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The Big News From McDonald's Earnings News Has Nothing To Do With McDonald's

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No corporate strategy over the past five years has been more successful than the "me, here, now" focus adopted and exploited by companies like Apple (AAPL), Keurig (GMCR), Chipotle (CMG), Netflix (NFLX), Pandora (P) and even pawn shops.  Whether they deliberately set out with this in mind or stumbled into it, they nailed social mood perfectly.  Their products, services, and marketing fit a world of chronic underconfidence in which our preferences, decisions and actions favor self-interest, close physical and ethnic proximity, short-term time frames, simplicity and high transparency.  (And for more on how chronic underconfidence is changing America today, check out Peter's TED talk on the topic here)

For McDonald's, not so much.  The fast food giant has continued to fight like British Redcoats in a world of Revolutionaries, moving in a huge straight line while others have serpentined between the trees.

Last week, McDonald's capitulated.  The company's press release and conference call all but oozed actions aimed at making the company more "me, here, now" weak social-mood compliant:

• more regional autonomy
•  simpler menu
•  products that are locally relevant
•  local ingredients
•  easier ordering
•  greater transparency on ingredients
•  personalized meals

Just like Burger King (BKW) in the similar weak social mood year of 1974, McDonald's now wants you to "have it your way."
Arguably, McDonald's capitulation should be a strong bullish contrarian indicator for the markets.  Much like how investors throw the towel in at the bottom, corporate executives often make ill-timed changes in strategy at lows, too, succumbing to customer, investor, and analyst and boards to do something to end the current pain.

In the case of McDonald's, while last week's actions may coincide with a major bottom in management sentiment, I don't think that is at all the bottom for the company's stock or the market.  As I have offered before, transnational corporations like McDonald's face an enormous challenge to "local" during today's era of weak global social mood.  While the company's attempts are noble and a step in the right direction, I think it will be extremely hard for the company to achieve the perceived authenticity of truly being local demanded by consumers today.  If you're McDonald's, no matter what you say and do, you can't be local in more than 100 countries at once.
For the markets as a whole, rather than suggesting that a major bottom has occurred, what I am afraid McDonald's actions suggest instead is that THE peak in the "me, here, now" market bubble is finally here.

Just look at the price charts of Apple, Keurig and Chipotle, three of the best "me, here, now" companies out there:


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Back in September I couldn't help but smile when I saw a picture of people lining up in front of the Apple store in New York hoping to be the first purchasers of a yet unknown product on a yet unknown release date.
Talk about a non-market measure of an extreme in confidence in "me, here, now."



Then there was this two page color ad spread from SAP in this morning's Wall Street Journal. 



Maybe it is just me, but it was wild to see a transnational corporation like SAP take aim at the complexities of its own transnational business model and recommending simplification.

Last week, Amazon (AMZN), one of the horsemen leading the "me, here, now" chariot gapped lower on disappointing earnings.  Coupled with the McDonald's strategic capitulation and the line at the Apple store above, I think THE top is now in.

The "me, here, now" trade has finally run its course.  We all believe.  But please appreciate how overweight the indices and many money managers are in these "me, here, now" horsemen.  For example, Apple itself is almost 14% of the Nasdaq 100; and many of the other big "me, here, now" names like Netflix, Keurig and Chipotle are popular among large momentum funds as well.

For investors, the "me, here, now" trade has offered tremendous rewards over the past five years.  Looking at McDonald's capitulatory actions last week to join the club strongly suggests that caution is now warranted.

Peter Atwater's groundbreaking book "Moods and Markets" is now available on Amazon and Barnes & Noble.
 
"Peter Atwater brilliantly provides a framework for understanding both the socioeconomic hubris that led to the great credit bubble of the past decade and the dark social-psychological hangover that has resulted from its collapse. In so doing, he offers an invaluable guide to what promises to be a very difficult and turbulent period ahead as we experience what he calls the 'me, here, and now' behavioral tendencies of the post-crash world."  -Sherle R. Schwenninger, Director, Economic Growth Program, New America Foundation


Twitter: @Peter_Atwater
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Position in SH and JPM.
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