Financial Sarcasm Roundup for 11/24/15

I should have blasted this out yesterday but cleantech thoughts kept me occupied all day long. It is better to be clean than dirty. Just ask any pig headed to the slaughterhouse.

Wall Street averages continue to rise in spite of global economic headwinds. Greater fools are always ready to rush into the top of a bull market. I have been waiting for these fools to get financially kneecapped for the past several years. The spectacle will be worth the wait. My cash will be ready when the top-buyers are all broke.

The Federal Reserve may raise rates in December, according to the consensus interpretation of its most recent notes. It's important to remember that the Fed can immediately reverse itself if a rate increase proves too explosive for the system's emergency brakes. Our mandarins are playing it by ear because they have enticed every investor to take on extraordinary risks. The first rate rise past 0.25% will test the yield curve's long end, and make long-duration bondholders wonder whether their portfolios are safe.

Some obsessive food selfie people have figured out that restaurants and other food service sector companies will monetize their food photos on Instagram and other social media sites. It's great that people who want us to know what they eat will make money from their idle habits. Eating is a natural function, so perhaps we can take other natural functions to their logical monetary conclusions. People who take shower selfies can sell Instagram advertising space to makers of soap and shampoo. Do I have to mention other bathroom functions? Don't make me go there.

I promised my cleantech contacts that I would clean up my act. I behaved myself this time around. My word is my bond.

Financial Sarcasm Roundup for 02/02/15

Anyone who thinks I will ever run out of sarcasm needs to think hard.  I mean, like, really hard.  Sarcasm is like cosmic background radiation . . . it is always there.

Uber just can't catch a break, and doesn't deserve one.  Google is developing a competing app.  Drivers who thought they were contractors are suing Uber because they're being treated like employees but have to pay operating costs themselves.  Uber's bro-jock culture is about to render its competitive advantages inoperative.  Jerk bosses usually stick it to employees, but Uber's arrogance takes it to a new level.  Nobody remembers Webvan from the '90s, which is why today's startups are repeating its operational errors.

Whole Foods is no longer the darling of the grocery sector.  It has long catered to upscale eaters who have more money then brains.  Regular grocers have figured out how to stock quinoa and kale.  I know a lot of people in San Francisco who swear by Whole Foods' offerings and they're all idiots.  Salmon in a can from a discount grocer is the same fish as the fresh salmon at Whole Foods.  Rich shoppers are impoverishing themselves by opting for sixteen flavors of granola at Whole Foods.

McDonald's is having a tough time at the other end of the quality scale in food retailing.  Trying to be all things to all eaters puts it in competition with upscale brands whose regular customers have more buying power, and thus more options.  McDonald's should focus on being the low-price leader in lame food for poor people who have few options.  Human taste buds evolved to favor crispy, salty, sugary things that signaled a high fat content.  The golden arches needs to engineer those factors into cheap foodstuffs that poor people will find addictive.  Downscale brands thrive when developed economies hit the skids.  Put a McDonald's next to every dollar discount store for a countercyclical trend.

I did not watch the Super Bowl yesterday but I can't avoid the news feeds mentioning the halftime show.  Katy Perry's "left shark" was an unenthusiastic dancer.  Maybe he was sad after a bad experience taking Uber, a huge grocery bill at Whole Foods, or a soggy burger at McDonald's.  I do like watching Katy Perry shake her hindquarters.  She's welcome to come over to my place anytime provided she leaves her sharks somewhere else.

Full disclosure:  I have no positions in the stocks of the lame, stupid companies mentioned in this article.  

The Haiku of Finance for 04/17/14

Obese consumer
Drive fast food franchise profits
Fat America

The Haiku of Finance for 03/15/14

Fast food bankruptcies
No one can afford mall food
Too poor to dine out

Financial Disruption Opportunities In Meatonomics

The Commonwealth Club presented one of its awesome Climate One shows today on meat.  The author of Meatonomics and the head of the California Cattlemen's Association discussed the meat industry's effects on our climate.  The science behind the contribution of livestock to global warming has been contentious ever since the UN FAO's 2006 report "Livestock's Long Shadow."  The existence of a baseline of methane production from livestock is more important to the public than the amount of production.  This invites regulation, which in turn opens the possibility of entrepreneurial disruption.

