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Tax Cuts: Top Trades from 'Fast Money'

Catherine Holahan of CNBC's "Fast Money"
Tuesday, 7 Dec 2010 | 11:37 AM ET

Expect the markets to rally on Tuesday as investors react to a tax compromise worked out between President Barack Obama and Congressional Republicans that extends the Bush-era tax cuts, said two "Fast Money" traders.

Being as the news is expected to lift the U.S. economy, Tim Seymour of EmergingMoney.com and Brian Kelly of Kanundrum Capital looked at ways to play it.

Seymour is banking that commodities — particularly crude — will reach new highs on what he thinks is another U.S. stimulus. So, he's taking another look at the solar industry.

“It is all very commodity supportive,” said Seymour, adding that crude could soon challenge $100 per barrel. “The solar trade is worth another look.”

Meanwhile, Kelly is watching the Treasurys and the Ultra Short Treasury exchange-traded fund in particular. Although Federal Reserve Chairman Ben Bernanke said in a televised interview Sunday that the central bank may expand its bond purchase program beyond the $600 billion announced last month, Kelly said the central bank might not buy as many bonds as believed.

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“I think that could be a hidden trade in that Bernanke doesn’t have to do as much work,” Kelly said. “QE2 may stop at $600 billion and it doesn’t have to go to a trillion or two trillion.”

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