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Two Ways To Play: Gold in Them Thar Bailout?


Strengthen your portfolio in good times and bad.

According to Bloomberg, Federal Reserve Chairman Ben Bernanke said the Fed will keep using "all of the powers" necessary to keep the financial system functioning shortly after Congress passed the $700 billion rescue bill.

Bernanke said in a statement:

"The legislation is a critical step toward stabilizing our financial markets and ensuring an uninterrupted flow of credit to households and business. We will continue to use all of the powers at our disposal to mitigate credit-market disruptions and to foster a strong, vibrant economy."

This came today after payrolls plunged in September and the unemployment rate rose to 6.1%. Now, Fed funds futures are pricing in a 78% chance that the Fed will lower its fed funds target by 50 basis points to 1.50%.

From the Bull Pen: It's been a tough market for bulls and bears. Even gold stocks took a huge beating yesterday. But Bernanke's statement basically spells out the argument for the yellow metal. Those that remain bullish can use yesterday's selloff as an opportunity. Consider the ETF (GLD).

From the Bear Cave: Bears need to be cautious that if rumors of global rate cuts do come to fruition, we could see stocks melt up in the short term. Then, a rally in the homebuilders ETF (XHB) could present a downside opportunity.
No positions in stocks mentioned.

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