Month: July 2021

By Alicia Kelso of RestaurantDive,

Summary:

• McDonald’s announced it is cutting the technology fees it planned to charge U.S. franchisees by 62%. This equates to about $42 million, from the $68 million communicated to the system in December.

• Bloomberg reports the change was made after a third-party review was conducted of the technology fees. The independent review was announced in February at the request of the National Franchisee Leadership Alliance, made up of McDonald’s operators, who contested they owed any tech-related debt.

• According to an internal memo obtained by Bloomberg, the change was made to “reset” the relationship between corporate and franchisees. Tension between the two factions escalated after the fees were initially announced, leading to operators cutting off nonessential communication with corporate and pushing for the formation of a technology co-op to gain more control over spending decisions.

The back-and-forth with franchisees persists for McDonald’s despite an otherwise strong performance for the chain during the pandemic for the chain as it saw 5.5% same-store sales growth in Q4, record-high revenues and more profitable restaurants.

Though McDonald’s claims operators were made aware of the new fees well in advance, several franchisees have publicly said they were caught off guard by the tech fee announcement, adding that their technology costs have increased 10-fold in 10 years. Operators have added this issue is “irrefutable,” claiming they do not owe any funding for a lag in technology investments, Restaurant Business reported.

Perhaps ironically, McDonald’s restaurants were somewhat insulated in part because of the company’s technology infrastructure. The chain generated nearly $1.5 billion in digital sales for Q1 2021 through its app, kiosks and delivery, for example.

That said, McDonald’s technology hasn’t been a sole silver bullet, either. In March, reports surfaced that the company was considering the partial sale of Dynamic Yield following franchisee complaints that the artificial company was not driving the sales boost they expected.

McDonald’s also shifted its remodel strategy in 2018 after franchisee discontentment over the hastened pace of the costly initiative. Such compromises are critical — 95% of McDonald’s U.S. system is franchised, so tensions between operators and corporate could have significant implications on the business.

It’s unclear at this point whether the reduction, however, will ease current tensions. Though 62% is a large trim, $42 million remaining is still a significant number. The company seems willing to find a solution once again, which is progress compared to just a month ago, when several franchisees were threatening legal action over the tech fees. Finding a compromise this time around may be even more critical to long-term success in a post-pandemic environment as the chain prepares to roll out its new loyalty program and as a vast majority of consumers plan to hold onto their digital behaviors.

Formula One fans have watched enough races and cockpit live feeds to notice F1 cars have yokes instead of steering wheels. Even when the race cars are zooming around hairpin turns, F1 drivers barely turn the wheel about one-third of a full rotation, nevertheless take their hands off the yoke. But for whatever reason, when Tesla refreshed the Model S, it decided to swap out traditional steering wheels for yoke-style steering, which has been a nightmare for some driving on conventional roads. 

There’s been a fierce debate on social media on whether the yoke is safe for public roads, while Tesla fanboys are defending using the race car steering wheel that is meant for the track. 

In the video below, a Tesla owner must make multiple rotations on the steering wheel to complete a normal turn. 

“Don’t judge the yoke and the lack of shifters until you try it,” they said. pic.twitter.com/bG0lCbJr5f

— Quinn Nelson (@SnazzyQ) June 26, 2021

Here another video of a Tesla driver using the yoke that makes driving so much harder. Notice how many rotations the driver has to make for a traditional turn than a standard steering wheel? 

Another clip shows a driver who has to make multiple rotations of the yoke just to stay straight in a parking lot. 

Commenting on the video, one Twitter user said: “This is literally the incorrect way to drive. The reason you hand over hand is to keep control of the wheel in both directions. If your hand slips like this while turning, you’re going right into oncoming traffic.” 

The National Highway Traffic Safety Administration (NHTSA) says it’s fine if a driver has to move hand-over-hand at low speeds but making multiple rotations at high speeds with one hand off the yoke is a recipe for losing control. 

Meanwhile, the refreshed Model S, otherwise known as Tesla Model S Plaid, was raced at the 99th running of the Pikes Peak International Hill Climb, without a yoke but a traditional steering wheel. Hmmm… 

The yoke seems to be another gimmick that is not practical for everyday driving. 

… and one more thing: 

pic.twitter.com/ozoAI2nWTy

— Armando Ferreira (@mondobytes) June 27, 2021

While today’s jobs report came in a bit on the weak side despite its impressive headline beat of 850K jobs created in June (a majority of which were teachers and bartenders) with wage growth slowing and the unemployment rate rising, we expect the Fed to look at today’s jobs data and try to again kick the can although whether this month or next, the inevitable taper announcement is coming not too long ater, the first rate hike as well. The only question is when.

