This past weekend Don Trump worked the fries and drive thru at a McDonald’s in swing state Pennsylvania. It is good to see he found a job that he is qualified to do. Now we just have to find a job Kamala is qualified to do and get them both to stay there, but I digress. Trump actually said he loves salt. I think pepper was triggered and felt slightly offended while others just assumed him to be racist. This is the high level of reporting and chicanery we are getting in the world’s largest economic power with a soon to be $36 trillion deficit. Photo ops and both candidates taking turns trying to say who could cut taxes on more people. Why don’t they just say it? I am going to abolish the IRS and no one will have to pay any more taxes yea! Vote for me.
Unfortunately, here on planet earth where neither of their fiscal plans have any chance of working, we are stuck with an angry 10 year bond yield that has bounced over 50 basis points and counting since Jerome Powell lowered interest rates. Wait a second, I thought Powell cutting rates was going to save the housing market by lowering rates and making it more affordable. Wrong, it has gotten even less affordable. I guess we will all have to wait until Kamala gives us $25k each to go buy a new house but by then the houses will be $25k higher in price oops.
I was going to give McDonalds some kudos for handling the Trump photo op with some real class. They get its good business to be politically neutral. They said we aren’t red or blue but golden. I get it like the golden arches. Well, no deed goes unpunished as I’m sure someone set off an email and now McDonalds stock has dropped 10% on an E. Coli outbreak that has sickened dozens. Democrats will not tolerate a happy meal anywhere near a man with 34 felonies on his record. It was actually quarter pounders that were the culprit of the outbreak. Between Trump on the fries and the quarter pounder outbreak McDonalds might not be safe to frequent after breakfast is over. But as a man that knows his way around the steep banked cornered track known as the McDonald’s drive thru window, I will always recommend their breakfast.
From one breakfast conglomerate to another, Starbucks still seems to be pissing into the wind. Their preliminary sales are out and the sales show another 10% drop in its North American stores. First of all, you are too expensive and too slow. This hasn’t been a secret for some time now. When no one was going to work and the only thing people had to do was a Peloton class all day sitting and scrolling through your phone in the drive thru line at Starbucks was a right of passage for many a yuppie. Now that people are being called into work, that puts a little more urgency on the user experience and Starbucks is getting replaced. Stick to cafes for consultants and you will be fine.
Moving to the sit down breakfast variety, Denny’s has announced that they will be closing 150 of its restaurants. This is a breakfast joint double whammy as first Bacon and gouda isn’t doing so gouda and now the whammy is hitting the moons over my hammy. The restaurant cited its customer was in the lower echelon of earnings and severely affected by this economy. This will continue to reverberate across the country. It is happening in waves, industry by industry, and it will continue.
Another company that seems to have lost its way has been Amazon. A dirty little secret about that company is it makes all its money in clouds and servers and such and doesn’t make much at all being in commerce where the consumer lives and breathes and nonstop shops. It is now closing some of its unmanned stores and it is also closing down the entire unit of Amazon Today. This was the site where someone could order something in certain cities and Amazon would have it delivered same day. It has been replaced by people getting off their asses and driving to the store. This is a new start up that has been around since Henry Ford’s day in the mechanized version and the alternative version was called walking to the store. This has some serious moats for apps and contract drivers to bridge. People can’t afford it when they don’t have free government money to spend now do they?
Shari’s Café and Pies are shutting down all of their Oregon locations totaling 42. Now why doI think it is weird for all these businesses to be struggling when the economy is so good. That is what I hear ever morning on Bloomberg. The economy is doing great. Where does this economy live of which they speak so enthusiastically. Can I visit? Is it nothing but Tesla drivers riding Pelatons and drinking Boba tea? Do they all eat vegan or are eggs allowed? Are all the mobile phones turned to CNN and the Colbert show? Or and this is a big OR, is this located exclusively in the great investor Nancy Pelosi’s house?
