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McDonald's Delicious Dip


Fast-food chain still digesting its yearlong move.


Greetings from New York, where I'm reminding myself that bears make money, bulls make money, and pigs get slaughtered, defleshed, mulched, grilled and turned into delicious McRib sandwiches!

This is a wordy way of saying I took off some of that succulent pop in Bank of America (BAC) at the open and used the proceeds to buy the dip in McDonald's (MCD). McDonald's has been digesting a large move between the mid-50s and mid-60s for the better part of a year. I've been playing accordingly, but -- as is always the case in retrospect on trades that work -- not aggressively enough.

Worrying about trades prospectively, I'll spend the rest of the day mulling if I should have taken all the gains in Citi (C) and Morgan Stanley (MS). That's the thing about trading stocks in industries you regard as more or less doomed: It makes it sort of tough to ride out the positions to their optimal conclusion.

Here's what I'm doing when not pondering the genius of the Simpsons episode in which Troy McClure visited the slaughterhouse:

  • As much as I love corporate catfights, this Lewis versus Thain slapfest is more predictable than a Die Hard sequel. I'd happily trade my McDonald's breakfast meal to hear Lewis explain Thain's firing with something like this: "In addition to needing a scapegoat for wildly overpaying for Merrill Lynch, he's 9 years younger than I am. Criticize me however you want, Maria, but I'm not foolish enough to start hiring my own replacements when I'm looking at billions in losses for the next few quarters. As far as my BOD is concerned, I want them to think BAC is Ken Lewis and a collection of guys who make sea slugs look smart."

    Despite the fact that Mr. Lewis will say nothing of the sort, the stock is up 10% since he announced he was buying shares. I stand behind my offer to kiss him full on the mouth.

  • Somewhat ironically, even as the banks scream higher like a scalded chimp, companies engaging in financial behavior as a sidebar to core operations are getting slapped down consistently. Southwest (LUV) has taken a 17% beating after hedging losses, following in the jetstream of United Airlines (UAUA) and American Airlines (AMR) losses and price action last week.

  • Pfizer (PFE) is down 9% after the company finally took it's merger bat off its shoulder and made a purchase. While I'd imagine Pfizer CEO Jeff Kindler is less than thrilled about the subsequent reaction (particularly since the Street all but begged him to make a purchase for years), the idea was that Pfizer would put some of its cash to work in order to diversify their business. Borrowing $20 billion to buy Wyeth (WYE) is a bit like trashing your pristine balance sheet in order to become a bigger version of what you were before - then fire thousands of people.
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No positions in stocks mentioned.

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