Rate Hike? What Rate Hike?; Chipotle’s Rocky Road to Recovery; McCormick’s Spicy Good Earnings

Easy does it?

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Image courtesy of twobee/FreeDigitalPhots.net

Well, if you’re looking for the Fed to raise rates, don’t hold your breath. Despite the fact that the Fed’s next meeting is planned for April 26th and 27th, experts think a move like that probably wont happen before July. It was initially believed that there would be four rate hikes over the course of the year, after the Fed raised the rates for the first time in nine years back in December. But now it looks like there will be just two.  Federal Reserve Chair Janet Yellen is still promising a gradual pace of rate increases, but even she admits that the economic climate just isn’t quite impressing these days. The Central Bank is paying very close attention to all the annoying economic issues going on in the world, like the global economic slump, the very very low oil prices and a relatively volatile stock market. Of course, it wouldn’t be right not to mention China’s own economic downturn.  Plus the Fed’s not too stoked about the rate of inflation, which has been holding steady at about 1% when its target is closer to a 2% rate. Add to that weak consumer spending and you’ve got a Fed that’s not looking to stir any fiscal trouble. Hence, the Fed has assured the country that it plans to “proceed cautiously” in its rate hike plans, which is awfully considerate, according to some people, anyway.

Burned burrito…

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Image courtesy of rakratchada torsap/FreeDigitalPhotos.net

Free burritos or not, Chiptole’s road to fiscal recovery is looking very far off.  Wedbush Securities analyst Nick Setyan came out with a new report that says he doesn’t expect the fast food chain to recover before 2018 – calling it “the best case-scenario” – and even lowered Chipotle’s price target from $450 – $400. Ouch. Before the food safety crisis, each Chipotle restaurant was pulling down $2.5 million in sales on average. But that’s not expected to happen again for quite some time, especially given the fact that Chipotle’s operating costs are only going to get higher and higher because of its more comprehensive and stringent food safety measures. And even though the company sent out coupons for nine million free burritos, with another 21 million free burrito vouchers en route, Chipotle will still eat a $62 million tab for that, as a burrito typically costs $7.10. But hey, whatever it takes to try and erase the ugliness of E. Coli and norovirus outbreaks, right? Even with all those vouchers being sent out, the company only expects that a quarter of them will actually get redeemed. Naturally, news of the report sent shares south when the stock is already down 37% since August. Shares of Chipotle closed today at 460.10.

Spice spice baby…

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Image courtesy of jk1991/FreeDigitalPhotos.net

Of all the companies to report earnings lately, this one’s pretty…spicy. Yes. I had to go there. McCormick & Co. just released its first quarter results and considering that the company’s products aren’t items typically used in bulk, the $13 billion company pulled in some very impressive figures. In the process, McCormick & Co. even managed to raise its 2016 outlook, and unlike other major food producers that have been struggling to keep up with a health/organic revolution,  McCormick hasn’t faced quite the same challenges. In fact, its stock is up around 28% in the last twelve months with a little help from some recent acquisitions. The spice-maker was expecting to earn between $3.65 to $3.72 per share. But now it’s looking like it’ll pick up between $3.68 and $3.75 per share for the year. Incidentally, despite China’s economic downturn, the country still managed to give McCormick some boffo growth. Perhaps there’s a correlation between economic stress and and a desire for spicy food? Hmm. Will have to explore that one…In any case, McCormick picked up a profit of $93.4 million on $1.03 billion in revenue and adding 73 cents per share. Analysts only expected 69 cents on $1.03 billion in revenue while the year before the company took in a profit of $70.5 million on $1.01 billion in revenue with 55 cents added per share. And if that’s not enough, McCormick also scored a new 52 week high today of 99.90.

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To Hike or Not to Hike: That is the Fiscal Question; Doggone it, Home of the Whopper Gets Frank; Is Lumber Liquidators Finally in the Clear?

 

1,2,3 – Hike!

