Timeshares, that wonderful relic from the 1970s, are about as popular as disco and excessive chest hair this year. Thanks to the recession, timeshare sales are forecasted to suffer their worst fall since this vacation option came on the scene more than 30 years ago. The plunge could reach 30 percent, according to Howard Nusbaum, president and CEO of the American Resort Development Association, a trade group, and the next year and a half could be tough, as well.

In the United States, timeshare sales fell 8.5% last year to $9.7 billion. They reached their peak the year before, when sales hit $10.6 billion, according to a study by Ernst & Young. The 2008 decline was the first sustained by the industry since it started keeping score in 1975.

Starwood Property Trust (NYSE: STWD), which is a real estate investment trust, struck gold last night. The company issued 40.5 million shares for its public offering, raising a cool $810 million (this was 35% more than expected). The offering price came to $20.

Why the excitement? Basically, Starwood wants to capitalize on the low valuations in the commercial real estate markets. The main approach will be to purchase debt securities -- and perhaps wind up owning some choice properties.

Starwood (NYSE: HOT) is recently up $1.54 to $49.08 on renewed buyout chatter.

HOT announced on November 9, 2007 an expanded share repurchase authorization by $1 billion and increased is annual dividend 7%.

HOT has a market cap of $8.9 billion with long term debt of $3.5 billion.

HOT March 55 calls have traded 38 times on transaction volume of 2,002 contracts above its open interest of 1,176 contracts. HOT option implied volatility of 43 is above its 26-week average of 39 according to Track Data, suggesting larger risk.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

MOST NOTEWORTHY: The U.S. beverage sector, ImClone, Starwood Hotels and Marriott International were today's noteworthy upgrades:

• Goldman Sachs upgraded the U.S. beverage sector, including Coca-Cola (NYSE: KO), Molson Coors Brewing Company (NYSE: TAP), Anheuser Busch Companies (NYSE: BUD), PepsiAmericas Inc (NYSE: PAS) and Coca-Cola Enterprises (NYSE: CCE) to Attractive from Neutral. The firm cited expectations for a stronger 2008, benign commodity cost outlook, better than expected US beer demand, and valuations. Goldman upgraded shares of PepsiCo Inc (NYSE: PEP) to Buy from Neutral citing valuation and improving industry fundamentals.
  
• Bear Stearns upgraded ImClone (NASDAQ: IMCL) to Outperform from Peer Perform citing positive Flex trial results and the new market opportunity for Erbitux.
• Thomas Weisel upgraded Starwood Hotels (NYSE: HOT) and Marriott International (NYSE: MAR) to Market Weight from Underweight based on healthy August trends, credit market may ease concerns over supply growth, and valuations.

OTHER UPGRADES:

• Thornburg Mortgage (NYSE: TMA) was upgraded to Buy from Neutral at UBS.
• Western Digital Corp (NYSE: WDC) was upgraded to Outperform from Peer Perform at Bear Stearns.
• KeyBanc raised Ruby Tuesday (NYSE: RT) to Hold from Underweight.
• Take-Two Interactive Software (NASDAQ: TTWO) was upped to Buy from Hold at Gabelli.

Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) -- volatility Elevated on renewed Kerkorian speculation. HOT, a leading hotel and leisure company, is frequently mentioned as a private equity break up/recapitalization candidate. Chatter is circulating that Kirk Kerkorian's Tracinda has a mid-$90's offer on the table for HOT. HOT is recently up $0.63 to $70.64. HOT has a market cap of $15 billion with long term debt of $1.8 billion. HOT reported quarterly March 2007 total revenue of $1.4 billion. HOT July option implied volatility of 34 is above its 26-week average of 27 according to Track Data, suggesting larger risk.

Countrywide Financial Corp. (NYSE: CFC) -- volatility not confirming renewed takeover speculation. CFC, the largest U.S. home mortgage lender, is recently up 26 cents to $38.16. CFC July option implied volatility of 36 is near its 26-week average of 34 according to Track Data, suggesting slightly larger price fluctuations.

Option volume leaders today are: Apple Inc. (NASDAQ: AAPL), Freeport McMoran (NYSE: FCX), Goldman Sachs Group (NYSE: GS) and Valero Energy Corp. (NYSE: VLO).

