A handful of links worth checking out this weekend.

We have discussed before the possibility that megacap stocks are undervalued relative to small caps. breakingviews in the Wall Street Journal echoes this observation.

Not since the grizzly aftermath of the 1970s “Nifty Fifty” boom have large-cap stocks been so cheap relative to the market. Once again, investors appear to be punishing America’s biggest companies for their recent disappointing performance.Yet these stocks are attractive for reasons other than valuation. They tend to be more stable than smaller companies during economic downturns. With the domestic housing market wobbling and emerging markets vulnerable to a China slowdown, the defensive qualities of U.S. large-caps may soon return to favor.

The Capital Spectator is disturbed by the rise in “core inflation” and the fact that is above new Fed chairman Bernanke’s expectations for inflation stability.

The new new game with inflation has become watching core CPI, and watching closely. It’s already above Ben’s comfort zone, and that’s no aberrant trend. Core CPI’s annual rate of change has been at or above 2.0% each and every month in 2005. The only question is what will Ben do, and when will he do it? Perhaps we’ll hear the argument that the core CPI doesn’t really reflect the “true” rate of inflation.

Mark Hulbert in the New York Times notes that despite its impressive track record for forecasting, the yield curve has come into question of late. While the yield curve has flattened of late some are skeptical that it has any true statistical ability.

So what is there to debate about the yield curve, given its apparently impressive forecasting record? One reason to be tentative, many economists say, is that monetary conditions have changed markedly. In comments echoed by several other economists interviewed for this column, Mr. Goldstein speculated that if a recession followed an inverted yield curve today, it would be for reasons other than those that led to economic slowdowns after the curve inverted in previous decades.

Lewis Braham in BusinessWeek thinks do-it-yourself investors can create long-short hedge fund like returns with the use of good old fashioned mutual funds. While there are some technical reasons why it is not exactly the same, it does at least represent some interesting thinking.