The livestock industry has tried to criminalize whistleblowing exposures of its dirtier practices by lobbying for ag-gag laws.  When these laws succeed, our democracy is poorer for the lack of informed consent in what we consume.  The Pew Commission on Industrial Farm Animal Production notes that the concentration of food processing in the hands of a few large companies creates unique food supply stresses that are a departure from much of American history.  This evolution of the livestock industry invites entrepreneurial disruption from food producers who transparently display their livestock processing.

Organically raised meat is fashionable in places like the San Francisco Bay Area.  This says little about its advantages in profitability or even sustainability.  Like anything else dependent on cold chain logistics, the financial viability of organically raised meat may vary by geography and the cost of energy.  The American Grassfed Association won't want to hear the Meatonomics evidence that grassfed cattle contribute measurably more methane to the atmosphere than cattle that are corn-fed in commercial breeding programs.  This implies that innovations to capture methane and other greenhouse gases from cattle production, and convert them into energy that brings ranches close to net-zero energy use, will find a ready market in the organic sector.  The rural land experts at the American Society of Farm Managers and Rural Appraisers (ASFMRA) have a large body of knowledge for types of land suited for agricultural production.  Food entrepreneurs don't have to reinvent the wheel.  The USDA-funded Agricultural Marketing Resource Center describes grants and data available to agribusiness entrepreneurs.  Anyone going whole hog (pun intended) into organic production should do their market research first.

Sometimes Uncle Sam helps out agricultural innovation in small ways.  The USDA's NRCS maintains an Environmental Quality Incentives Program (EQIP) that provides grants for producers' conservation projects.  A truly free market approach would eliminate federal crop insurance, price support programs, and insurance for floodplain habitation.  Those reforms would be much more appropriate targets for the livestock industry's lobbying than more ag-gag laws.  One area that probably will not see reform is the existence of commodity checkoff programs that fund sector-wide promotions.  Entrepreneurial producers of sustainable foods may as well use checkoffs to their advantage while they exist.

Meatonomics may not succeed in convincing Americans to reduce meat consumption, but cattle ranchers are amenable to arguments for more sustainable production.  This allows room for ag-tech entrepreneurs.  Understanding where to begin means knowing USDA's AWIC farm animal standards.  Launching disruption means mastering USDA's AFSIC organic production practices.  It takes more than a fortnight to connect the market data from the Economic Research Service and the National Agricultural Statistics Service but farmers and the American Farm Bureau Federation do it all the time.  Food technology startups are the new darlings in the VC sector's eyes.  They can attract funding if they disrupt the unsustainable practices of industrial farm animal production.  

The Haiku of Finance for 11/11/13

Serving up free food
Razor-thin profit margin
Starving investors

Hip-Pocket Analysis of Resturant Chains Offering Veterans' Day Specials

Military veterans are familiar with the "hip-pocket training" that junior NCOs and company grade officers conduct when there's white space on the unit training schedule and no one has anything better to do.  Well, I can still pull this off for the finance sector.  Here comes my hip-pocket analysis of a few restaurant chains I sampled this Veterans' Day weekend.  These chains offered free meals to veterans yesterday and today.  I found their service to be excellent.  Let's see if that service pays off in the bottom line of their financial statements.  

I had dinner last night at McCormick and Kuleto's in San Francisco's Ghirardelli Square.  It's part of the McCormick and Schmick's chain, owned by the Landry's multi-brand collection.  Its old ticker symbol was LNY but it's now privately held.  Their financial performance numbers aren't publicly available and I don't have time to talk to their investor relations folks.  I'm on a deadline here.  I will give them props for the fried shrimp and french fries.  In years past I've had the seared chicken on Veterans' Day.

I had breakfast today at Denny's.  The all-you-can-eat pancakes hit the spot but I could only handle two servings.  My metabolism is slowing down and I'm not out to bankrupt a company with free pancakes.  

Ticker:  DENN

P/E:  23.17

Profit margin:  5.77%

EPS Growth (5yr):  -5.02%

ROE (5yr):  unavailable?!

I had lunch at Red Robin Gourmet Burgers.  The free Red's Tavern Double Burger and bottomless fries came with a little US flag stuck in the burger bun.  God bless America, land of burgers.  I could only handle two servings of bottomless fries after those pancakes for breakfast.  I would have preferred a bottomless waitress (and topless) but I can't have it all.  

