MCD, UPS, HOT Reveal the Real Economy

The title of an abysmal Gen-X movie more than a decade ago sums it up in 2 words: Reality bites. 

No whining here, save for my ongoing embarrassment at buying a movie featuring both Ethan Hawke and Janeane Garafalo. I’m not even going to argue the curiosity of a 100-point rally driven by Ford (F), or its ability to make money in a competitive environment in which it received money for nothing -- while its larger competitor, General Motors, was saved from bankruptcy and is now run by the US government. If Ford isn’t giddy over its set up for the next few years, it needs to get collective treatment for anhedonia.

What the remaining “long-term investors” should be reacting to, in my entirely not humble opinion, are the earnings from McDonald's (MCD), Starwood (HOT), and United Parcel Service (UPS); all reported misses -- at varying degrees of miserable -- this morning. "HOT is up" -- a reaction I was once young enough to find confusing, and now dismiss as stock players thinking companies missing guidance and lowering estimates will surely do better next time. It’s a hope trade. People engaging in hope trades are better off if they lose; if they put together a winning streak of hope, they're going to be wrong in a lifestyle-changing way.

Ignoring Starwood, let’s talk about 2 very well-run companies that simply don’t miss earnings. Unless, it seems, the economy drops off a cliff.

I bought the McDonald's dip even before I saw Glenn Curtis’ well-written and logical, Four Reasons to Buy a McDonald's Dip column. Needless to say, I found the article brilliant (and agreeing with me is a very good way to make me think you’re bright as a new penny). I’m long, I’m ready to buy lower, and my stop is a close below $50 or so. They're a tremendously well-managed company, trading below 15 times, and remain relatively well positioned for a lousy economy.

And the lousy economy brings us to UPS, which has now turned green after a $2.50 drop at the open. You think I take trades personally? Have a chat with the guy who sold UPS at $50.80 today. I can all but guarantee you that seller is arguing with his screens that he was right to sell, no matter what the stock does.

And he’s probably right. UPS ships things America buys. Business is lousy, and the recovery, such as it is, isn’t going to end in time for UPS to save the most critical part of the year -- December.

Best-case scenario, panicked retailers pay top dollar to air-ship goods from overseas in order to make up for under-ordering going into back-to-school and Christmas (as evidenced by the sharply reduced load levels of retail orders being shipped by the tanker companies). UPS absolutely kills in that situation. If UPS is using their extra, empty jets to deliver letters, my advice is stopping by the North Pole to beg Santa for a better-than-expected Christmas.