Archives for June 9, 2017

McDonald’s Is Coming Back From the Dead, and It’s Not Just Because of $1 Soda

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It has been a long haul back from the dead for McDonald’s (MCD) , but signs of life on several fronts continue to emerge.

Credit Suisse analysts raised their price target on McDonald’s by $8 to $157 in a note Thursday, citing “continued momentum,” as “SSS [same store sales] among our franchise contacts have accelerated from 1Q17 [first quarter], with each month better than the last.”

The stock closed Thursday’s session at $151; a year ago, it was trading at $123.09.

Among the menu offerings that have driven growth are $1 soft drinks and $2 small coffee. Additionally, franchisees told the analysts that improving food quality and operations may now be helping to lift market share. Other upcoming changes are a nationwide roll-out of chicken tenders that are now being tested.

“While the stock may look expensive on an absolute basis, we note McDonald’s trades in line or at a discount to most of its franchise peers,” wrote Credit Suisse analysts Jason West and Jordy Winslow.

McDonald's hoping for a continued turnaround.
McDonald’s hoping for a continued turnaround.
McDonald’s earnings were $4.8 a share in 2015 and $5.72 a share in $2016, but Credit Suisse estimates they will be $6.33 and $6.75 a share, respectively, for 2017 and 2018.
Meanwhile on Wednesday, McDonald’s and other companies, including Uber, were able to breathe a sigh of relief when the Department of Labor (DOL) withdrew informal guidance on joint employment and independent contractors instituted in 2015 and 2016 under the Obama administration. The withdrawal nixes the classification of companies with franchise business models as “joint employers” along with their franchisees, reported New York on Thursday.

Trade organizations representing the fast-food industry praised the Trump administration’s move.

“While uncertainty surrounding the new joint employer standard has made it harder for America’s 733,000 franchise owners to grow and create new jobs, we are pleased the DOL is taking first steps to undo this costly regulation created by the previous administration,” said International Franchise Association Vice President of Public Affairs Matt Haller Wednesday in a press release. “That being said, we urge Congress to now recognize the uncertainty and unreasonable costs the NLRB’s [National Labor Relations Board] decision has placed on franchise owners and take action to find a true permanent solution.”

In a pending case involving McDonald’s, the NLRB has sided with the fast food workers, wrote New York.

Bill Gates and Warren Buffett agree on this singular piece of advice for entrepreneurs

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Two titans of business took a tour of a mattress factory and seemed to be having the time of their lives. And that merry jaunt during Berkshire Hathaway’s BRK.A recent annual shareholders weekend is not unrelated to why they’re both billionaires. Warren Buffett and Bill Gates chat and laugh, as they loll about the Buffett-owned Nebraska Furniture Mart in Omaha, Neb.

“My real vocational goal was to be a mattress tester,” Buffett told Gates in the video posted online this week. “I thought that would be a terrific job.” (Instead, he bought the company.) When asked if he could remember buying his first mattress, the Oracle of Omaha answered, “Well, I didn’t do much of the purchasing in our family. I can’t recall ever buying anything, actually.”

But Buffett and Gates agreed on one thing that drove their success. They did something they enjoyed: Buffett — investing and finding good deals (rather than shopping) and Gates — building computers and software. “Building Microsoft was incredibly fun and because we were right about software we had the wind at our back,” the co-founder of Microsoft MSFT said.

The chairman of Omaha-based Berkshire Hathaway said it’s critical to choose a profession or vocation that you love. “Being successful in almost anything means having a passion for it,” Buffett said. “If you see someone with even reasonable intelligence and a terrific passion for what they do, and get people around them to march even when those people can’t see over the top of the next hill.”

Testing mattresses with Warren Buffet and Bill Gates:

It’s something that other successful entrepreneurs always look for in potential investors. Case in point: Max Gunawan, founder of a San Francisco-based Lumio, an LED lighting company, appeared on ABC’s “Shark Tank” in 2014 to seek investment after raising $578,000 on Kickstarter. He asked billionaire Mark Cuban and the other sharks for $250,000 for an 8% equity stake in his business.

The sharks loved the product, but they were also impressed that Gunawan spent four months camped out at his factory in China perfecting the product. They knew he believed in his lights. All five sharks offered him a deal and he accepted $350,000 for a 10% equity in Lumio from investor and panelist Robert Herjavec. Lumio is now sold in high-end stores all over the world.

Not everyone agrees with the passion approach to finding success. As Cal Newport wrote in his book, “So Good They Can’t Ignore You: Why Skills Trump Passion in the Quest for Work You Love.” “If a young Steve Jobs had taken his own advice and decided to only pursue work he loved, we would probably find him today as one of the Los Altos Zen Center’s most popular teachers.”

“But he didn’t follow this simple advice,” Newport wrote of Apple’s AAPL, -0.24%  co-founder who died in 2011. “Apple Computer was decidedly not born out of passion, but instead was the result of a lucky break — a “small-time” scheme that unexpectedly took off. I don’t doubt that Jobs eventually grew passionate about his work.” (Or perhaps his passion was finding solutions to problems.)

