shorting VAR, CBRL, CAKE

We feel the current market bounce may yet have some life, perhaps even with a few days of stunning rallies in the coming week or two, but we do not wish to be late in replenishing shorts as we believe a new and severe downturn in the markets will begin soon.

Should markets continue to rally in the near term however, we'll have more attractive entries on some short targets we're tracking, while currently we like the short entries diarized today regardless of near-term market moves.


First, regarding Varian Medical Systems Inc. , VAR, let us say we like the fundamental growth and note the medical/biotech sector is generally rising fast at present. We respect the products and business model and believe the company will do well over time, however the recent spike in share price reveals what we feel is an overbought condition which, should general markets turn lower soon as we have forecasted, will likely be corrected with perhaps a 15% drop thus we short VAR which last traded at $64.97


The next two ideas we feel are less speculative, given the current economic conditions, credit troubles at the personal and household levels, North American unemployment data, and our feelings on the general market direction in the coming months.

CBRL Group, per the business summary found at this link, "operates restaurants under the Cracker Barrel Old Country Store name. Its restaurants offer breakfast, lunch, and dinner menus featuring home-style comfort foods. CBRL Group's retail stores offer various decorative and functional items, such as rocking chairs, seasonal gifts, apparel, toys, music CDs, cookware, old-fashioned-looking ceramics, figurines, and a range of other gift items, as well as various candies, preserves, syrups, and other food items. As of October 2, 2007, it operated 565 full-service Cracker Barrel Old Country Store restaurants and gift shops located in 41 states. CBRL Group was founded in 1969 and is headquartered in Lebanon, Tennessee."

To us this model doesn't seem likely to prosper in the coming economic environment, the restaurant itself seems to have saturated its potential market, and theme restaurants are not generally long-lived in any case. The company reports earnings on September 16th, and we are not bullish on the share price going much higher given the stock's recent 30% rise already to an established down-trend which goes back to early 2007 thus we short CBRL which last traded at $28.81


In Cheesecake Factory, CAKE we have a down-trend stretching back to early 2006. We are perhaps late to this trade, but we don't believe so given that the stock is up roughly 25% over the past few weeks and considering the earnings trend and sales growth figures reported here.




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