Ticker:  RRGB

P/E:  36.15

Profit margin:  3.13%

EPS Growth (5yr):  1.17%

ROE (5yr):  6.85%

I had dinner at Olive Garden.  Those rustic sausages and bell peppers were just fine, and I even got a take-home plate to enjoy that stuff tomorrow.  They were generous with the soup bowl and I got more than my fill of sausage, potato, and leek spiciness.  Darden owns the Olive Garden and other chains, so that's where I have to look for data.  

Ticker:  DRI

P/E:  18.53

Profit margin:  4.28%

EPS Growth (5yr):  4.25%

ROE (5yr):  23.82%  

These numbers are disappointing.  DENN trades in single digits but only a moron with a single digit IQ would think that's a good value given its high P/E and thin profit margin.  Reuters didn't have an ROE listed for Denny's but I don't care enough to calculate it myself.  I could easily say the same for RRGB, another let-down.  DRI has an impressive ROE but I am doubtful they can sustain it with such a high debt load (more than 2x net income).  

None of these investments are for me.  I have probably said before that retail food outlets are very sensitive to changes in middle class consumer spending.  If I haven't said it before then I'm saying it now, woop-de-doo.  The Fed's eternal monetary easing will squeeze middle class incomes and force consumers to stop dining out.  It will also force up commodity prices and make national supply chain management costs prohibitive for branded restaurants, unless they're smart enough to lock in long-term food contracts right now.  Hyperinflation will turn microeconomics into an art form for those locally owned chains lucky enough to have pricing power in their markets and dedicated local suppliers.  I'm thankful for the free meals on Veterans' Day but these national chains can ill afford to give away food.  

The Haiku of Finance for 08/29/13

Dumb fast food worker
Wants more pay but has no skill
Get a life, loser

Stupid Fast Food Workers Demand More Pay

I laugh at the latest wave of stupidity sweeping America.  Fast food workers think they deserve massive pay increases.  I say they deserve exactly what they're paid right now, and if they don't like it they can take a hike so some ambitious teenager can earn extra cash after school.

The minimum wage that fast food workers earn was never intended to guarantee a level of income that supports an entire four-person household.  Raising a family in post-Cold War America usually requires two wage earners because our halcyon days of prosperity are long gone.  Put two such wages together and you've got a $30K household income, more than enough to sustain a family in most of America.

This entire stupid idea is pushed by SEIU and other labor organizers to increase their base.  Private sector union membership has been declining for years.  Employers don't like union demands, work rules, production stoppages, rampant absenteeism, and other problems caused by activists who possess more attitude than intellect.  Consumers don't buy union label products because they want value for their dollar.  The unionized work ethic and its entitlement culture destroyed the US automobile industry.  Bring that culture to fast food and your burger will take an hour to serve.

Fast food workers can always work other jobs with equivalent prerequisites if they don't like flipping burgers.  They can pick vegetables, sweep floors, haul boxes, or shovel manure.  I've had to work some pretty worthless jobs in my life but I outgrew them once I acquired education, advanced skills, and leadership experience.  I don't expect most adult fast food workers to take the hint because I suspect they cluster at the left end of the IQ bell curve.

McDonald's And Burger King In The Land Of The Free

I rarely patronize fast food chains because I dislike lowest-common denominator products.  Today is Independence Day and I have no backyard grill, so I felt like sampling the burnt beef offerings of the most widely available grills in our country.  That would be McDonald's (MCD) and Burger King (BKW).

The silliness of fast food as a lifestyle choice astounds me.  Chains are perpetually tweaking their menus to bring watered-down flair to customers whose taste buds have never ventured more than a few blocks from home.  The breakfast offerings at McDonald's now include white cheddar and egg whites on the McMuffin.  I tasted zero difference between that version and the normal McMuffin but many Americans aren't known for their taste anyway, so I don't expect the typical McDonald's customer to care.  "Mickey Dee's" also has smoothies for those who pretend to be concerned with their health and chilled coffees for those who pretend to be European sophisticates.

