October is just around the corner. It’s the first full month of autumn, the first month of the last quarter, and oftentimes it sets us up for what we affectionately call the “Santa Claus rally.”
There will be fund manager window dressing, arguments over the merits of gold, and even some AAPL stock put on investors’ books.
October also marks a very important annual tradition for McDonald’s, that of the return of the coveted McRib. For over 30 years, the McRib has been a part of legendary folklore for its rabid fan base. When I read that McDonald’s is delaying the 2012 debut of the McRib to create their own “Santa Claus rally,” I was immediately overwhelmed with feelings of betrayal. October without a McRib just won’t be the same! They might as well ban costumes while they’re at it!
McDonald’s has to maintain the same holiday success as last season. On the back of extraordinary global weather, same store sales year-over-year were up nearly 10 percent during that time period. When you are dealing with a company that does almost $7 billion quarterly in sales, that’s a significant amount of cash.
This leads me to the “meat” of this decision. Global competition has gotten so fierce, Corporate America now structures its product releases around weather, historical trends, and deemed market inefficiencies.
Gone are the days of bringing things to market upon completion, even if it means alienating long time customers. Intellectual and physical backlogs run rampant nowadays. Remember when hundreds of storage tankers would sit offshore awaiting macro crude moving news? Just recently, we saw farmers attempting to store corn unconventionally for release at a later date in an attempt to top-tick the market. And the new iPhone 5 isn’t as new as we are meant to believe – its inception was alive and well during Steve Jobs’ reign.
While companies continue aiming to create their own “Santa Claus rallies”, at what point does the market become too efficient? Sometimes if we overthink basic economic principals, we lose sight of what’s actually happening. It’s critical for investors and money managers to consider all of the variables at hand.
Content provided by guest writer Matt Santini, CLS Portfolio Manager