Saturday Morning Links, News, And View

Miscellaneous

Regular readers know that at one time I did not "like" Starbucks at all. I thought their coffee was overpriced and customers elitist. Now, I am their number 1 fan. Their coffee is competitively priced -- definitely more than McDonald's, but ... well, what can I say?

Their food keeps getting better, and they have plans to get even better.

Starbucks’s best ever fiscal third quarter earnings, with profits up 25% and key sales trends in the U.S. rising 9%–all in the face of a supposedly dismal economy.

Needless to say, investors are impressed. Shares are up 7% at $72.96, trading at about 35 times its earnings. For comparison, McDonald’s stock trades at roughly 18 times its earnings.

Starbucks has been on a mission to “reinvent” its food menu. The assumption is that its loyal fans are willing to pay top-dollar for a cup of coffee, so they must be able to afford a snack or lunch on the side. Food contributed about 22% of Starbucks’s same-store sales growth in the U.S. in the latest quarter, with the help of new items like zesty chicken and black bean salad bowls.

McDonald's, by the way, had a mediocre quarter.  We've discussed this before. I think McDonald's is struggling with digital. Starbucks welcomes the digital customer, actually installing additional electrical outlets for folks to re-charge the mobile devices. McDonald's, on the other hand, has a corporate policy to remove all electrical outlets in their seating area. I understand McDonald's dilemma; they are justifiably concerned with the riff-raff they might attract. For some reason that doesn't happen in Starbucks. Anyway, a lot could be written comparing the two (McDonald's and Starbucks) but time to move on.

Oh, the Starbucks loyalty program is incredible. With every 12 purchases, "the next purchase" is free, and it doesn't matter whether the next purchase is a $1.67 cup of coffee or a $6.95 sandwich. I did not know that until recently. I could be wrong, but I believe when you order a $1.67 cup of coffee and a $6.95 sandwich, and "the next purchase" is free, they ask which one you want free -- the coffee or the sandwich. Any place else, the lesser-priced item would be default.

 

WSJ Links

The flight of "drone" from bees to planes: 

Drone-strike disclosures have prompted headlines like this one from the Atlantic Wire: "How the NSA Is Using Cell Phone Data to Drone Civilians (In Pakistan)." "Drone" has increasingly come into play as a verb, meaning "to target or kill in a drone strike," especially among critics of the Obama administration. But how did "drone" become the label for unmanned aircraft in the first place?

Since Old English, "drone" has referred to a male honeybee whose only role is to mate with the queen. Because drones, unlike worker bees, need not worry about gathering nectar or pollen, they have often been seen as idlers, and by the 16th century, "drone" could refer to lazy humans, too. Around the same time, "drone" began branching out as a verb, meaning to buzz like a bee or to speak in a monotonous fashion reminiscent of a bee's persistent hum.

Bees also played a key role in the use of "drone" for early radio-controlled aircraft, but for other reasons. The military historian Steven Zaloga, author of the 2008 book "Unmanned Aerial Vehicles," explained the source of the term in a recent letter to Defense News.

In 1935, U.S. Adm. William H. Standley saw a British demonstration of the Royal Navy's new remote-control aircraft for target practice, the DH 82B Queen Bee. Back stateside, Standley charged Commander Delmer Fahrney with developing something similar for the Navy. "Fahrney adopted the name 'drone' to refer to these aircraft in homage to the Queen Bee," Mr. Zaloga wrote. The term fit, as a drone could only function when controlled by an operator on the ground or in a "mother" plane.

Pipeline to bring natural gas to Florida utilities (what about all those wind turbines, solar energy?) 

Spectra Energy Corp. and NextEra Energy Inc. will build a $3 billion pipeline bringing natural gas to power utilities in Florida, the companies said Friday, connecting the state to the natural-gas supply boom happening outside its borders.

The Sabal Trail Transmission project underlines the increasing role natural gas is playing in power generation, one that comes at the expense of coal and crude-oil use. The pipeline will deliver one billion cubic feet a day of natural gas from a distribution hub in Alabama to central Florida, doubling the amount currently available for power generation in the Sunshine State.

Gas from the pipeline will come from various points throughout the U.S., including West Texas shale formations or wells in the waters of the Gulf of Mexico, Spectra said. Florida has no significant natural gas production of its own and currently has only two other major pipelines bringing in natural gas from outside its borders.