Meanwhile, until that happens, Bank of America’s CIO Michael Hartnett reminds us that every day for the foreseeable future, as has been the case every day for the past 6 months, central banks bought $10 billion of bonds every day, the US federal government spent $20 billion every day, global stock market cap grew $73 billlion every day, and US bond & stock issuance averaged $20 billion every day.

The result: the just completed first half of 2021 was the 7th best for global stocks in the past 100 years…

… although as BofA cautions, the annualized return following prior 6 best H1 gains was a 9% drop in the next 6 months. The first half of 2021 was also the 5th best start for commodities in past 100 years…

… and unlike stocks, returns in the subsequent 6 months far more solid, with BofA calculated that annualized return following prior 4 best H1 gains was 12% in 6 months.

Some more details: 50% of the S&P500’s 15% YTD gain was generated by just 29 stocks (oh which, the top 20 are shown below).

And while Hartnett mocks that everyone’s favorite H2 “contrarian” trade (an oxymoron) is long FAANG – because supposedly the reflation trade is now out of favor – the top 5 S&P500 stocks, the tech gigacap FAAMGs, still account for 22.4% of index (down from 24.5% peak in Aug’20 – Chart 12).

What about the economy: Well, during the past 6 months, global COVID-19 vaccinations surpassed 3 billion…

… which helped US GDP grow at the fastest pace in 70 years, while US CPI surged 8% annualized, the fastest pace since ’82; or as Hartnett correctly predicted about one year ago, “vaccine = boom.”

But if H1 was a stellar “boom” quarter for markets and the economy, H2 will be far bumpier: here are the “known unknowns” according to BofA:

• China eases (bullish),
• US payrolls/labor market recovery weak (bullish + no taper + productivity “miracle” + “carry trades” carry-on);

• bubble in stimulus = bubble in asset markets;
• cost-push inflation (higher oil + huge impairment to global supply chains – see US manufacturing goods inventories vs deliveries, chart below) hits profit margins (bearish);

• Biden infrastructure deal collapses (bearish);
• New Fed Chair nominated Oct/Nov (bearish);
• Inflation ends Fed’s “strategic ambiguity” on monetary tightening (bearish);
• Peak US consumption as artificial supports end & labor/tax/health uncertainties + demographics keep US savings rate at high (Japanese/European) levels (bearish).

What does Hartnett think happens next? Looking at the second half, the BofA CIO sees:

• inflation to stagflation,
• QE to QT,
• combo of rising Rates, Regulation, Redistribution (3Rs) & peak Positioning, Policy, Profits (3Ps) = low/negative stock/credit H2 returns;
• optimal barbell long inflation & long quality;
• note June global PMI’s…1st time since Apr’20 more countries posted monthly declines than gains + US ISM prices paid index @ 92.1, highest since Jul’79; peaking PMI’s = IG credit > HY & flight-to-quality

In short, a stagflationary mess is about to unfold.

A Romanian bitcoin billionaire who died suddenly at the age of 41 has left behind more questions than answers – chief among them; where’s the money?

41-year-old Mircea Popescu, an outspoken figure and an early adopter of Bitcoin, left behind an estimated $2 billion in bitcoin after reportedly drowning off the coast of Costa Rica near Playa Hermosa, according to local news reports, which said that he was “swept away by the current and died on the spot.”

And while his death has since been confirmed by three women who were reportedly close to him, others have suggested he may have faked his own death.

According to the Daily Mail, rumors are swirling that Popescu’s family doesn’t have access to his digital assets – which, as crypto analyst Alexander Marder of Crypto Briefing notes, could mean that tens of thousands of Bitcoins are ‘off the market.’

Other Bitcoin watchers have similarly suggested that the reported $2 billion in bitcoin could be lost forever.

“It looks like that with the deaths of Mircea Popescu and John McAfee a significant amount of $BTC might be lost forever. RIP,” tweeted Marder (though McAfee claimed to have been broke near the time of his death).

It looks like that with the deaths of Mircea Popescu and John McAfee a significant amount of $BTC might be lost forever.

RIP https://t.co/8KGPows3Kh

— Alexander Mardar (@amardar1) June 28, 2021

Popescu was known for being eccentric and outspoken – causing offended critics to dub him the ‘father of Bitcoin toxicity.’

“Bitcoin is fate. It operates completely outside of any human agency. For all you know about [bitcoin creator Satoshi] Nakamoto, bitcoin might as well have created itself,” he said in one post.

