Monthly Archives: June 2007

Technically you’re not supposed to take pictures inside the Walt Disney World Country Bear Jamboree. But I did. It’s a lousy picture, and a lousy attraction. Img_0318


It’s About Time…to Buy More P&G

Yield curve is steepening, for good and ill. Short rates are staying put, long end is going up. My variable rate interest mortgage needed a breather just like millions of other people. Too bad we have to take it in the neck in the stock portfolio to get the pause.

This is from Liz Ann Sonders, Chief Investment Strategist at Schwab, and a decent straight shooter:

With the aforementioned rise in long rates, the yield curve has been steepening, from a long period in inverted territory (when short-term rates are higher than long-term rates). As Ned Davis Research points out, a steepening curve typically has favorable implications for the stock market.

However, longer-term implications have been much less favorable after steepenings caused by rising long rates (as is the case today), not falling short rates. A year after steepenings caused by rising long-term rates, the S&P 500 had a median increase of 5.4% compared with a median rise of 16.8% a year after steepenings caused by falling short rates. In addition, cyclical stocks tend to outperform when the curve is steepening caused by falling short rates while more defensive stocks outperform if the cause is rising long rates. This latter point helps reinforce our current bias toward defensive sectors like consumer staples and health care.

Pret’s Rules

More businesses should do fewer things and do them well. Lesson hit home on Mon, 6.11 in meeting with Julian Metcalfe, the cofounder of Pret A Manger, the British quick-serve sandwich shop. I don’t know why they haven’t taken over Manhattan yet. Cosi and ABP suck. At Pret, the resto concept is pared down. Lots of registers, fewer sandwich choices, grab and go, it’s all fresh. Speed and quality are paramount. All the sandwiches and breads are made in each store’s own kitchen throughout the day. Ham and gruyere was tasty. Metcalfe is stickler about simplicity. Juices are eponymous (carrot’s carrot, no fancy Jamba names like Chai Meditation Explosion). Metcalfe dismisses customer service training. "You can’t teach someone to smile." Employees get respect, not training.

It took them a few years to work with NYC food suppliers, struggles early on with only 11 stores built over five years or so, but now they’re set to explode. Distributors get it. Going to 44 NYC stores by 2010. And France, Shanghai, Boston, DC.  Same-store sales up 23% in US. Any restaurant would kill for that growth. McDonald’s still owns 30% of the equity. Some founders want to cash out. Look for some share sale in the next 12 months. If it’s anything like Chipotle was, get in on it.