McDonalds' -- Beats But Warns

Posted 2013-01-23 08:13
by Karl Denninger
in Earnings

Oops....

$1.38 .vs. $1.33, sales light a touch at $6.95 billion.

The problem is in expectations -- they are talking about January comps coming in negative, which is not something that usually happens with The Mickey D.

It seems that The Squeeze is indeed on; again, what I think everyone needs to be thinking about is forward guidance, not necessarily results.

What we keep seeing in the forward indicators are numbers that strongly imply at best flat economic conditions. The regional Fed surveys point to this repeatedly, yet nobody thinks this is a big deal, and of course this means that prices should go up for stocks.

But contemplate this: If The Fed is standing on the gas pedal and yet there is no traction of materiality being gained, what is really happening?

That's not hard to figure out -- all of this deficit spending, which is what The Fed is enabling and shoving into the economy, is in fact false demand that doesn't exist in the economy as a whole.

The idea that one should "jump start" the economy is a common chestnut, but we should be instead contemplating whether the previous 30+ years of economic patterns are reasonable -- and sustainable. The answer is "No" -- this "economic progress" has in fact come through debt accumulation that has surpassed improvements in economic output.

This is by definition a pyramid scheme since a percentage change on an ongoing basis must become evermore larger as time goes on.

The basic exponential curve is a mathematical expression that you can't change.

Even if you're McDonalds'.

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