As the SPDR changes its plea of optimistic guidance just a few short months ago to warning of hard times ahead, Adam Lass draws Taipan Daily readers' attention to areas where they can still capitalize on this loss.

Damien Hirst creates grotesqueries. Grand statues of pregnant mothers’ intestines… drowned sheep in tanks of blue water… corpses in full wedding regalia lying under a table.

His conflations of birth, love and death have made him the darling of the art world in recent years. As aberrant as it might seem to place a diamond-covered human skull in the lobby of an office building, this sort of odd behavior is actually quite the norm at the peak of an inflationary bubble.

After all, it makes about as much sense to pay $3 million for a “Neimanesque” painting of four rotting skulls as it does to pay $3 million for a two-bedroom condo on Manhattan’s lower West Side. Why the heck not, when the money itself has become as meaningless as the art’s supposed aesthetic or the cachet of the address.

A Chill Breeze…

And then a crash blows through, bringing a bracing chill to the public’s fevered conscience. Suddenly, the idea of spending dollars as fast as one can possibly manage seems remarkably foolish.

And so it is that last week, auctioneers to the overly rich, Phillips de Pury and Co., were completely unable to peddle off Hirst’s “Beautiful Artemis Thor Neptune Odin Delusional Sapphic Inspirational Hypnosis Painting.” In fact, an additional 20 lots enticed no bids whatsoever – this despite all the champagne staffers plied attendees with.

This sudden grim turn is hardly unique to P.d.P’s. Christie’s reports that it was unable to move an equally grotesque self-portrait by Francis Bacon that had been expected to pull down some $40 million.

The Awful Grip of Reality

If I could tell you that this is all simply symptomatic of a long overdue upper-class comeuppance, I surely would. Unfortunately, while this crash may have started in Downtown Manhattan, it is now spreading its clammy fingers throughout the global economy, sparing neither high nor low.

Just last week I was perusing my Bloomberg feed and came across an article describing the alarming increase in shoplifting and pick-pocketing... by elderly Japanese retirees. According to Japan’s Ministry of Justice, the number of petty thefts by this suddenly-bereft cadre has doubled in 2008.

Chuo University’s Masahiro Yamada credits the spike to anxiety over increasing lack of assets and a failing social net. And this in a society famed for its familial loyalty and massive savings rate! One can only imagine the sort of future we have to look forward to here in the States.

High Anxiety

We are certainly becoming ever more anxious. Recent polls put the current White House occupant’s approval rating in the low 30s. And The Reuters/University of Michigan Consumer Sentiment Survey is pegged at a 28-year low for the second month in a row.

And for those of you who dismiss such surveys as “utterly disconnected from reality,” I must point out that this one has found alarming traction in the “real world.” Retail sales put in a record breaking collapse in October. Nor was this 2.8% drop but so unique. In fact, sales have fallen in each of the past four months, the first such instance of prolonged retail failure since we began keeping track in 1992.

Needless to say, many of the retailers that comprise the Standard and Poors Consumer Discretionary SPDR (XLY: NYSE) have recalled their more optimistic guidance of a few short months ago, and are now finally warning of hard times ahead.

Capitalizing Fear and Pain

For some, this admission is rather late in coming, seeing as how the XLY has already cut itself in half over the past five months. Fortunately, regular readers of both this and my WaveStrength Options Weekly (WOW) column have been completely prepared for this blow.

Here, I have begged folks for the better part of a year to protect themselves by purging these stocks from their portfolios, while in WOW, I armed readers with put contracts against the weakest players that have garnered gains of approximately 1,873%.

It is NOT too late to do either. First of all, the retail stocks as a whole could still easily cut themselves in half again, as we move through the most “anxious” holiday shopping season in recent memory.

Beyond that, you can capitalize this loss simply by buying a mid-dated, at-the-money put against the XLF itself. My calculations show that a contract of this nature can expect to gain $50 for every additional dollar the retail ETF loses.

Heck, with the gains you might make, you could even buy that dreadful Hirst painting of the skulls and all. And probably at a marked discount to boot.

Sincerely yours,

Adam

P.S. According to a recently-released government report, consumer spending has declined at the fastest rate in 28 years… just another aftershock from today’s credit crisis. And things will only get worse.

Join Taipan Daily’s Justice Litle along with editor Zach Scheidt for Taipan Publishing Group’s new Emergency Web Summit to learn how you can protect yourself against this consumer credit crisis. The summit airs on Friday, November 21st at 11 a.m. Eastern Time, and in it, Justice and Zach will discuss important questions about this credit shockwave and what it all means to you… plus they’ll introduce you to new ways to profit from the credit crisis for potential triple-digit gains.

You really shouldn’t miss this opportunity. The summit begins at 11 a.m. this Friday, the 21st… and it’s absolutely FREE to you. But you must register now.