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Trading The High Cost Of Everything

Inflation vs. recession. Not since Joe Lewis fought Muhammad Ali has their been such a controversy over who (or what) throws a more powerful punch.

After 12 rounds it appears recession may be throwing in the towel. That leaves inflation looming large.

Of course it’s very much a consequence of the Fed’s decision to lower interest rates aggressively to defeat recession so you could say this fight was fixed.

But the consequences are serious. Now it appears higher prices are here to stay, especially those that are held captive by gasoline. As consumers deal with some rather unpleasant sticker shock how can you turn skyrocketing costs to your benefit?

According to strategic investor Dennis Gartman gold is probably the best play and he likes playing it with the gold ETF. “Gold goes up as inflationary concerns arise and the dollar gets weak,” he explains. “The trend is up right now. I’d buy on a $10 dip.”

Grains present another play on upward pressure. “The trend is from the lower left to the upper right,” Gartman says. “And I think the ETFs are also the best way to play grains." In the space he recomends iPath AIG Grains ETN (JJG) and PowerShares DB Commodity Index Tracking Fund (DBA).

Steel names may also experience some tailwind due to inflation. “The lower dollar has helped US based companies including as US Steel ,Nucor and AK Steel ,” explains Guy Adami because our steel is less expensive to overseas buyers.

Also Potash , Monsanto and Agrium are inflation plays that should work through the end of the year, according to Joe Terranova and Pete Najarian. They believe that as farmers get higher prices for their crops they will turn a large portion of the money into fertilzer, seeds and other ag products. “Buy on the dip and sell on the rip,” says Terranova. “If you see a dramatic 10% pull back in the ag stocks, that’s when I’d buy. And the story will break at some point but right now I think it remains in tact,” adds Najarian.

And if you want a more direct play on inflation Karen Finerman has two suggestions. “Get long iShares Lehman TIPS Bond fund or short the 30-year bond,” she says.

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Trader disclosure: On June 30, 2008, the day of taping, following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (BTU), (MSFT), (NUE); Najarian Owns (AAPL), (AMLN), (ANR), (NOK), (NUE), (TSO), (XLF), (YHOO), (HD); Najarian Owns (WFMI) Puts, (MER) Puts, (WFMI) Puts, (HBC) Puts; Najarian Owns (MYGN) Calls, (SLB) Calls, (WM) Calls, (WLT) Calls; Finerman Owns (GS); Finerman's Firm And Finerman Own (TIP), (FLS), (GLNG); Finerman's Firm And Finerman Own (C) And (C) Leaps; Finerman's Firm And Finerman Own (GE) And (GE) Puts; Finerman's Firm Owns (MSFT), (SUN), (TSO), (TWX), (VLO); Finerman's Firm Owns SPX Index Puts; Finerman's Firm Owns (HUN) Calls; Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM); Terranova Owns (BNI), (YHOO), (LUV), (CME), (GOOG), (SU), (INTC), (FXC), (IYT), (XLF), (FCX); Terranova Owns Dollar Index Futures

Terranova is chief alternatives strategist at Phoenix Investment Partners;; Phoenix Investment Partners Ltd. Owns (RWX), (DBC), (DBV), (IGE), (AAI), (ALK), (AMR,) (APA), BP plc, British Airways plc, (CHK), (CVX), (COP), (CAL), (DAL), ENI SPA, (FCX), (XOM), Gazprom, (HA), (HES), (HOC), (HSE), (JBLU), Lukoil, (MRO), (MUR), (OXY), Petrobras Intl Fin, Petro-Canada, (POT), (PBR), Petroleos De Venezuela, (QAN), (RJET), Royal Dutch Shell plc A Shares, (SKYW), (LUV,) (SU), (TSO), Texaco Capital, Total SA, (UAUA), (LCC), (VLO)

Other relevant disclosures:

Adami Owned (AGU) On 6/18/08: Najarian Owned (BHI) On 5/28/08

Gartman Owns (GLD); (JJG); On 6/30/08 Gartman Owned (GLD) On 6/30/08; CIBC Gartman Index Owns Corn, Gold, Copper, Soybeans; On 6/30/08 CIBC Gartman Index Owned Gold, Corn, Copper, Soybeans