Back in Nebraska Furniture, Gates and Buffett stumbled upon another money-making trick in retail. It’s easy to get in, but hard to get out. “How do we get out of here?” Gates asked. “Well, we don’t want you to get out of here. It’s well designed in that respect,” Buffett replied. “It’s like a casino,” Gates said. “Let me get oriented now,” Buffett replied. “The truth is I don’t know where we are.”

What the UK election result means for Brexit

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The European Union flag is displayed on stage during the launch of the Liberal Democrats' manifesto in London, U.K., on Wednesday, May 17, 2017.

Simon Dawson | Bloomberg | Getty Images
The European Union flag is displayed on stage during the launch of the Liberal Democrats’ manifesto in London, U.K., on Wednesday, May 17, 2017.

With the result of the U.K. General Election showing a hung parliament, analysts are contemplating what it means for Brexit negotiations, with Prime Minister Theresa May losing her parliamentary majority.

The Conservative leader called a snap election to strengthen her parliamentary majority and have more power and freedom to negotiate Britain’s exit from the European Union.

However, the results could make talks with Brussels “more complicated,” according to Guntram Wolff, director of the Brussels-based Bruegel think tank.

“It may be impossible to compromise due to domestic political pressures in the U.K.,” he told CNBC. “So a no-deal scenario may become more likely.”

Karel Lannoo, the chief executive officer of the Centre for European Policy Studies think tank, agreed. “A small majority will not help. This means a lot of infighting will go in the Tories (Conservatives) and this will not be helpful for the EU either, as no clear position will emerge.”

A senior EU official told CNBC at the end of May, when polls were projecting a stronger presence in parliament for the Conservatives, that “the election will certainly help (Brexit talks).”

“We need a strong leader,” the official said on the condition of anonymity due to the sensitivity of Brexit talks, adding that nonetheless the divorce process will have to happen in the step-to-step approach that the EU wants.

Meanwhile, John Hardy, head of forex strategy at Saxo Bank, told CNBC via email that the outcome of the British vote will have a little impact on Brexit, given that the European Union will not change its stance on the negotiations.

“I think the EU’s stance will be little affected by the outcome of the election unless there is a sense that Brexit can somehow be re-engineered into an eventual Bremain referendum,” he said.

By 7:30 a.m. London time, Prime Minister Theresa May’s ruling Conservative party had won 314 seats while the opposition Labour Party, led by Jeremy Corbyn, had 261 seats. Meanwhile, the Scottish National Party (SNP) had won 35 seats, the Liberal Democrats were at 12 and the Democratic Unionist Party had secured 10. Voter turnout was at 68.7 percent, according to the BBC.

Comey ‘stunned’ by Trump’s request to drop Flynn investigation, Senate committee hears

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Former FBI director gives damaging testimony about dealings with U.S. president

Former FBI director James Comey accused the Trump administration Thursday of spreading “lies, plain and simple” about him and the FBI in the aftermath of his abrupt firing in dramatic testimony that threatened to undermine Donald Trump’s presidency.

As he opened his much-anticipated first public telling of his relationship with Trump, Comey disputed the Trump administration’s justification for his firing last month, declaring that the administration defamed him and more importantly the FBI by claiming the bureau was in disorder under his leadership.

“Those were lies, plain and simple,” Comey told the Senate intelligence committee. “And I am so sorry that the FBI workforce had to hear them and I’m so sorry that the American people were told them.”

In testimony that exposed deep distrust between the president and the veteran lawman, Comey described intense discomfort about their one-on-one conversations, saying he decided he immediately needed to document the discussions in memos.

“I was honestly concerned that he might lie about the nature of our meeting, so I thought it really important to document,” Comey said. “I knew there might come a day when I might need a record of what happened not only to defend myself but to protect the FBI.”

Comey made his comments as the packed hearing got underway, bringing Washington and parts of the country to a halt as all eyes were glued on televisions showing the hearing. He immediately dove into the heart of the fraught political controversy around his firing and whether Trump interfered in the bureau’s Russia investigation, as he elaborated on written testimony delivered Wednesday.

In that testimony he had already disclosed that Trump demanded his “loyalty” and directly pushed him to “lift the cloud” of investigation by declaring publicly the president was not the target of the FBI probe into his campaign’s ties to Russia.

​Comey also said in his written testimony that Trump, in a strange private encounter near the grandfather clock in the Oval Office, pushed him to end his investigation into former national security adviser Michael Flynn.

The Senate intelligence committee chairman, Republican Richard Burr of North Carolina, asked Comey the key question about that encounter: “Do you sense that the president was trying to obstruct justice or just seek a way for Mike Flynn to save face, given he had already been fired?”

“I don’t think it’s for me to say whether the conversation I had with the president was an effort to obstruct,” Comey replied. “I took it as a very disturbing thing, very concerning. But that’s a conclusion I’m sure the special counsel will work towards to try and understand what the intention was there and whether that’s an offence.”

Later, in a startling disclosure, Comey revealed that after his firing he had tried to spur the appointment of a special counsel by giving one of his memos about Trump to a friend of his to leak to the press.

“My judgment was I needed to get that out into the public square, ” Comey said.