The Economy Looks a Lot Like Pizza

According to a news report from nytimes.com, “If the recent problems of Domino’s Pizza sound a lot like the issues hanging over the broader American economy, it’s no coincidence. With its dependence on consumers, its sensitivity to the run-up in dairy and wheat prices and a risky decision last year to double its debt in order to pay a huge one-time dividend, the pizza chain’s recent troubles speak volumes about the challenges facing both companies and consumers in the year ahead.”

“But Domino’s trajectory isn’t just another tale of economic gloom and doom. It’s also a story of how large investors — including none other than Michael S. Dell — have kept the faith in the sliding shares of Domino’s, much as they have stuck with the overall stock market despite earnings worries and other fears,” said the story. “The battle over Domino’s encapsulates the uncertainty facing Wall Street in 2008, with money managers remaining bullish even as veteran strategists like Byron Wien of Pequot Capital Management forecast a recession and a 10 percent drop for the Standard & Poor’s 500-stock index. So far, at least in the case of Domino’s, the pessimists have the upper hand. Domino’s shares closed Friday at $11.72, down from $20 last summer. And on the first trading day of 2008, Joe Buckley, a Bear Stearns analyst, cut his rating on the entire restaurant group, warning that the combination of higher food and labor costs and slow growth equals a “perfect storm” for the sector.”

Click Here to View Original Article