Even as energy demand in Florida has increased, it remains isolated from the energy boom occurring throughout the rest of the country. Hydraulic fracturing, horizontal drilling and other advanced drilling techniques have helped U.S. oil and gas companies unlock vast amounts of natural gas from shale formations in recent years. 

This is an incredible story, and I bet the dots will connect it all back to the Bakken when ONEOK moved in.

Oil investors enjoy the slopes:

Like skinning cats, there is more than one way to make money from the oil price. That maxim has particular relevance given this month's sharp rally in the price of U.S. benchmark West Texas Intermediate crude oil.

The front-month WTI crude-oil future has risen 9.6% over the past month, in large part due to the easing of logistical bottlenecks in the Midwest.

Two other price markers linked to WTI, and used by many investors to gain exposure to oil, are providing opposing views on the price, though. The United States Oil Fund, an exchange-traded fund, or ETF, that invests in futures contracts as opposed to physical barrels, is up 10% over the same period. But shares of the BP Prudhoe Bay Royalty Trust, which has rights to some of the Alaskan field's output and pays quarterly dividends linked to the cash price of WTI, have actually fallen 4.9%.

 JPMorgan gets out of the power-plant business due to heightened regulatory scrutiny of Wall Street's ownership of such assets.

Tebow plays receiver at Patriots camp.

No stories on Syria. Whatever happened to Syria?

Op-Ed: the real reason the once-great city of Detroit came to ruin -- the politics of Mayor Coleman Young drove out the white and black middle class. This is a great essay. I was introduced to it on talk radio on my drive to Dallas from Los Angeles. Huge story.

The truth is that Detroit was a failed city long before it became insolvent, thanks to a virtual collapse of its municipal government during Young's 1974-1994 reign as mayor.

A radical trade unionist who ran as an antiestablishment candidate reaching out to disenfranchised black voters, Young lacked a plan except to go to war with the city's major institutions and demand that the federal government save it with subsidies. Critics called it "tin-cup urbanism."

As the city's government became increasingly less effective, whites and then middle-class blacks fled. "He left the city a fiscal and social wreck," the eminent political scientist James Q. Wilson wrote in a 1998 article in The New Republic, "The Closing of the American City."

Young was right that Detroit needed reform to deal with problems sparked by the migration of poor Southern blacks into the city in the 1950s. He and others, white and black, criticized the political power structure in Detroit, and especially its police department, as racially insensitive. The 1967 riots, sparked by a police raid on an after-hours club in a black neighborhood, generated legitimate calls for change.

Elected ostensibly as a reform mayor in 1973, however, Young made things worse. He divided the police department along racial lines, creating separate layoff lists of white and black officers. He and his handpicked police chief, William Hart, made clear that policing that resulted in too many arrests or citations in the black community would not be tolerated. "I wouldn't write tickets for black kids," one black officer told journalist Tamar Jacoby in her 1998 book "Someone Else's House: America's Unfinished Struggle for Integration."

When residents complained about a lack of law enforcement, Chief Hart called the protests "racism and sour grapes." Mayor Young declared that "law and order was code for 'Keep the n-----s in their place.'" Detroit became one of America's most violent cities.

One word: Haiti.

Four words: Haiti without the hurricanes.

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The Spanish train wreck, from the print edition of The Dallas Morning News:

[The train driver's] Facebook page, deleted Thursday morning, included a photograph and posts that portrayed a taste for speed. One photo posted in March 2012 showed a speedometer needle stuck at 124 mph and his remark: "I'm at the limit and I can't go any faster or they will give me a fine." 

Add Francisco Jose Garzon Amo to the list of unemployed in Spain, though he won't have to worry about three squares and a cot for the rest of his life.

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Also from The DMN: The voting rights act. US Supreme Court Chief Justice Roberts and Obama's top lawyer, Donald Verrilli, earlier this year:

Roberts: Do you know which state has the worst ratio of white voter turnout to African-American voter turnout?
Verrilli: I do not.
Roberts: Massachusetts. Do you know what has the best, where African-American turnout actually exceeds white turnout? Mississippi.
The exchange continued:
Roberts: Which state has the greatest disparity in registration between white and African-American?
Verrilli: I do not know that.
Roberts: Massachusetts.

Washington can't handle the truth.

I still don't know what residents of Massachusetts have that Texans don't have, and Texas has no state income tax. And housing is a whole lot more expensive in Massachusetts than Texas, so don't even think about mentioning property taxes.

I do think Boston has more Dunkin' Donut restaurants than Dallas but I could be wrong.