Where to put cash in a rising interest rate environment

Interest rates are about as low as they're gonna get right now. When the economy starts to improve (I'm not sure if that's started to happen yet), the Fed will start rising rates again. Now is the time to figure out what does well in a rising rate environment. Here are some ideas:

Commodities- Gold, silver, oil, natural gas

TIPS (Treasury inflation protected securities)- These are bonds that are issued by the government that adjust their interest rates for inflation, which will also be a natural consequence of all the dollars we've been printing recently. Premium Ginnie-mae paper are also good in a rising rate environment. There's also no credit risk because Ginnie's are a direct obligation of the government.

Short-term paper-- won't be affected too much when rates rise because you're holding them to maturity anyway.

High quality preferred stock- Preferred stock is like a hybrid between a stock and a bond, as it trades like a stock, but it pays you interest. A lot of the banks issue preferred stock that pays 8-9.5%. You're also a little bit higher up in the debt structure, so if a company goes bankrupt and the common stock gets wiped out, preferred stock holders might still get something. Make sure you buy the higher up trust preferreds as you have a better chance of getting something back if the company goes belly up. You can also get preferreds with adjustable or floating rates that go up as rates go up.

Bond funds- There are some great bond managers out there that do a great job making sure you get a decent return in all types of environments. Bill Gross runs the Pimco Total Return fund, which is the largest, is one of the best. They've even managed to be up a couple percent last year and you also get good interest. Other good bond funds are run by Franklin, Oppenheimer, Lord Abbot, and Van Kampen.

Finally, Cal G.O.'s (CA General Obligation municipal bonds)- G.O. Muni's are issued by states, counties, hospitals, school systems and are backed by the full faith and credit of the municipality. There is a great opportunity for Californians to buy Cal GO's because they sold off in the great sell-off of last year and Cali is in bad shape. People must realize though that the state HAS to pay off it's bond debt according to it's constitution. They would have to not pay police officers and fire fighters before they default on their own debt, therefore you're getting a good spread right now (not as good as earlier in the year, but historically still really good) You can get 5% interest and that's tax-free!!

Let me know if you have any other ideas. Leave comments!!

Ivan