The Federal Open Market Committee is meeting today and tomorrow. Fed watchers expect the committee to raise the federal funds interest rate to 1.25% from a 46-year low of 1%. Look for the announcement Wednesday afternoon at about 2:15. Also, tonight, Fed chief Alan Greenspan competes for a new job on NBC's Last Comic Standing. (OK, we're kidding about that, but we think Al could win.)

In today's Motley Fool Take:

Amazon Fights Back


Alyce Lomax

(TMF Lomax)

Last night, AMZN) responded to the lawsuit that Toys "R" Us(NYSE: TOY) whacked it with last month -- by launching a countersuit, The Wall Street Journal reported. Amazon asked the Superior Court to end the relationship for $750 million in damages. The upshot is, Amazon tattled on Toys "R" Us, accusing it of not holding up its end of the deal. Now, it sounds like Toys "R" Us could lose important Internet real estate.

For a lawsuit on kids' stuff, there was lots of strong language. No, not that kind of language, but there were fighting words, at least. According to the lawsuit provided by The Wall Street Journal, Amazon cited Toys "R" Us' "chronic failure... to meet contractual obligations," and added, "Without guaranteed selection and high in-stock rates... cannot hope to maintain a 'best-of-breed' online store for toys and games and baby products that can win customer loyalty and compete with both parties' largest competitors, such as Wal-Mart."

The deal was originally penned in 2000, when the emerging online strength of Amazon -- a longtime Motley Fool Stock Advisor pick -- helped make Toys "R" Us king of toys on the Internet, even though it was getting a real-world walloping by discounter Wal-Mart(NYSE: WMT).

Now, Amazon says that Toys "R" Us often didn't have all the top merchandise available for delivery to customers, and that terms of the agreement allowed it to seek such items from other merchants. Indeed, lacking popular toys, especially during the key holiday season, would have endangered both companies' hold on online shoppers.

It also accused the toy retailer of not offering its wares at low enough prices, a roadblock for Amazon, as it considers itself an Internet discounter, and that's one of the attributes that made it popular to begin with.

It seems a shame that just when Toys "R" Us may be looking a bit better, and coming up with some exciting ways to woo customers back to its bricks-and-mortar stores, this skirmish is under way. Toys "R" Us could use the present environment to better its circumstances, considering many of its competitors are currently crippled or out of business.

However, should the agreement between the two companies indeed terminate, there's the danger that both would cede the online toy business to their discount rivals. More than ever, it seems Toys "R" Us, which may have the right environment for a turnaround, stands the most to lose.

Alyce Lomax does not own shares of any of the companies mentioned.

Wanted: Foolish Writers

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WaMu's Whammy


Rick Aristotle Munarriz (TMF Edible)

Last summer, Washington Mutual(NYSE: WM) ran a half-page ad in The Wall Street Journal, touting not its financial services but its stock. Billing itself as "a stock that will look good on anyone" makes me wonder if beauty is in the eye of the beholder, because it certainly isn't in the eye of the shareholder.

The stock is getting hammered today after WaMu warned that a slowdown in its mortgage business will send earnings lower this year. The country's largest savings and loan is now looking to earn between $3 and $3.60 a share this year. That's well below the $4.21 a share that the company earned last year.

Higher rates are the culprit. Borrowing costs have started climbing as lenders brace themselves for the Fed's first rate hike in four years. Demand is drying up. The days of cheap financing are over. Companies like Countrywide(NYSE: CFC) and H&R Block(NYSE: HRB) that were riding the hot refinancing market are in for a cold shower.

While there may be some more last-minute scrambling by folks looking to lock in low rates before they become a distant memory, it's not as if long-term investors are hurting. Countrywide has had it so good that it has announced three stock splits over the past year. WaMu's shares haven't done much since last summer's chest-thumping ad ran, but the company did hike its dividend earlier this year.

That's important: Now that the stock is getting roughed up, it's pushing the yield up well above the 4% mark. While that may not be enough to get Income Investor readers excited, as long as the company is able to maintain its puffy payout, it's a welcome security blanket. And as far as fashion statements go, a security blanket is something that will look good on anyone.

Longtime Fool contributor Rick Munarriz did refinance his home twice over the past few years, but he's done for now. He does not own shares in any companies mentioned in this story.

Discussion Board of the Day: Cheap Air Fares

With impressive growth, JetBlue appears to have overcome the airline sector's shortcomings (see below). But it's not just JetBlue putting up a good product at a low price these days. What do you think of the other bargain carriers? Where do you find the best rates? All this and more in the Cheap Air Fares discussion board.

