Making money: what the experts think
● Lovin’ it
The rise and fall of Steve Easterbrook – the McDonald’s CEO fired last November for having a “consensual relationship” with a subordinate – is a cautionary tale, said Ian Cowie in The Sunday Times. But does it have any bearing on the company’s stock? Before he became boss in March 2015, the City consensus was that “McDonald’s was strictly for clowns”. I took a contrary view, buying in at $95 a share in July 2014. The shares have since more than doubled to $207, dipping only by a few dollars when Easterbrook was sacked. The chief takeaway from this for DIY investors is that “tips from City brokers should not be taken too seriously” – and that we should have confidence in the evidence in front of us: “I have never seen a quiet branch of McDonald’s.” Middle-class critics may sneer, but the firm “continues to provide affordable treats for millions”. Every reason to carry on lovin’ it.
● Oily waters
The oil market has “recovered from the dark days of April”, when the pandemic hit demand, storage tanks filled to near capacity and “crude futures were briefly deemed less than worthless”, said The Economist. The price of Brent crude has now recovered to around $45/barrel – thanks to “persistent Chinese buying” – but no one is taking anything for granted. Back in May, the international oil cartel Opec slashed output by 9.7 million barrels a day – “the largest cut ever”. Now comes the tricky task of reopening the spigots without risking another price collapse. Much depends on China’s “buying spree” and the risk of a second wave of infections. The oil market is “back from the brink”, but it isn’t out of danger.
● Buffett’s U-turn
Gold – and, more specifically, gold shares – had an “unexpected endorsement” this week from Warren Buffett, when his investment vehicle, Berkshire Hathaway, bought “roughly half a billion dollars’ worth of stock” in miner Barrick Gold, said Dominic Frisby on MoneyWeek.com. In the past, Buffett has been pretty “outspoken against gold”, viewing it as an inert and useless store of wealth. Investing in a gold miner isn’t the same as buying bullion; still, his “change of direction is a big deal”. Expect plenty of “Buffett trackers and copycat vehicles” to follow suit.