The collision of global markets and social mood

Tuesday, July 22, 2014

When The World Downshifts

Chipotle net rises 26% on strong sales

Chipotle reported earnings last night and hit the ball out of the park. This is not bullish.

Yes, its profit rose 26%.

Yes, revenue rose 29% to $1.05 billion.

Yes, same-store sales rose 17.3%.

Yes, the stock ripped over 10% after hours, over $60 per share.

So how is this not bullish.

This chart shows why. Customers are downshifting from $20+ spend to sub-$10 spend.

No more Red Lobster, Olive Garden, or Longhorn. They're headed South where prices are lower. So is Dardens' stock price, the owner of these restaurants.

It's even more apparent going back to 2007 when the downshift began. Since 1/1/2007, Chipotle is up 972.6% while Dardens is up 12.5%. These figures will change as soon as CMG opens this morning.

Downshifting to burritos is not bullish behavior. It's the same as shifting expenses onto a credit card in order to maintain the same lifestyle as other costs go up. CNBC may think the corresponding increase in consumer credit is bullish, but that's bull.

Last night I happened to hear Cramer tell his audience "tweet me -- nicely -- at...." Socionomics suggests that social media will soon devolve into a platform for anti-social behavior. It already seems to be happening, which is another warning sign.

Rising negative mood amid rising markets will end up being just as bearish as the world downshifting.

The underlying cause is the Fed and its misguided policies.

While deflation rages in the credit-debt complex, inflation creeps into stuff like gas and food which in turn has a deflationary effect on spending.

Which is why people downshift to burritos to continue to enjoy the small indulgence of dining out.

This is not what fuels bull markets. What fuels this market is liquidity pumped by the Fed.

The level of interest today is the July 16th Bradley Turn Date high which is 1983.94 on the S&P cash. Staying below that level keeps the pressure on for a retest of the 1960 area, while above it would signal a probable run to new highs, possibly to a measured move target of 2018.32, where there is also a Fibonacci confluence zone from 2002.30-2013.28.

I love burritos. I love tacos. I happily go to Chipotle when I'm away from my favorite places such as Loco Cocos in Kittery, Maine, or Las Olas Taqueria in Hampton, NH. But when the world downshifts, it pays to listen.

Maybe Reservoir Dogs started it.

No comments:

Post a Comment