JetBlue's Clever Hook


Rick Aristotle Munarriz (TMF Edible)

Do you buy into the company or the sector? Clearly, most will side with the former, though it's impossible to ignore the latter. There's no denying that JetBlue Airways(Nasdaq: JBLU) is toiling in one of the most unforgiving industries. It's so dreary that Southwest(NYSE: LUV), the 20th century darling in the airline space, is trading essentially where it was five years ago.

Even Berkshire Hathaway's(NYSE: BRK.A)(NYSE: BRK.B) Warren Buffett has sworn off airline stocks after getting burned by investing in USAir -- now US Airways(Nasdaq: UAIR) -- in 1989. Joking that the air carriers have taken one step forward for mankind but one leap backward for capitalism, by Buffett's account, it has been a net destroyer of wealth.

But now you have a company like JetBlue that has had a few good years of reinventing the wheel. It has overcome its sector's shortcomings to produce respectable results and heady growth, and earn a worthy Motley Fool Stock Advisor newsletter recommendation.

After admiring the company from afar for years, I took my first two JetBlue flights this month. I was impressed. Both treks -- even a redeye on Sunday night out of the tiny Long Beach airport -- found few, if any, empty seats.

JetBlue can be contagious. I can't fathom taking another cross-country flight without the comfort of the leather seats, the legroom, the wide range of snacks, and the entertainment. That last point can't be emphasized enough. The airline offers live DirecTV(NYSE: DTV) programming; it's refreshing to see that kind of considerate opulence in a discount carrier.

JetBlue knows it, too. That's why it was a hoot to see passengers waiting to board rival carriers wince when the JetBlue boarding announcements advised passengers to grab their headsets on the way in so they could enjoy the 24 channels of televised content. Guess where those envious sky travelers will turn for their next flight? You've got to love it when a simple public terminal announcement can do the marketing work of a fleet of missionaries. One can only imagine what will happen when XM Satellite Radio(Nasdaq: XMSR)hooks up JetBlue passengers with digital radio.

Here's to higher ground.

Longtime Fool contributor Rick Munarriz can't recall eating blue potato chips at 30,000 feet before. He does not own shares in any of the companies mentioned in this story.

Quote of Note

"I want to say it gently, but I want to say it firmly: There is a tendency for the world to say to America, 'The big problems of the world are yours, you go and sort them out,' and then to worry when America wants to sort them out." -- Tony Blair

Starbucks Slims Down


Alyce Lomax (TMF Lomax)

Anybody who surmised that Starbucks'(Nasdaq: SBUX) delightful, summery Frappuccino beverages might be shutting out some health-conscious customers received a bit of good news last night. The company is introducing a new light Frappuccino beverage.

The low-fat version of the popular drink will extend only to the coffee versions -- Coffee Frappuccino, Mocha Frappuccino, and Caramel Frappuccino. (For anyone interested in a taste test, mark your calendars: Starbucks plans sampling of the new drink in North American stores tomorrow.)

Starbucks has been working hard to rope in any customers it might be missing. Last quarter, it announced a new assortment of non-coffee drinks, for "the way the other half lives" -- namely, the other half of Americans who don't break for coffee.

The company said that it's trying to draw on current trends. Data from Yankelovich Monitor points to 42% of Americans who are reducing the fat in their diets, with 33% claiming that low-calorie products influence their purchasing decisions. The new "light" version of the Frappuccino offers 30% to 40% less calories than the original, and features low-carb dieters' favorite sugar substitute, Splenda.

You've got to applaud the coffee purveyor's recent initiatives to provide something for just about everyone at Starbucks. Not to mention, recent health awareness has been a strong force for various food and drink outlets, including beleaguered Motley Fool Stock Advisor pick Krispy Kreme(NYSE: KKD) and newly health-conscious McDonald's(NYSE: MCD). (However, it doesn't hurt to mention that Starbucks has seemingly gone unscathed over recent months, while so many companies stumbled into low-carb crisis.)

One of the resident baristas on our Starbucks discussion board recently pointed out a clientele ripe for this sort of thing. These are the plentiful folks who go skim or request sugar-free syrups for their drinks, and sweeten with the yellow and blue packets, instead of going for straight-up sugar.

On the one hand, were most calorie-counting Starbucks aficionados already perfectly happy with those solutions? On the other, anyone who was planning to forego the icy pleasures of Frappuccinos during the upcoming dog days because of all the fat and sugar may be more likely to change their minds. Further, those who used to avoid Starbucks altogether because of caloric concerns might now give it another go.

In the case of Starbucks, cutting calories and sugar in a few summertime favorites could add up to a sweet, sweet deal.

Alyce Lomax does not own shares of any of the companies mentioned. She's been watching her own calories this summer, avoiding Frappuccinos and sweetening her lattes with Splenda.

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