Saturday, October 17, 2015

30% of McDonalds Insolvent?

So says a Nomura analyst report:
"We are in the throes of a deep depression, and nothing is changing," one franchisee wrote in response to the survey by Nomura analyst Mark Kalinowski. "Probably 30% of operators are insolvent."
How come?
"The CEO is sowing the seeds of our demise. We are a quick-serve fast-food restaurant, not a fast casual like Five Guys or Chipotle. The system may be facing its final days."
Perzactly!  "The system." It's just not possible to build out 14,000 stores to do one specific thing well and then change it to a Chipotle (aside from being "like Chipotle" is a different failure.)  McDonald's was designed to borrow massively and cheaply to buy subsidized corn, sugar, pork, chicken, soybeans, sodium, wheat, beef, milk and cheese, rendered to its lowest common denominator and sell it as food.  it is designed to be addictive and is cumulatively harmful. They were in trouble when they have to lure children in with free toys.  The infrastructure and talent is hardwired and purpose-built, the thing has to be bankrupted to  mark it to market, in order for any chance of profitability with those assets.

McDonald's food is not worth the money, their assets cannot be repurposed to what is worthwhile, what customers they have are too poor to follow them up market (or care).

It was a great ride, made possible by mal-credit.  It's on it way out.  When the subsidies go, good food will fall in price because the land USA devotes to subsidizing gmo food will be recovered to grow wholesome food.  The 47 million Americans who claim themselves unable to feed themselves will have better choices at lower prices.

Big Ag is dying out.  The secret TPP is supposed to save them, and finish off small farming in USA.  The customers will win.  We just need to get customers what they want.

The most revolutionary thing you can do in USA is start a business.

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Friday, October 16, 2015

Export Food Seminar

If you need or want to find customers overseas for USA food or beverage (or both), come take the all-day seminar at UCBerkeley extension Saturday, December 5, 2015. Whether selling your own products of representing producers, this seminar is for you.

This seminar is highly rated and has been presented to the Western United States Agricultural Trade Association in various states, the Northwest Food Processors Association annual conference and will be again offered to the Indian Agricultural Council.

In this seminar you create the tool, adapt the tactic and assume the attitude necessary to go straight at a qualified buyer to get your orders.  If no order immediately, you learn, immediately, why not.  We develop either business, or a valid and reliable test to determine what will generate business for your product.  The process is relentlessly focussed on sales.  No theory, no case studies, no speculation... just your product selling now.

This is a hard core, all day boot camp, well worth the investment in time and money.  The course can be used as an elective for one of the UC Berkeley Extension certificates, and in any case you are allowed CEU and a certificate of completion.

For more information, email me or sign up here...


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Why Economics is Mystifying

In capitalism, economics has been exalted out of its subcategory under ethics in the field of philosophy, to an unwarranted sole and separate discipline.  Adam Smith, the grandaddy of economists, was a moral philosopher.

To tart economics up to play the role of a school of study, definitions were necessarily, ahem, enhanced.  Terms such as profit, money, currency, credit, entrepreneur, all have multiple and contradictory definitions depending on who is talking.  If is cacophony when economists meet.

Outsiders are perplexed by what it all means, and explanations go right past interested observers.  Even people who know exactly what they are talking about are unable to communicate what is going on to most people, for most people don't know what the speaker in a given instance means by, say, money.

Two examples:

1. Lacy Hunt is brilliant, and Mish reviews his latest report here.  Both Mish and Hunt know what they are talking about, but that word "money" is so sloppy that unless you are replacing the wrong use of the word money with the term they mean, their point is inscrutable.

And by the way, when this economy comes down, no one can say they did not see it coming.  Your paycheck, pension and property are all forfeit in the coming disaster.  Your only hope is self-employment.

2. Even the Austrians redefined money to make it closer to reality, but money is strictly gold or silver (almost always) otherwise is is tallies represented who owes whom what.

Aristotle said something about "first, define your terms."  A field of study in which the vocabulary means nothing is the playground of scam artists.

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Wednesday, October 14, 2015

Rents Rising?

Mish missed this...
I talked to a complex in Portland last week that had 3500 apartments under management with a total of 7 open apartments.
I am amazed by the amount of apartments that are either tax credit or subsidized in some manner. All of them have long waiting lists.
Landlord welfare program...  Section 8, massively distorts rents.  Section 8 welfare program pays the difference between what poor people can afford and the prevailing rent in a neighborhood.

Easy enough... a land lord can have 5 people paying $1500 a month, and that this the prevailing rent.  Then he can put section eight people in his other 15 units at $1500 per month, $300 from the renter and  $1200 from the taxpayer.  The building suffers, but the landlord makes outsized profits.

If no such subsidy existed, rents would be more what the market could bear.  Rents would fall.

But as long as the hegemon can extend credit with no rational basis, he can maintain the sinecures of the welfare state as he prosecutes criminal wars worldwide.

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Monday, October 12, 2015

IMF Three Trillion Credit Crunch

You mean world corporate mal-credit is not maintaining the nominal valuations upon which bankers depend for their bonuses?
Governments and central banks risk tipping the world into a fresh financial crisis, the International Monetary Fund has warned, as it called time on a corporate debt binge in the developing world.
These people fly around on private jets and have caviar and duck and champagne with each meal, and sometimes catch wind there may be a problem out there.  Now that it turns out the USA cannot prosecute wars effectively, even when it wants to, faith in the warfare/welfare state creeps in.

Paycheck, pension or property... unload those and clear off any debt.  And start up your own family business.  No family?  Start one!

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Sunday, October 11, 2015

The Two Business Killers: Inventory and Receivables

So we are at it again, yet another crash-warning indicator, inventory overload.  Read the article for yourself, but note below...
Hardly. Even today, for most companies, capital isn’t free. And there are millions of other reasons why large inventories are a risk: spoilage, changing fashions or customer preferences, new products and obsolescence, stuffed warehouses and overflowing storage tanks…. When inventories get out of hand, they become a nightmare, and whittling them down often means big price cuts and write-offs, euphemistically called “inventory adjustments.” Cash down the drain.
When credit originates from the banking system, instead of the wholesalers watching their customers, an organic link is broken and wholesalers are blind (or simply do not bother to look) at the health of their customers.

Before 1970, wholesalers monitored the creditworthiness of their customers, and extended interest-free, asset backed credit to worth customers.

Once the banks got in the business of of lending nothing (credit) at interest, there was no rational limit to what they could lend, and easily and to the unworthy, driving the worthy out (like money, bad credit drives out good.)  In the last fifty years, the unitive effect of bene-credit extension has completely atrophied, and no one currently knows how to manage this competitively.  So add to the list of what to bring back after this next crash, and that is bene-credit management.

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