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Image courtesy of jscreationzs/FreeDigitalPhotos.net

The Fed will most likely not be lowering rates so don’t hold your breath. Not that you were planning on it. But the Fed is likely to do one of two things: raise rates according to its plan of “gradual adjustments” – meaning regularly raising those rates a smidgeon.  Or the Fed will choose to do nothing. Zero. Zilch. Nada. You might have thought that China is messing up our economy in unimaginable financial ways and therefore a rate reduction is justified. However, the Fed doesn’t feel that China is messing it up enough to warrant lowering rates. In fact, Janet Yellen and company also don’t feel that the rest of the world’s economic troubles are affecting the U.S. so much either. Instead, Yellen feels the U.S. economy will grow no matter what, oil gluts, falling global stocks, and all. None of it is our problem and we shouldn’t waste time worrying how it will all affect the U.S. economy. What is our problem is that the Dow fell 1,700 points since the Fed announced its first rate hike back in December. Even so, Ms. Yellen sees employment gains and wage growth, despite financial tightening conditions, and said that the U.S. financial sector has been resilient.” Be on the lookout for a potential rate hike (or not) next month when the Fed holds its next meeting March 15-16.

Hot diggety dog…

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Image courtesy of atibodyphoto/FreeDigitalPhotos.net

It might be the home of the Whopper but Burger King’s new menu offering is taking on a whole different shape. Starting on February 23, Burger King will be serving up hot dogs at all of its 7,100 + locations in the U.S. Burger King brass are calling it “the most obvious product launch ever” and feel that hot dogs are a natural fit with the chain. Besides, the dogs were already tested in five markets bringing in sales increases that also apparently proved a natural fit for the company. It will make Burger King the biggest hot dog seller in the country and bonus: There will be no boiling or rolling involved in crafting these fine specimens. Instead, the dogs will be flame broiled and come in two variations: the $1.99 “classic” version and the $2.39 “chili cheese” version.  Burger King is partnering with Oscar Mayer to make a proprietary 100% beef delicacy. But the best part – to me anyway – Snoop Dogg and Charro (not sure how they came up with that combo) will be starring in training videos, hoping to make it more exciting for employees. Hey, whatever works.

Hold your breath…

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Lumber Liquidators Holdings Inc. is almost out of the fiscal woods. Sort of. After testing conducted by the U.S. Consumer Product Safety Commission, the results are in and Lumber Liquidators’ suspect flooring has a very low risk of causing cancer. Phew. What is more likely to result from the toxic floor coverings are breathing problems and other irritations – besides the emotional irritations brought on by purchasing flooring that contains formaldehyde. Lumber Liquidators has already paid up $13.2 million in fines and forfeitures for its formaldehyde-laced floors produced in China between 2012 and 2014. If you recall, it was just almost a year ago when “60 Minutes” ran a very (financially) damaging piece exposing the company. But now, with any good news on Wall Street, shares have been rising steadily today, hovering at about 12.63. Its 52 week low was 10.53.

Radio Shack’s Got Nick Cannon’s Talent; Fed’s Merry Rate Hike; Yah-who?

 

Going for broke…

 

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Radio Shack may have filed for bankruptcy protection back in February, but that hasn’t stopped the struggling electronics retailer from putting celebrity Nick Cannon on the payroll. Indeed, the America’s Got Talent host was just named Radio Shack’s CCO, as in Chief Creative Officer. Laugh all you want, but it’s not like its Nick Cannon’s first foray into business. He is a bona fide electronics entrepreneur…according to some, anyway. The retailer thinks Nick Cannon can lure in that magical, elusive millennial demographic into its over 1,700 stores by having him develop exclusive products, curate playlists for the shops and even sing a song or two in the process. Among his other duties, Nick Cannon will also be responsible for helping to advance Radio Shack’s education and STEM initiatives. Because, after all, isn’t Nick Cannon the first image that springs to mind when you think of the STEM fields?  As for his paycheck, well, Radio Shack’s not talking, but I suspect Nick Cannon won’t need to ask for a raise anytime soon.