Another company that is dealing with a lack of free government money to support their business. Polaris. Their quarterly earnings were a bloodbath. This from ZeroHedge, “ Sales $1.72 billion, -23% y/y, estimate $1.77 billion (Bloomberg Consensus)
Off Road sales $1.40 billion, -24% y/y, estimate $1.41 billion
On Road sales $236.5 million, -13% y/y, estimate $241.6 million
Marine sales $85.9 million, -36% y/y, estimate $133.7 million
Gross profit margin 20.6% vs. 22.6% y/y, estimate 21%
Cash and cash equivalents $291.3 million, -1.4% y/y, estimate $337.8 million
Adjusted EPS from continuing operations 73c, estimate 89c
Visualizing Polaris’ quarterly revenues… The cheap money era of Covid, plus folks moving out of cities to resort towns and or just rural America, sparked a massive demand for outdoor vehicles.” Challenging, challenging. C Thomas stop underselling this. What are they going to do? They are going to join Boeing and PPG and Intel and International Paper and CVS. They are going to have to lay people off, a lot of people. You can’t sell almost half as many boats as last year and keep all that staff. It’s over, until the government prints more BS money everyone that has an SUV, a camper, a boat, and a dune buggy with the two seats right by each other will be stuck with another toy they can’t afford.
NYCB or New York Community Bancorp, remember the struggling bank that got a billion-dollar bailout, and their stock didn’t even move. Remember that one. It is now laying off 1,900 employees in its Flagstar Bank unit and changing its name to Flagstar Financial. I remember calling for the end of NYCB, but I might have done so prematurely. As is, the skeletons on its balance sheet are still hiding.
Bank OZK the country’s largest real estate lender has now capped its loans at $500 million to reduce its exposure on commercial real estate. This bank has been a very aggressive early stage lender and has loans with exposure to many cities with large commercial loan crises. They are cutting back on risk as a move that tells us the economy simply isn’t as strong as we are being told.
Bank regulators are asking themselves the same thing. Officials from the IMF and European Central Bank met this week to discuss among other things, private credit. This from Laura Benitez at Bloomberg, “Regulators have warned about a lack of transparency around private loan valuations and potential liquidity mismatches over the last year or so, as the market has ballooned to $1.7 trillion in size and interest rates have remained high. Some, including the ECB, have gone further to scrutinize how banks, private equity firms and insurers are tied to private credit, and how a lack of transparency could affect those groups. “Systemic risk is something we think about,” Elizabeth McCaul, a member of the Supervisory Board at the ECB, said on the panel.” There are certain phrases that I don’t even joke about any longer. Being late, do you want pineapple on your pizza, didn’t I see you at a Puff Diddy party, but the one that scares me the most is probably systemic risk. That means the whole thing is going down. That is what happened in 2007 and the government bailed out the banks because as John Paulson said the ATMs will be empty in the morning. In 2020, the government just bought everything to keep the selloff from going any further. They bought treasuries, stocks, corporate bonds, whatever. When systemic risk shows up, its like that Diddy party hitting 1 am, nothing good happens after that.
Even Jack Sweeney has found the current times to be challenging. Jack Sweeney is the guy that tracks private planes and posts their locations on different social media sites. Elon Musk banned him and Taylor Swift got her lawyers after him, but now Meta has banned him posting on their platforms of Mark Zuckerberg’s whereabouts. I guess Sweeney tracking all those flights to the bunker in Hawaii didn’t cluck with the Zuck. It turns out that rich people love to tell poor people to go green and then fly in private planes and abuse the environment far worse than anyone poor could afford. Stop frequenting their products then. If everyone got off Facebook tomorrow, Zuckerberg’s stock would crash, and he would be teaching Tom Brady’s wife jiu jitsu in a month. That’s all it would take or a nuclear device and the electromagnetic pulse making all electronic devices worthless. Pretty tough selling advertising on a social media site when there is no grid, no phones, and no electronic money. Remember that it was 50/50 last month.
Fortunately there is one benefit to these challenging times, we are that much closer to a reset. Gold has risen 40% this calendar year, or you could also say that the dollar it is priced in has fallen 40% this year. Regardless, when things get uncertain the precious metals begin to show why they are precious. There is very little that holds your purchasing power than gold. Not price, not value, just the purchasing power. I was once told that one ounce of gold will buy you a new suit and one ounce of silver will always buy you a nice lunch. Man, suits and lunch have certainly gotten expensive haven’t they? That’s why my frugal posterior sticks to breakfast burritos.
Sincerely Yours,
C Thomas Printer
On this date in history… 41 years ago to be exact, US and French troops were the victims of suicide bombers in Beirut. 241 US servicemen and 58 French troops lost their lives.
Also born on this date …. Gertrude Ederle, the first woman to swim across the English Channel. Speaking of Bygone Relics, they aren’t making many Gertrudes these days.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.