Last week turned out to be a mixed bag for everyone. Short-term interest rates were up, the stock market was strong and up, gold was up, the dollar was down and long Treasuries performed well in the face of everything, including another increase in the semoney supply.

Gold and the stock market continue to amaze one and all. The performance in gold reflects legitimate purchases of worried investors, and not speculators, as it takes millions of dollars to move the price of gold.

Perhaps the stock market is looking across a mild recession to better times in a couple of quarters. Time will tell, but the equity market's performance in the face of higher interest rates, etc. . .is remarkable.

It appears the federal funds rate (the rate member banks of the Federal Reserve system charge each other for the use of their excess reserves) is now at 11 1/2 percent. The prime rate (the rate commercial banks charge their top customers for loans) is now 13 to 13 1/4 percent and the discount rate (the rate the Fed charges its member banks to borrow funds) reached a new high of 11 percent.

At this point the Fed is trying to slow down the demand for credit by raising the price of money. Money is available although at a high cost to the borrower. However, with inflation running 13 to 14 percent it is cheaper for businesses to borrow money because on an after-tax basis a negative cost is realized by the business. Theoretically rates should rise until the cost of money is a real positive burden on the borrower.

Last week a 9-month, tax-exempt note guaranteed by the state of Pennsylvania returned lucky investors 7.02 percent of tax-free income.

Coming this week are two Treasury offerings that all small investors should consider. On Tuesday a 2-year note will be offered in minimum denominations of $5,000. On Wednesday a 4-year note will be sold in minimums of $1,000.

It is quite possible that the 2-year note could return investors 10 percent especially if the market sells off in the next couple of days. A guesstimate on the 4-year would be 9.50-9.60 percent.

Subscriptions for the Treasuries may be entered no later than 1:30 p.m. on the aforementioned days at the U.S. Treasury in Washington, or any of the Federal Reserve banks or their branches. A non-competitive bid should be entered for any investment under $1 million.