3…2…1…Hike…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Fed Chairwoman Janet Yellen managed to put a little drama (okay, I’m getting carried away) into her talk at the Economic Club of Washington when she made it clear that this month interest rates, which have been sitting pretty close to zero, would finally receive its much overdo hike. It will be the first time in a decade that the Fed has raised the rates and many there feel that the economy is long overdue for this riveting moment. After all, the labor market is kicking butt, in a good way, and the economy is holding its own. Of course, Janet Yellen said it much more eloquently explaining that a rate hike is a testament to an economy’s recovery. But I am no Janet Yellen and could never take down Ralph Nader as graciously as she did last week. But I digress. Both the economy and the labor market have unwittingly met the Central bank’s goals which are resulting in that much-anticipated rate hike expected by December 16. Unemployment is staying put at 5%, when back in 2009, unemployment was 10%. Inflation is still not as high as the Fed would like it to be because of low oil prices and the strong dollar. But the Fed expects it will reach 2% – a natural and necessary component to a healthy economy. At least that’s what the experts say. There are those naysayers at the Fed who are not down with any hiking right now because they think its too soon and it might trip up a steadily recovering economy. But Janet Yellen says not raising those rate could have even worse consequences. So there. Besides, the time between putting monetary policy into place and seeing the results of it take so long that it’s almost like not raising those rates at all. Sort of. Okay, maybe not.  Any subsequent rate hikes will be based on data and reports so don’t assume that this is the beginning of constant stream of hikes.

Boohoo Yahoo…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Things are kind of iffy at Yahoo these days even though shares did rise more than 7%. But the reason they rose is because the board is meeting to make some big decisions that will hopefully reverse Yahoo’s downward spiral. One of the bigger questions on that conference room table is whether to sell its core internet business, which includes YahooMail and YahooNews. Shareholders value that particular biz at less than zero. To be fair, however, YahooNews is one of the most visited websites in the U.S., according to someone, anyway. But, if it’s sold, it could fetch around $3 billion. So it’s not that worthless. Then there’s the issue of Marissa Mayer who after three years has still been unable to reverse the company’s aforementioned downward spiral. Yahoo’s total market cap is around $34 billion. But that’s mostly because it has a huge $30 billion stake in Alibaba Holdings Group Ltd. and another big stake in Yahoo Japan. Corp. Which brings us to the next order of discussion: whether to spin off the billion dollar Alibaba stake into its very own company.  The problem, however, is whether or not Uncle Sam will find a way to make such a transaction taxable and sic shareholders with a $12 billion tax bill? Yahoo Activist Investor Starboard Value LP already considered this unpleasant scenario and last month put the kibosh on the idea of such a sale.

A Dow-ner of a Day on Wall Street; On Rate Hikes and Coffee; Chipotle’s Latest Effort Is Calorie-Free

All fall down…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Fewer things are uglier than a 1,089 point plunge on the dow. And that’s just how Monday started off, within the first few minutes of trading. By closing, however, the market was down only 588 points. Phew. Apparently the market is correcting itself, so the drops shouldn’t be too alarming. Also don’t look too much into last week’s 1,000 point drop. At least that’s what the experts are saying. The term “correction” is meant to reassure us. So are you reassured now? But correction or not, overnight there was a big sell-off in China that brought about a very unsightly 8.5% hit to the Shanghai Composite Index which the Chinese media is very unaffectionately calling “Black Monday.” Yes. It’s that bad. And worse since the repercussions of this hit are spreading through Europe, and yes, even our shores. Feel free to cringe now. The world’s second biggest economy is slowing a little too much for our liking. Countries that depend on China to buy its commodes and luxury goods companies that have enjoyed selling to the Chinese are  now freaking out and revising their outlooks. Although, Apple CEO Tim Cook graciously pointed out, much to the delight of Wall Street, that the Chinese are, in fact, still buying, albeit, at a slower pace and that Apple actually had a record few weeks in China. Well, lucky Apple.

