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Fast Funds

Tom Lydon of ETFTrends.com tells us he's expecting some big changes in the year ahead, and as a result investors may want to make big ETF moves!

Lydon tells the desk he sees one of two possible scenarios playing out next year.

The first is inflation and higher interest rates largely due to all the stimulus money going to work. As a result he sees unemployment going down and economic growth going up.

Scenario #1: Inflation & Higher Interest Rates

-Buy Powershares Dollar Bull ETF (UUP)

-Buy Short 20 YR Treasury ETF (TBF)

-Buy Vanguard Short-Term Bond (BSV)

- Buy Consumer Staples ETF (XLP)

Source: Tom Lydon, ETF Trends

All of these ETFs should do well in a higher interest rate environment, explains Lydon.

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The second scenario is a bit more ominous.

Lydon foresees the possibility of higher prices without much economic growth, a condition known as stagflation. It was something prevalent in the 1970’s as oil price rose dramatically while unemployment remained stubbornly high.

Scenario #2: Stagflation

-Buy SPDR Gold Shares ETF (GLD)

-Buy iShares Barclays TIPS Bond ETD (TIF)

- Buy Vanguard EM ETF (VWO)
- Buy iShares EM ETF (EEM)

Source: Tom Lydon, ETF Trends


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Trader disclosure: On Dec. 28th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders

For Steve Grasso:
Grasso owns (AAPL)
Grasso Owns (BAC)
Grasso Owns (C)
Grasso Owns (CSCO)
Grasso Owns (PFE)
Grasso Owns (WMT)
Grasso Owns (V)
Stuart Frankel is Short (QQQQ)

For Steve Cortes:
Cortes Owns (GD)
Cortes Is Short (TOL)
Cortes Is Short (PHM)
Cortes Owns (SPX)
Cortes Owns US Dollar
Cortes Is Short Gold

For Pete Najarian:
Najarian Owns (LLTC) calls
Najarian Owns (MS) & Short (MS) Calls
Najarian Owns (PFE)
Najarian Owns (STEC) Call Spread

For Joe Terranova:
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.

For Jeff Harte:
Sandler O'Neill Has Received Compensation from (C)
(C) Is A Client Of Sandler O'Neill

For Steve Levenson
Stifel, Nicolaus & Company, Inc. makes a market in the securities of (ALOG)
Stifel, Nicolaus & Company, Inc. expects to receive or intends to seek
compensation from (ALOG)
Stifel, Nicolaus & Company, Inc. makes a market in the securities of (ASEI)
Stifel, Nicolaus & Company, Inc. expects to receive or intends to seek
compensation from (ASEI)

For Tom Lydon
Lydon's Clients Own Shares of (TIP)
Lydon's Clients Owns Shares of (VWO)
Lydon's Clients Own Shares of (EEM)
Lydon's Clients Owns Shares of (GLD)

For Heath Terry
FBRCM acts as a market maker in (ATVI)
FBRCM acts as a market maker in (ERTS)
FBRCM acts as a market maker in (THQI)
FBRCM acts as a market maker in (TTWO)



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