06-11-2020, 11:20 AM
Right now McDonald's carries a total shareholder's deficit on its balance sheet of $9.29 billion, so its price to book ratio is negative. I have never seen a big capped company have such a negative ratio. That means equity holders got nothing if MCD goes bankrupted. Its debt exceeds the value of its assets plus cash.
This is the consequence that traders and buyers are only looking at price to earnings ratio and dividend yields. So MCD management keep borrowing money to pay dividends to keep good yield and keep borrowing money to buy back shares to keep lower P/E ratio. People pay little attention to their increasing debt in the past five years. And when Covid 19 crisis happened, they borrowed more money from the Fed on early March. And I think people will eat much less often at restaurants after Covid 19. MCD will have hard time to pay back their debt because their revenue and earnings will take a big hit in post-Covid19.
Very dangerous and a lot of other stocks will be in the same boat.
This is the consequence that traders and buyers are only looking at price to earnings ratio and dividend yields. So MCD management keep borrowing money to pay dividends to keep good yield and keep borrowing money to buy back shares to keep lower P/E ratio. People pay little attention to their increasing debt in the past five years. And when Covid 19 crisis happened, they borrowed more money from the Fed on early March. And I think people will eat much less often at restaurants after Covid 19. MCD will have hard time to pay back their debt because their revenue and earnings will take a big hit in post-Covid19.
Very dangerous and a lot of other stocks will be in the same boat.
I sold many puts today, so another down 1000pts day and I'm actually forced into long shares. We haven't seen a day like this since March IIRC. We knew it was coming, but it got so stupid we didn't know which month. I was getting some FOMO for sure and bought some names outright today, but it was 3 shares here and 25 there. Afraid to make a big move long in anything with extended valuation (which is damn near everything now). My holdings are very defensive and it is sure tricky figuring out when to move more of it to growth plays. I am fairly skilled at avoiding most of the beating, but I don't want to miss out on the ride higher. It's just market timing in the end and requires more luck than skill. We'll find out soon if this was a must buy dip, or the first of more weeks like it. I'm inclined to think straight up is over for awhile. That thought may be proven wrong within a few days.