As for that rate hike…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Whether you see it as a good thing or bad thing, plans for Janet Yellen and the Fed to hike rates in September just might have hit a wall thanks to the financial turmoil rocking the world as of late. Sell-offs, swings and losses (oh my!) just might have done the trick to put the kibosh on the Federal Reserve’s intention to raise rates next month, at least according to investors, who probably know a thing or two about that. In fact, that hike is now looking like it will take place around March. It’s all sort of ironic since the Fed seemed almost non-plussed about China’s fiscal comings and goings because the U.S. economy was the hogging the spotlight for the way it’s been picking up speed lately. Oh well. Guess that thinking caught up with the Fed. Incidentally, Starbucks CEO Howard Schultz, always at the forefront of the cause du jour, sent out an email advising employees to be sensitive to investors who seem a bit edgy, not from caffeine withdrawal, but rather from the volatile global market situation. He writes: “be very sensitive to the pressures our customers may be feeling, and do everything we can to individually and collectively exceed their expectations.” Can I get a kumbaya?

Scrumptious…

Image courts of Stuart Miles/FreeDigitalPhotos.net

Image courts of Stuart Miles/FreeDigitalPhotos.net

Chipotle’s got a plan. But this one has nothing to do with adding to its millennial-appealing menu. That part seems to be covered. It seems that a stronger economy, an increased demand for restaurant dining and a minimum wage increase across states and companies has put quite the crimp in the talent pool for Chipotle employees, resulting in fewer applicants and not enough workers to dish out the aforementioned millennial-appealing fare. To combat that, Chipotle is launching a “National Career Day” where on September 9, the Denver-based chain plans on hiring some 4,000 new employees. The company is hoping to attract talent with this latest initiative, throwing around terms like “six-figure salaries” for high-performers to earn (far) down the road. Chipotle’s already part of the the Starbuck’s led 100,000 Opportunities Initiative. Starbucks, McDonald’s, Wendy’s and a slew of other companies have all been offering up all kinds of new interesting perks to attract a greater talent pool, from college reimbursement to more paid vacation. Al things I can certainly appreciate. Chipotle already employs about 60,000 people and on September 9 the company will likely increase its workforce by 7%. All you have to do is register at http://www.nationalcareerday.com. All U.S. Chipotle restaurants will conduct interviews between 8 and 11 am and if you land a gig, look forward to making more than $10 per hour to start.

Home Sweet Amazon-Serviced Home; Ben Bernanke Joins the Blogosphere; AG Settles Score With GNC

Is there anything it won’t sell?

Image courtesy of renjith krishnan/FreeDigitalPhotos.net

Image courtesy of renjith krishnan/FreeDigitalPhotos.net

Amazon has come out with yet another way to take your money. This time it’s through its new Amazon Home Services with over 700 home improvement service providers services at your fingertip, with verified reviews for added peace of mind. Plumbing problems? Too tired to assemble that new gym equipment? Don’t feel like vacuuming? No problem. Just log on and Amazon will make sure it all gets taken care of. Services are paid for via your Amazon account only after the project is completed. So why is Amazon’s home service offerings different from all others, like Angie’s List, Yelp etc.?  Perhaps it the comprehensive vetting process it conducts, including making sure service professionals are licensed, insured and have had their backgrounds thoroughly checked. But Amazon also offers a money-back guarantee charmingly called a “happiness guarantee.” Apparently, consumers also trust Amazon, giving an added incentive to use the ever-powerful e-commerce giant. To be fair, however, I too, once trusted Amazon. But then last month one of its vendors sent me a completely different set of fairy wings than the ones I ordered. Just sayin’.

Payback…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

The blogosphere just got a bit more crowded now that Former Federal Reserve Chairman Ben Bernanke joined the mix with his own blog for the Brookings Institute. He is, after all, its latest Distinguished Fellow in Residence of the Economic Studies Program. It’s very pish posh, indeed. The position, I mean. Not the blog. “Now that I’m a civilian again, I can once more comment on economic and financial issues without my words being put under the microscope by Fed watchers.” Which means he doesn’t have to be polite anymore and gets to say whatever he wants. For instance, Mr. Bernanke can use his blog for, among other purposes, striking back at the many critics he’s had over the years who took issue with his policies. Janet Yellen, who took over for him last year, does not get to have that kind of fun. At least for now. In today’s post, Mr. Bernanke graciously explains the reasons behind the low interest rates. By the way, he’d like you to know that it’s not necessarily because the Fed is keeping it that way – though there is some truth to that.

