- MGM closing below $30.99 is very bearish.
When you match up that franchisee sentiment with MCD’s stock price, it becomes apparent that increased levels of franchisee anxiety does not bode well for the overall MCD system and its stock price. For reference, the late 1990’s to 2002 was one of the worst periods for McDonald’s franchisees and not surprisingly, MCD’s stock. This number has now crept up to 5.2 (above the 3.7 average)…Stay tuned!
Prices are finally coming down (down -7% year over year), and this is starting to stimulate some tepid demand. I still think prices have to come in another -14% in order to alleviate this untenable inventory position of unsold homes. On the inventory front, month’s supply is still extremely elevated at 11.2 months.
If you are long a US home and looking to sell it, marking it to market rather than to model is my advice.
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As the leverage cycle rolls over alongside the economic cycle, access to capital will continue to tighten. This will lead to some mega blowups in the land of levered long hedge funds.
Keep your eyes on this developing "Trend”.
In 1965 while speaking before the House of Commons Macleod famously observed “We now have the worst of both worlds—not just inflation on the one side or stagnation on the other, but both of them together. We have a sort of “stagflation” situation.”
Macleod died in 1970, but he would certainly recognize the implications of the chart attached below. With the GDP numbers released on Friday for the second quarter the UK economy is clearly entering the worst of both worlds.
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My approach to the question this week was specifically geared to McDonald’s. I believe that the McDonald’s system faces many challenges, the extent of which is not being felt in Oak Brook. Having been a McDonald’s observer for the better part of 15 years now, I wanted to put franchisee anxiety into historical context. With that in mind, we set out to survey the McDonald’s franchise system to see how the general population is feeling.
If "1" is 100% contentment and "10" is wanting out as fast as you can, what is your level of anxiety with how Oak Brook is handling the issues franchisees are facing today? For historical context, to the extent they could, they were asked to rate past periods too.
(1) Overall in the history of MCD – 3.7
(2) In the 1980s – 4.3
(3) In the late 1990s to 2002 – 6.9
(4) Today – 5.2
The late 1990’s to 2002 was one of the worst periods for McDonald’s franchisees. While we are not seeing those levels of discontent today, the trend is not working in management’s favor.
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