treasury bonds. The other is Pro-Funds Rising Rates Opportunity Pro-Fund. Another inverse bond fund, it’s a bit more leveraged and is designed to appreciate 12.5% for every 10% drop in bond prices.

While higher rates are a boon for some funds, they’re a disaster for many stocks. Two in particular, according to Mr. Larson, are mortgage lender Golden West Financial and homebuilder Lennar Corporation. Lennar recently reported a paltry 3.5% gain in its first-quarter home orders, its worst result since late 2004. The company also forecast full year earnings short of analyst estimates. Meanwhile, Mr. Larson notes, Golden West’s loan originations are slumping, while its loan delinquencies are rising, a toxic combination, he says.

Given his inflationary views, Mr. Larson believes precious metals, despite their big run, will remain an outperforming market force. In this context, he favors U.S. Global Investors World Precious Minerals Fund, silver and gold producer Coeur d’Alene, Australian mining giant BHP Billiton, a major coal producer, and streetTRACKS Gold Trust, an exchange-traded fund that tracks the price of gold, and Pan American Silver.

Meanwhile, a professor of business at the University of Maryland, Peter Morici, thinks the 0.4% rise in the CPI and surging energy prices mean the Fed will likely be forced to seriously weigh further rate hikes beyond the expected May 10 boost to 5%.