Whaddya mean there’s no ginseng in there? 

Image courtesy of Getideaka/FreeDigitalPhotos.net

Image courtesy of Getideaka/FreeDigitalPhotos.net

This time it is not a bank that has reached a deal with New York Attorney General Eric Schneiderman. GNC Holdings Inc. begrudgingly settled a lawsuit over its Herbal Plus products found at GNC, of course, but also at Target, Walmart and Walgreens. Apparently, it wasn’t at all clear that the ingredients listed on the outside of the bottles of the dietary supplements were actually present on the inside. Who would have thunk it? The presence of things like echinacea, ginkgo biloba, ginseng and St. John’s wort couldn’t be verified when the AG used DNA barcoding methods to test for them. That’s kind of a huge embarrassing problem in the $33 billion a year dietary supplement industry. Of course, GNC disagrees vehemently with the AG’s testing methods saying the “lawsuits are without merit.”  GNC, however, used its own internal test methods, in addition to third party independent test methods which, naturally yielded different results. Despite all that, the supplement company will now be using bar-coding methods –  just like the AG’s office –  beginning in the next 18 months, so that consumers will know for sure if there really is echinacea in that bottle they’re holding, conveniently labeled “echinacea.”

 

 

Morgan Stanley Finally Owns Up to All the Trouble It Caused; It’s a Darn Claim Unemployment Filings Are Up; Sears is Losing It

It was just a matter of time…

Image courtesy of  dream designs/FreeDigitalPhotos.net

Image courtesy of dream designs/FreeDigitalPhotos.net

Morgan Stanley is taking a bit of a beating today on Wall Street now that it has finally finally settled with the Department of Justice over its shady little role leading up to the 2008 financial crisis. Morgan Stanley reached a deal with the DOJ  that’ll have the bank paying $2.6 billion to get Uncle Sam off its back.  Attorney General Eric Holder and the DOJ will graciously end their probe into whether Morgan Stanley duped investors by telling them how very great their home loans were when in fact, they were anything but. This settlement is sure to put a major dent in MorganStanley’s 2014 profits. By major, I mean it’ll eat up nearly 50% of what MorganStanley got to take home in 2014. It officially lands Morgan Stanley on that illustrious list of banks who also had to shell out billion dollar settlements to the DOJ for their smarmy actions leading up to and during the 2008 financial crisis, including  – but not limited to –  Bank of America who reigns the top spot with a $16.7 billion payout. It’s followed by JPMorgan Chase which holds the number two spot for its $13 billion settlement. Citigroup rounds out the group with a $7 billion settlement.

Don’t stake this claim… 

Image courtesy of renjith krishnan/FreeDigitalPhotos.net

Image courtesy of renjith krishnan/FreeDigitalPhotos.net

The number of people filing jobless claims went up. Not down. But up. The number climbed to 313,000 people instead of a projected 290,000. While the news is a bit of drag, economists  – who presumably know a thing or two  – are telling us that we can’t work ourselves up into a collective panic over one month’s lousy numbers. At least for now, anyway. First, the number of people filing those claims is still relatively close to the 300,000 mark. If it were way past that number, then yeah, having a fiscal freak out might be considered almost acceptable. Two, the labor market’s rockin’, sort of, and hiring is strong, which brings us to reason number three. Because hiring is strong, wages are actually going up. Walmart, TJ Maxx, Gap…the list goes on as to how many retailers are raising its employees’ wages. All these factors allow us to almost ignore this fiscal hiccup. However, leave it to Fed Chairwoman Janet Yellen to remind us that, “wage growth remains sluggish” and that there’s always room for improvement.  You don’t say.