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

MOST NOTEWORTHY: Websense Inc (WBSN), Dow Jones & Co, Inc (DJ), Krispy Kreme Doughnuts (KKD), US Airways Group, Inc (LLC), Starwood Hotels & Resorts Worldwide, Inc (HOT) were today's more noteworthy downgrades:

• Jefferies downgraded Websense Inc (NASDAQ: WBSN) to Underperform from Hold with a $20 target to reflect slowing growth in the URL market, near-term business disruption from the pending SRF deal and summer software seasonality.

• Dow Jones & Co (NYSE: DJ) was cut to Hold from Buy at Gabelli and to Market Perform from Outperform at Wachovia.

• Krispy Kreme (NYSE: KKD) was downgraded to Neutral from Overweight at Prudential.

• Merrill Lynch downgraded US Airways Group (NYSE: LCC) to Neutral from Buy.

• Goldman downgraded Starwood Hotels (NYSE: HOT) to Neutral from Buy to reflect the weaker-than-expected quarterly fundamentals reported by the major hotel companies. The firm believes investors should stay away from the lodging sector...

OTHER DOWNGRADES:

• JP Morgan cut Federated Investors, Inc (NYSE: FII) to Underweight from Neutral on valuation.

• Genesco Inc (NYSE: GCO) was downgraded to Market Perform from Outperform at Piper Jaffray.

• UBS cut Liz Claiborne (NYSE: LIZ) to Neutral from Buy.

• Tibco Software Inc (NASDAQ: TIBX) was cut to Hold from Buy at Jefferies.

• Baird downgraded Watts Water Technologies, Inc (NYSE: WTS) to Underperform from Neutral.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

The Volatility Index for S&P 500 Options (VIX) is up .16 to 13.62.

Cypress Bioscience (NASDAQ: CYPB) -- option implied volatility Elevated at 194. CYPB closed at $7.46. Data from CYPB's end PII Milnacipran (Fibromyalgia Syndrome; FMS) trail, is expected to be released before mid-year. JEFF has a Buy on Attractive Risk/Reward with a $14 price target on CYPB. JEFF says "our diligence with investigators and statisticians increase our confidence in the prospects for a positive outcome." CYPB June option implied volatility is at 194 according to Track Data, suggesting large price fluctuation risk.

Starwood (NASDAQ: HOT) -- implied volatility suggests Flat risk; HOT at Record price on Chatter. HOT, a leading hotel and leisure company, is frequently mentioned as a private equity break up-recapitalization candidate. HOT is up $1.13 to $70.97. HOT's CEO Steve Heyer resigned on 4/12/07. HOT will announce EPS on 4/26. HOT has a market cap of $16 billion with long term debt of $2.3 billion. HOT reported 2006 annual total revenue of $5.9 billion. HOT May option implied volatility of 26 is near its 26-week average according to Track Data, suggesting non-directional risk.

Option volume leaders today are: Best Buy (NYSE: BBY), Qualcomm (NASDAQ: QCOM), Apple Inc. (NASDAQ: AAPL) and Altria (NYSE: MO).

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Numbers are Actual vs. Estimate

Excellent Reports

• Goodrich Corp. (NYSE: GR) 78c vs. 67c
• Goodrich profits increased on a jump in sales of aircraft equipment to Boeing and Airbus. The company said margin expansion associated with sales growth and improved operating efficiencies are primary reasons for a continued positive outlook.
  

• International Paper Company (NYSE: IP) 47c vs. 35c
• The company's profits rose on a gain from the sale of its U.S. forestlands and a strong operating profit from its industrial packaging unit. IP is transforming operations to focus on its global uncoated papers and packaging business.
  

• Starwood Hotels & Resorts Worldwide (NYSE: HOT) 92c vs. 73c
• Higher room rates helped to contribute to a strong quarter for the parent of hotel chains including St. Regis, Westin and Sheraton. The company has been enjoying strong travel demand and limited growth in supply. It has also been selling hotels and retaining management contracts to free up cash.
• Electronic Arts (NASDAQ: ERTS) 63c vs. 57c
• The video game publisher had a 38% drop in quarterly profit but beat Wall Street targets, overcoming investor anxiety that holiday shortages of new video game consoles would hurt sales. Shares rose 6% on the news. Company CFO Warren Jenson said EA was entering a growth period.