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Two Ways To Play: Interest Rates Get Interesting


Strengthen your portfolio in good times and bad.

Bloomberg reports Richmond Federal Reserve President Jeffrey Lacker is adding to speculation that the Fed may begin lifting interest rates later this year.

In a speech today in South Carolina, Lacker joined his cohorts, saying downside risks to economic growth have "diminished appreciably" in recent weeks and reversing the interest rate cuts make "eminent sense."

Earlier this month other Fed members made similar comments that the risks to the economy have eased. Analysts believe the Fed is more concerned now that the recent surge in energy costs and food could become rooted in public expectations, which would then further accelerate prices.

The next FOMC meeting is scheduled June 24-25. Fed Funds futures imply a 72% chance the Fed will leave interest rates unchanged but also a 52% chance the Fed may increase rates a quarter percent to 2.25%.

From the Bull Pen: The gold ETF (GLD) was a buy off its 200 DMA. Bulls can continue to look to the yellow metal for an upside play as inflation symptoms continue to negatively affect the economy.

From the Bear Cave: Given a stagflationary environment, Bears might find an upside play in the TBT, the Ultrashort Lehman 20+ year Treasury ETF. This fund seeks investment results that correspond to twice the inverse of the daily performance of the corresponding Treasury Bond.
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