This Week in Summary 10/28/2022

Oct 31, 2022 | Bubble Monitor, No Bull Economics

Bubble Monitor Chart
Bubble Monitor Chart

It all started last week with Bank of America telling us that everything was great with the consumer. So good in fact, that consumers are borrowing more money, including +12% consumer credit card growth! Of course, we were skeptical because government economic data is telling a different story. But then, the restaurants started to report encouraging 3Q22 results, starting with Domino’s which had been sucking wind but now is able to point to sequential growth over the last couple of quarters. In turn, Starbucks’ report of +9% same-store-sales growth gave us reason to celebrate by running out to buy a hot latte (old school since 75% of its sales are now driven by cold beverages). But surely Starbucks is an anomaly since all its affluent customers are trading down from the purchases of expensive luxuries (like cars & houses) to affordable indulgences like nitro cold brews that also serve as a legal form of speed. But then an innocuous casual chain, BJ Restaurants, weighs in with a +8% comp increase for the quarter with management reporting its belief that the increasing trend of workers returning to the office will continue, driving more lunch business as well as in-person meetings which will provide a tailwind for catering. Say what?? Certainly, they are predicting a tailwind to bread lines? Ok, and then Wingstop completely wows the markets with a +36% 3-year comp during the quarter driven by a customer base that includes many from the lower-income demo. What do we conclude? Not exactly sure, but maybe lower gas prices (down -23% from June) have something to do with all the exciting news? The question is: how to keep this trend moving in the right direction without draining the nation’s strategic oil reserve? This question may become increasingly relevant, especially if we don’t get a break on interest rates real soon.     


Is it Time For Capital Markets to Evolve?

How to React to Federal Defecit Improvement?

BJ Restaurants Profits From Workers Returning to the Office

Starbucks a Diamond in the Rough

Will Netflix’s New Low Cost Plan Save Them?

Follow us on LinkedInTwitterFacebook, and YouTube!

Disclaimer of Liability
Restaurant Research

Email Sign-up

15 Second Posts

What is the Federal Government’s Job?

A couple of weeks ago we conducted a thought experiment in which the government became a nonprofit, and this week we propose another thought experiment in which the government becomes a public corporation. We suggest that this could provide very useful input into the debt ceiling debate.

The Importance of the Balance Sheet in Financial Analysis

While most investors are focused on sales growth & margins, they would be well served to further consider the strength of a company’s balance sheet. We look at BlackRock’s financial condition as an illustrative point.

The Importance of Free Cash Flow in Financial Analysis

Cash represents the lifeblood of all business enterprises which is why it is important to analyze free cash flow which we define as operating cash flow minus capex, dividends, and stock buybacks. We illustrate DoorDash as an example of why cash flow analysis is so important. 

Lessons From Tucker Carlson

There are many theories about why Fox booted Tucker Carlson, but it may be a very simple reason which can instruct everyone involved in the consumer retail segment.

It is Imperative that Climate Change Regs Incorporate Economic Reality

This week we spotlight efforts by international agencies to lower the earth’s temperature by imposing onerous regulations on energy producers. We suggest it will be better to: begin a process of implementing continuous improvements designed to support both economic & climate progress; and use international organizations to share tech & best practices as opposed to providing them with regulatory powers best left to individual nation-states.   

Part 3 – It’s Nice for the US to Save the Climate, But What About the Rest of the World?

In our last 2 posts, we outlined the probability that the UN’s push to lower the world’s temperature by -2 degrees Celsius could drive significant U.S. energy price hikes & shortages. How is this going to help as Asia ramps up the use of coal? Can humans lower the earth’s temperature anyhow?

Part 2: Who is Left to Make Investments in Fossil Fuels & Clean Energy?

There is not a lot of incentive for profit-seeking companies to invest in demonized fossil fuels or in clean energy projects lacking ROI. This points to substantially higher energy prices and supply shortages that will have a profound economic impact.

Part 1: Ramping Energy Demand Clashes with UN’s Environmental Goals

From 2021 to 2050, ExxonMobil forecasts that 85% of the population growth will be driven by developing countries, which in turn, will drive a +15% increase in energy demand.

What if the Federal Government Was Turned into a 501c3 Non-Profit?

Given all the focus on the debt ceiling, we propose a thought experiment in which all 100 federal agencies must compete for charitable donations. If taxpayers get to choose for themselves what to fund, what might we learn? 

Like Sinatra Croons: “So you see it’s all up to you, you can be better than you are.”

The top-paid hourly workers are currently enjoying the fastest wage growth, indicative of the current challenge to recruit & retain a skilled labor force.

Digital Marketing Opportunities
Restaurant Research

A Restaurant Research LLC Company