“Bitcoin can kill all your friends, and all the people you respect… It can poop in your drink and rape your pets… If lightning strikes where you sit, whether you feel a warm cosy sort of love or the most burning hatred imaginable is strictly irrelevant – electricity stays,” he said in another.

Mircea Popescu was offensive, flawed and unapologetic. His death* is the most significant in #Bitcoin‘s history since the passing of Hal Finney. https://t.co/jbVQ1gpEzZ

— RIZZO (@pete_rizzo_) June 28, 2021

One of the technology’s earliest and most ambitious entrepreneurs, Popescu is known for starting MPEx, a self-styled “Bitcoin securities exchange.” Founded in 2012, the website was once an early breeding ground for early Bitcoin IPOs, a practice that earned him the ire of the U.S. Securities and Exchange Commission, an agency whose power he took no shortage of joy in openly undermining.

From there, Popescu would gain notoriety for being among the first to combat scams in public, emerging as a vocal critic of Ripple (the company that launched XRP) as well as Bitcoin Savings & Trust, which was later revealed to have been a pyramid scheme. –Bitcoin Magazine

 Read much more about Popescu here.

 

Authored by Euni Han via Entrepreneur.com,

With just seconds left until takeoff on Tuesday, SpaceX’s launch was halted after an aircraft flew into launch range, according to CNBC.

Founder Elon Musk voiced his frustrations on Twitter about the rules around rocket launching.

“An aircraft entered the ‘keep out zone’, which is unreasonably gigantic. There is simply no way that humanity can become a spacefaring civilization without major regulatory reform. The current regulatory system is broken.” 

Musk has been a vocal critic of launch regulations this year as SpaceX has been launching Falcon 9 rockets at an average rate of every nine days. The company has also flown several tests of its Starship prototype rockets. When one was delayed in January, Musk took to blasting the FAA.

“Unlike its aircraft division, which is fine, the FAA space division has a fundamentally broken regulatory structure,” he said. 

“Their rules are meant for a handful of expendable launches per year from a few government facilities. Under those rules, humanity will never get to Mars.”

Meanwhile SpaceX ignored warnings from the FAA about launching a test flight for Starship prototype SN8 in December. But since then, the FAA has defended the company in front of Congress, saying SpaceX “modified their procedures effectively.” The FAA also says it’s also working on streamlining launch regulations and rules. 

Despite recent tweets, Musk has said he agrees with regulators “99.9% of the time.”

On the “rare occasions” he doesn’t, the billionaire entrepreneur says it’s usually “due to new technologies that past regulations didn’t anticipate.” 

June’s US seasonally adjusted annualized rate for light vehicle sales collapsed sequentially from May to June, falling to 15.4 million as low inventory levels at dealers constrained sales.

Despite the sequential drop from May, where the SAAR was about 17 million, June’s number still marks a high teens percentage gain year-over-year, thanks to easy comps due to Covid.

Yes, June auto sales tumbled to a 15.4MM SAAR from 17MM

No, this is not due to lower demand (prices are soaring) but due to a collapse in dealer inventory

— zerohedge (@zerohedge) July 2, 2021

Goldman Sachs said in a note out this week that June’s SAAR was below their estimates of 15.5 million to 16 million. The number also fell below Bloomberg’s 16.5 million estimate and StreetAccount’s estimate of 16.1 million. 

Vehicle sales were up 22% year over year in June, Goldman noted, while pickup and SUV sales were up about 16% and 15%, respectively. Analyst Mark Delaney told clients that “pickups and SUVs as a percent of total units remained at a similar mix from the year prior at 19% and 53%, respectively” and that Goldman believed “consumer demand for SUVs and pickups remains strong, and Ford and GM are prioritizing production of larger vehicles.”

EV sales in June were up about 148% year over year and hybrid sales were up about 56%. 

Delaney attributed the growth in EV sales to “the increasing popularity of electric and hybrid powertrains, as well as a soft yoy compare as some states where EVs are more popular had stringent shelter-in-place restrictions in June 2020.”

Even as sales rose, incentive spending for vehicle was down 33% year over year and 11% sequentially, indicating that pricing could remain firm in coming months, leaving dealerships and automakers levers to pull to spur demand, if necessary. 

Most notably, inventory on a unit basis fell to 1.3 million in June from 1.4 million in May, Goldman noted. That number stood at 2.6 million in June 2020. 

“Inventories remain at historically low levels, and we continue to believe it will take time for inventory at dealers to return to normalized levels given the strong demand for vehicles coupled with ongoing supply chain challenges (particularly with semiconductor chip shortages, but also due to shipping constraints),” Delaney concluded.