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McDonald's Is Crack Cocaine
We can prove it. Plus UK recession rush, & markets moving on
Tim Vollans
October 30, 2023 • Estimated Reading Time: 6 minutes
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💡 The Lightbulb
McDonald’s Is Crack Cocaine
For legal reasons, we should clarify that McDonald’s is merely as addictive as crack cocaine, not actual crack cocaine.
We’re sure you knew that, but lawyers gotta justify their existence sigh.
(they gave up on David’s Twitter feed a long time ago)
Any listed food company just buy.
There is a reason it is listed and I can't think of a time where a listed food company hasn't done well.
Food is crack.
— David Belle (@davidbelle_)
10:46 AM • Oct 10, 2023
Proving David’s point, McDonald’s SMASHED estimates today,
Adj. EPS 3.19 (exp. 3.00)
Revenue 6.69bln (exp. 6.58bln)
And MASSIVE sales growth (global comparable sales increased 8.8%)
“With global systemwide sales growth of 11%, our third quarter results reflect our position of strength as the industry leader,”
These results can only be explained by addiction.
Chunky boi: seriously, it’s impressive. They see top line growth slowing, but they’re still ahead of competitors, and while the rate of price hikes is expected to decline, they’re STILL pushing price and seeing little customer pushback:
"Consumers continue to be more discriminating about what and where they spend... but we're seeing really no change at all in terms of customer acceptance... on pricing,"
Infinite demand for food. Infinite demand for McDonald’s = infinite demand for anti-fat pills?
pro.fink.money/p/fat-hedge
Mainly because we wrote about it here.
— David Belle (@davidbelle_)
11:26 AM • Oct 30, 2023
The Hunger Games was a futurist documentary. Prove me wrong…
🧠 The Big Brain
Markets Moving On From Gaza
What’s next?
Markets tend to care about conflicts for short periods of time. While we all love to poke fun at investors for being irrational, when it comes to tragic events like these, markets tend to calm down pretty quickly.
And it looks like markets have largely moved on now.
Shrug: barring a further escalation beyond Gaza and the immediate surrounding areas (essentially, the main conflict zone), the market impact looks to be minimal now.
Following a similar pattern to the Ukraine conflict. But faster.
So, what’s next?
For us, it’s all eyes on the Bank of Japan & US Treasury announcements.
Plus one other idea that’s been bubbling away in the background and looks ready to drop:
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⚡ The Spark
UK Rushing Towards Recession
One thing we’ve been chatting about a lot over the past few months is just how fast the UK economy will potentially flip…
From OMG inflation to OMG recession in the blink of an eye.
Today was another brick in the recessionary wall…
Money in the economy is plunging. Check out this chart:
That’s what economists/nerds call Broad Money. While the data can be erratic month to month, Julian Jessop points out just how weak the overall trend is:
The 12m growth of household M4 is at its lowest since records began in September 1998 - and the 3m ann rate is even weaker!
Hold on though…
Why should anyone care how much money is in the economy?
And if it’s not there… Where is it?
Second ones easiest. Usually money is disappeared by paying off or cancelling debt.
Why we should care: well, money contraction is usually associated with an economic slowdown, or recession.
In credit-based economies, contraction of the money supply correlates to contraction of credit, the lifeblood of the economy.
Which is where the orange line above comes into play.
Lending is down, big time. Especially for mortgages.
Number of mortgage approvals in the UK fell further in September compared to August, to around 43,300. Down roughly a third on this time last year. Market still in deep freeze.
… transaction levels are now so low that last month, mortgage repayments outweighed the value of new mortgage debt taken out. Again, the sort of thing we haven't really seen since 2008-2011 downturn
TL;DR Higher rates are absolutely doing their job. The Bank of England is done hiking (even if they won’t say so yet) and if these money/lending trends continue, we’ll be talking about UK rate cuts way sooner than markets are currently pricing.
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