Fed funds is already pricing in a 25 point hike in May and another 25 in June with 150 by year end. So while i agree with you that rates will certainly rise significantly over the next year, its pretty much priced in.


About your trade idea, oil prices have risen in anticipation of Iraq. However, the situation is a bit different from last time. First, Iraq's contribution to the world oil supply is fairly small and more importantly there is no threat to the Saudi oil supply(which was the real reason why oil spiked prior to the last gulf war). Still if tensions escalate, there is a very good chance that oil will rise in the short term.


Being short bonds and stocks is a very interesting play. Up to now, the two have been negatively correlated so that kind of trade would be a wash but we may now be looking at a regime shift in which the correlation will become positive. This would happen if confidence in the fed were to fall, especially with regard to inflation(which is a real risk since Greenspan's attempt to talk down the strength of the economy and hence bring down the long end of the curve has failed in the face of very strong US data).


But i still think the best trade idea is to be long investment grade corporates and short equities. Corporates are still suffering from Enron aftershock while equities have fully priced in a recovery.