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I’m a Gen X-er. I was born in the 1970s, but grew up in the ’80s – and McDonald’s (MCD, Weiss Ratings: C+) was a regular part of my life.
I remember bringing my report card there in elementary school because you could get free food or ice cream if you got straight A’s.
I remember being treated to meals there with the team after Saturday morning soccer games.
I still smile thinking about dunking Chicken McNuggets in the restaurant’s packets of honey. Barbecue sauce? That was for everyone else!
Heck, I remember being snuck the occasional double cheeseburger in high school because I knew someone working the drive-thru window.
|What’s the future for McDonald’s?|
But the numbers we keep getting out of this American fast-food icon show the company is running off the rails. U.S. comparable store sales – or sales at domestic restaurants that have been open for at least 13 months – tanked 4.6 percent last month. That was more than twice as bad as the 2.1 percent drop analysts were expecting.
Throw in the rest of the world, and you still get a 2.2 percent decline. That was worse than the 1.7 percent drop investors were anticipating. McDonald’s operates in 100 countries, with more than 35,000 restaurants worldwide.
So what gives? Why is a restaurant that was so much a part of my life – and the lives of my family and friends growing up – falling on hard times? Analysts blame changing consumer eating habits, worries about the freshness of McDonald’s food, weak economic growth, and more.
But maybe it’s as simple as a Business Insider headline put it today: “McDonald’s is Losing America.”
Look, I can count on one hand the number of times my wife and I have fed our kids McDonald’s in the past year. My 9- and 12-year-old daughters would much rather have healthier, better-tasting burritos from Moe’s Southwest Grill, or in a pinch, better-tasting nuggets or sandwiches from Chick-fil-A. My teenage stepson would rather get subs from Subway or the local Publix than a McDonald’s double cheeseburger.
|“It’s not a ‘treat’ anymore to go to a Mickey D’s like it was when I was a kid.”|
It’s not a “treat” anymore to go to a Mickey D’s like it was when I was a kid. It’s basically a last option for us if, say, we’re on the way to the airport at the crack of dawn and nothing else is open. The kids don’t want to eat McDonald’s food, and I don’t want to feed it to them if I can help it. Why would I, when for just a small price more, we can get better, fresher, tastier, healthier food?
So sure, at some point McDonald’s might represent a decent value. Its golden arches are ubiquitous from one end of the globe to the other. The shares sport a 3.6 percent dividend yield. Unlike the rest of the S&P 500, they’ve basically just marked time for the past two years rather than risen, too. Some investors will likely make the argument they need to play catch up.
But it might just be that the world is passing McDonald’s by – and that the grandkids I’ll have some day won’t even know what a Chicken McNugget is, much less a post-game trip with their soccer teams!
What do you think? Is this American restaurant icon done for? Or can it come back by re-tooling its stores and revamping its menu? Do you take your kids or grandkids to McDonald’s these days, and if so, why? What do you think of its food, its prices, and the quality of service? Head over to the Money and Markets website and let me know!
|Our Readers Speak|
We had another month of good jobs data … and another month where many posters at the website said they don’t believe the numbers. That has been the pattern all summer and fall.
One example: Reader Mike, who said: “I can’t believe you are buying into the government’s propaganda nonsense concerning these seasonally adjusted job numbers. The labor participation rate is flat, and still the lowest since 1978. The household survey showed we lost 150,000 full time jobs and the anemic gain of only 4,000 jobs came from low paying, part-time jobs. The government authorities put out this type of propaganda B.S. in the old Soviet Union before it collapsed.”
Reader Holygeezer added: “Jobs Surge?! What utter B.S. Every year the government loudly proclaims about the jobs created in November/December. And come every following January the truth comes out how they were nothing but lousy paying seasonal jobs that then evaporate.”
As for what the figures – legitimate or not – mean for interest-rate policy, Reader Ricardo V. said: “The global economic engine is chugging along — slowly and steadily. Europe is ebbing. The ECB is holding off on stimulus. Russia is in recession and China is on a slow down.
“Commodity prices are also down and the dollar is relatively strong. There are practically no wage pressures, save for the minimum wage protests! There is no inflation and the average household income has not increased. Why then would the Fed raise interest rates and kill any economic activity we do have? Steady as she goes. Don’t panic.”
And Reader Mike P. weighed in with the following: “The better-than-expected job numbers may increase expectations for an earlier rate hike, but the strong dollar should keep the Fed in check. Given the current economic environment, it is unlikely the Fed will increase the Fed funds rate more than 50 basis points in 2015.
“Eventually a strong dollar should act as a brake to somewhat slow the pace of U.S. economic growth. It remains to be seen if easier credit, especially lower mortgage standards, may outweigh a strong dollar and force the Fed to act more aggressively. IMHO the Fed will want multiple quarters of strong data before taking action.”
So to sum up sentiment out there? The economy isn’t as strong as the government says … it can’t handle higher interest rates … and even if it could, the Fed won’t raise them anytime soon. I’ve explained why I see things somewhat differently, but that’s why we have the website – to encourage debate and air everyone’s thoughts! Feel free to add yours here when you get a minute.
|Other Developments of the Day|
Big Pharma is on the move! Merck & Co. (MRK, Weiss Ratings: B) said it would buy Cubist Pharmaceuticals (CBST, Weiss Ratings: C+) for $8.4 billion, or $102 a share. That was a 37 percent premium to where Cubist was trading, making this just the latest mega-deal in the drug space.
Merck is buying Cubist to gain access to research on advanced antibiotics – treatments for “superbugs” that are resistant to current drugs.
A Navy Seal hostage rescue mission went awry in Yemen over the weekend, resulting in the death of American photojournalist Luke Somers. Somers’ cellmate, South African Pierre Korkie, also died in the raid.
Is destroying the value of your nation’s wealth a “good” strategy to spur economic growth? The answer should be self-evident: No! But Japan has been doing exactly that for the last couple of years in a desperate effort to spur inflation and growth.
With the yen hitting yet another seven-year low overnight, though, some are now questioning the value of all the money printing and currency devaluation, according to the Wall Street Journal. It certainly isn’t helping the real economy, even as it has inflated asset prices. We learned overnight that Japan’s economy shrank 1.9 percent in the third quarter, worse than the previously reported 1.6 percent.
Enjoy passing some time on your Xbox or Playstation? Then take a minute to mourn the passing of Ralph Baer this weekend. As the Washington Post notes, he helped develop the first home gaming console and the game of Pong.
Remember, you can comment on these or any other stories by clicking here!
Until next time,