Loser…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Sears isn’t having a very good year. Actually it hasn’t had a good year in…well, many many years. It just reported its fourth straight year of losses with this quarter losing $159 million and $1.50 per share. Incidentally, that figure is not nearly as dismal as last year’s $358 million fourth quarter loss. So you see, there is a bright side. Sort of. Run by the The Hoffman Estates, which also runs Kmart, the company has tried just about everything to help the ailing retailer reverse its downward financial spiral. From store closures to slashing inventory, the retailer has tried countless ways to cut costs. The company closed over 230 stores in 2014 and today has over 1,700 stores, which sounds impressive. But you know what’s more impressive? The over 3,500 stores the company had five years ago. The latest plan is to spin off between 200-300 stores into a REIT, which stands for Real Estate investment trust, by the way. The idea is apparently going to allow the failing company to pick up some $2 billion and help turn the fiscal tide. But if you want to know how exactly that works you’re on your own.

Waffle House: For All Your Shipping Needs; Home Deport Improves Earnings; Fed Chairwoman Ponders Millenials

Can you expedite that waffle?  

Image courtesy of rakratchada torsap/FreeDigitalPhotos.net

Image courtesy of rakratchada torsap/FreeDigitalPhotos.net

What do you get when you cross a restaurant chain known for its waffles with a delivery app? Roadie, of course. Haven’t heard of it yet? That’s probably because it’s only been up and running for a few weeks. However, it’s already got $10 million worth of funding with some of that cash coming from Google’s Eric Schmidt. The app is also being touted as the “Über of shipping.” The idea, created by founder Marc Gorlin is so simple yet so genius. It matches up people who need to ship something with other people who are already driving to that location, often for much less than what the usual shipping companies charge. And just where do the waffles come in? Enter Waffle House and its 1,750 locations which will serve as the meeting points for shippers and insured drivers. The cost to ship an item  – and yes it has to be legal! – with a “Roadie” could range from $12 – $200. First time “Roadie” downloaders are eligible for a free waffle. Get a free beverage to take along with you every time you make a delivery.  While it’s only available in 25 states , primarily in the southeast, there’s no need to fret. With 7,500 downloads and counting all signs point to some major expansion plans sooner rather than later.

Where can I find nails?

Image courtesy of zole4/FreeDigitalPhotos.net

Image courtesy of zole4/FreeDigitalPhotos.net

Home Depot had a particularly fabulous fourth quarter pulling in a 36% profit. Net income came in at $1.38 billion at about a buck per share Analysts only predicted Home Depot would gain 89 cents per share. A year earlier the company gained 73 cents per share. So what gives?  It seems the retailer earned some major cash from its website and its big push to improve customer service has paid off quite nicely for the world’s largest home improvement retailer. If you are lucky enough to be one of Home Depot’s esteemed shareholders , then congrats to you as you just earned 12 cents per dividend, which is now up to 59 cents per share. The company even has big plans to buy back $18 billion in shares. In the market for some gainful employment?  You might want to check out Home Depot’s job board. The company is looking to fill 80,000 jobs for the spring, the store’s busiest season. Unfortunately, the retailer’s forecasts for the year are tinged with a bit of disappointment as it is convinced that the exchange rate and that especially robust dollar of ours is going to put a 6% ding in the stock this year.

Everyone likes a good mystery…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Fed Chairwoman Janet Yellen is taking fiscal center stage today before the Senate Banking Committee.  The Fed Chairwoman gets to enjoy two days of back to back congressional testimony where she will be grilled on a loooong list of complaints, courtesy of the Republican controlled House and Senate. Among the questions with which she will be peppered is when exactly does the Fed plan on hiking those interest rates, an answer that has been eluding the American people and its elected officials for quite some time.  Not exactly the stuff that Oscar nominated movies are made of. But on Capitol Hill that testimony could give Game of Thrones a run for its money. Ms. Yellen also wondered aloud about that mysterious lot born in the eighties and nineties, a.k.a. Millenials. The Fed Chairwoman finds them to be a bit of a mystery and is unsure how the economy is going to affect them. If that’s what she’s wondering about them then I’m guessing she doesn’t get to Chipotle very often.