The Secret of Money-Doublers They Don’t Want You to Know
#3 Amazon.com (AMZN) Calls and SPDR S&P Retail (XRT) Puts
By Michael Shulman
I was ripped apart for predicting Black Friday would be a bust compared to expectations — and it was. Holiday spending was anemic, and 2010
will be the year people wake up and realize that the “New Frugal” is upon us — permanently. (See 10
Reasons the Economy Will NOT Recover in 2010.) U.S. retailers are typically well-managed, but they cannot fight falling demand and maintain earnings
and their stock prices throughout 2010. Discount retailers will do well while higher-end retailers will struggle.
Another trend that will accelerate in 2010 is cost disintermediation, which, in plain English, means shopping online. The winner will be Amazon.com
(AMZN). I buy everything from books to coffee to Advil on Amazon, and I don’t pay sales tax or
shipping charges (one-time yearly charge of $79). Barring a market crash, AMZN is a long for the foreseeable future, so buy AMZN call options.
With reduced consumer demand and an ever larger part of that demand being satisfied online, another top trade of 2010 will be SPDR S&P
Retail (XRT) puts. The XRT is a broad-based retail ETF, but online retailers comprise a very small
portion of the stocks this ETF tracks. Do not buy the XRT puts now, as the charts are not favorable. But if you’re patient, I think you’ll find this
to be a very profitable trade in the new year.
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