Put Ideas

I recommended the above as puts Jan 6th. I then recommended closing them Jan 25th. Here's how they performed

* a 65% hit rate: 17 out of the 28 picks dropped

* 10 dropped >5%

* 5 rose >5%

* 13 barely moved (+/- <5%)

In terms of sectors, here's how I did:

RETAIL - Poor performance. This was the one sector where I warned that it would be tricky to short.

AUTO - Good performance. More wins than losses.

RECREATION - Great performance. 5 out of 7 hits

INSURANCE - Great performance. 2 for 2

OTHER - Great performance. 5 out of 7 hits.

Since I suggested closing the puts, there were reversals:

* 7 stocks dramatically improved their performance (i.e. shifted from negative to positive territory)

* 4 stocks went dramatically worse

In going forward, I remain concerned about the short term impact on consumer spending of

1. Tax season (2 months and counting)

2. The Bush economic stimulus package

3. Lower interest rates

Tax season tends to reduce free cash. The Bush proposal will boost free cash. And lower interest rates will both boost new spending and enable debtors to re-finance and avoid defaults.

All in all, this will give retailers a 1 quarter boost. But I am focused on the longer term - sales are dipping. In fact, any company whose stock hsan't dropped yet is likely to drop soon.

So let's re-visit.

RETAIL - I think it is only a matter of time. So buy some puts. None of these stores will have sales strength - some retrenching will protect margins, but that won't do much. of these M and ZLC are my favorites to buy puts.

SKS - Staying strong due to buyout rumors and some sales strength. I'd beware of this one.

M - Sales are hurting and they are closing stores. Just a matter of time.

SHLD - Like Macy's, Sears is hurting. Recent moves (layoffs) will improve margins but sales will suffer. They are going to be hit by the Blue Collar Recession

ZLC - Sales dropped 7%. Another BCR favorite. They have yet to reaally drop.

RSH - A forward P/E of 22? With falling sales? No way. And Best Buy is suffereing, so expect some price wars. BCR favorite. Still room to drop.

HD - Home Depot is retrenching fast, but not fast enough. Things will just get worse.

PIR - This store needs to go bankrupt. They are showing margin improvements, but dropping sales will continue to hit earnings

AUTO - Need to hit this one hard! No good news here. All majors are reporting bad January sales. I don't think all the bad news is out, either. of these, HOG and KMX are my favprites to short.

HMC - Only a 7% drop?

HOG - Margins are slipping. I expect US sales to disapoint

TRW - This one is tricky. US made auto products look very cheap. I'd stay away for now.

AN - Missed earnings but nothing happened. The CEO of Sears is acquiring their shares. Weird.

KMX - Analysts expect growth in the used car market. Not likely.

RECREATION - Word has yet to hit these companies, but the Summer will show the problems.

I think CCL and MGM are headed for the biggest busts. LTM is also a good put target.

INSURANCE - I think AIG and PRU will still get chopped. Folks will be cutting back even more. I'd also throw in AET.

Buy puts 10% below the recent price and expiration in January 09.