Friday, January 24, 2014

On Starbucks, Bad Coffee, and the Abattoir of Investing

Denninger explains the current price-to-earnings ratio of Starbucks in simple terms.

A commenter, Capeman, disagrees on the quality of Starbucks:  You're clearly wrong on this Karl. Starbucks coffee tastes nothing like battery acid... it tastes like burnt ass.

I am happily unable to confirm that comparison.  I have, occasionally, gotten Starbucks' coffee, unembellished, or in a double espresso, in desperation, when trapped at a mall or an airport. I didn't think it was that bad.  I drink multiple cups pots of coffee every day and never complain, unless it is decaff, which tastes and smells like someone filtered it through a well-used ashtray full of old cigarette butts.  I am not a connoisseur.  More like a coffee 'possum. 

Anyway, Denninger mocks: 

Naw, nothing to see here with a 7,554 P/E

He continues laying down sarcasm like a '70s burnt orange shag carpet:

Now to be fair the company's stock IS only selling at 3.7x sales, which is better than some.  But it also has a profit margin of a hefty 0.06%, if I'm reading the latest data on Yahoo Finance correctly, which is obviously a highly-sustainable business.  After all, out of nearly $15 billion in sales it had a prodigious $8.3 million in net available to the common shareholder.

With insanity like this, how can anybody think that the stock market is a good place to invest?  It's a financial killing field. 


  1. While we have Starbucks in NZ it is usually the place of last resort if one is looking for good coffee.

    With margins like that, you wouldn't want to spill any beans!

  2. Too much foam would put you out of business.