Burger King takes the fast food carnival to another level.  Their summer sandwich specials have cute Southern names.  The brightly lit picture menus are now on HDTV panels.  The drink dispenser is pure genius, with a touch-sensitive LED screen where you can mix and match about two dozen different combos of heavily sugared sodas and lemonades.  Man, that self-serve fountain is sugar heaven for every obese American.

I think these menus and eating arrangements are funny.  San Francisco has spoiled me with a plethora of fine dining establishments.  Dipping into the trough of fast food on rare days is enough to remind me of what I'm not missing by eating healthy.  Comparing the hilarity of the menus and dining concepts of America's most well-known lowbrow eateries is very subjective.  Let's compare their fundamentals instead, with all glory to Yahoo Finance.

MCD
Market cap:  $100.6B
P/E:  18.61
Profit Margin:  19.79%
ROE:  36.59%

BKW
Market cap:  $6.84B
P/E:  50
Profit Margin:  8.07%
ROE:  12.07%

Mickey Dee's is more than twice as profitable as the King and the market cap reflects this success.  The Golden Arches are absolutely blowing out same-store sales records this year.  Meanwhile, Burger King tries hard to catch up.  Casting the King as a growth story would be a sad take on that incredibly high P/E ratio.  Burger King has always been an also-ran in the fast food sector and their management knows it.  The company has had several ownership changes over the years thanks to private equity shops who thought they could make it more competitive.  Nice try.  I've always wondered why Burger King has consistently fumbled its non-US franchising strategy.  Burger King penetrated the Australian market with Hungry Jack's but lost control of the master franchise agreement in court.  

People who love fast food have forgotten how to love themselves.  Ronald Mc-Gall-Dang-Donald is the high priest of faux self-actualization for the masses all over the world.  He reigns supreme because the cheap thrill of salt, sugar, and fat appeal to our evolutionary biological preference for energy.  We have not evolved beyond our basest desires.  America leads the way in obesity because people in the land of the free are still free to eat themselves to death.

Full disclosure:  No position in either MCD or BKW.  

Dollar Menus, Dollar Stores, Dollar People

Taco Bell is working on a new dollar menu.  I wasn't aware they were test marketing one in California but I don't get down to Fresno very often.  The taco folks are going up against McDonald's tiny dollar burgers and the low-priced high-calorie stuff you can find most anywhere.  The proliferation of dollar menus says a lot about the shrinking wallets of people who aren't planning meals ahead.  Spending a dollar on a junior-size burger probably delivers less nutritional value per money spent than the same amount spent on a handful of vegetables but most obese Americans don't seem to notice.  I'd rather buy fresh produce, whole grains, and canned goods I can rotate for months.

Have you been to a dollar store lately?  Take your pick from Dollar Tree, Family Dollar, Dollar General, and other regional equivalents.  Junk-addicted consumers can get their fill of cheap plastic goods here after they've stuffed their faces on dollar food at the fast food franchise across the mall parking lot.  Dollar goods are just as low-quality as cheap junk food but Americans don't care.  Our nation seems to like the convenience of buying useless things that break easily.  I hate buying things and I have everything I need to live; the money I don't spend stays in my portfolio working for me.

The problem with catering to lowest common denominator tastes is that retailers can't lower prices to stimulate sales, and can't develop brand loyalty by guaranteeing quality.  McDonald's is learning the hard way  that the dollar menu adds little value to its top line.  Dollar stores have grown so quickly that they've saturated the low-income market and are probably cannibalizing each others' sales.  Fast food chains have learned to take EBT cards to keep their low-information, low-income market hooked.  Dollar stores don't work that way unless maybe they let people use their free government cell phones to swipe a credit card purchase.  Okay, that was a cheap shot (pun intended).  I'm usually pretty cheap but I spend money on things that last.

America is turning into a one dollar nation.  Plenty of people addicted to consumption will spend their last dollar on unhealthy food or unneeded goods.  The psychological barrier of spending "only" one dollar is about as low as you can go.  You are what you eat.  My life is worth more than a buck.

Full disclosure:  No positions in any of the companies mentioned.  I also haven't eaten from a dollar menu in years.  

The Limerick of Finance for 04/28/13

McDonald's and breakfast all day
Two concepts that should go away
People are just too fat
There's something wrong with that
"Eat more veggies" is what we should say