The Five Dumbest Things on Wall Street This Week

2. Leftovers from McDonald's

Speaking of taking issue with our research, our original paper on deflationary Happy Meals wasn't received with unanimous acclaim last week.

Wow, you're thinking. What a shock.

Anyway, our first correspondent, who requests anonymity, calls our Happy Meal analysis "slightly askew."

Rather than reflecting deflation, says our correspondent, the two-toy Happy Meal signals poor forecasting amid declining Happy Meal sales. The purpose of giving away a pair of toys "is to deplete excess inventory from earlier Happy Meals. ... One might surmise that a root cause of the HM sales falloff is the increasing prevalence of discounting [among other items at McDonald's -- cf. the Dollar Menu] and the resulting tradeoff from nonkids who previously purchased HMs because of their better value/price than full-priced 'value' meals.

"As for forecasting," continues our friend, "even Cantalupo doesn't want to go down that road anymore!" Which is true. New CEO Jim Cantalupo has said the company won't be giving earnings guidance this year, no doubt because of the unhappy ending for Happy Meals.

Meanwhile, Charles Yu points out that we haven't properly acknowledged landmark prior research in fast-food economics, namely The Economist's 16-year-old Big Mac Index.

That index, based on the price of a McDonald's Big Mac in various countries around the world, as well as exchange rates against the U.S. dollar, is an attempt at illustrating the theory of purchasing-power parity -- the idea that a dollar should buy the same basket of goods and services in every country. In other words, once an overseas American has traded in his dollar for the local currency, a Big Mac in the local McDonald's should cost the same amount as it did back home.

Judging from The Economist's latest edition of the Big Mac Index, dated last Thursday, the British pound is 21% overvalued against the dollar, while the Russian ruble and the Chinese renminbi are each more than 50% undervalued.

So the next time your kids whine for a Happy Meal, tell them you've used their lunch money to go long the ruble. They'll thank you for it. Someday.

3. How to Compuware Out Your Welcome

Speaking of whining and disputed research, here comes software firm Compuware (CPWR Quote).

Like countless other companies within the past few months, Compuware has had its debt downgraded by a credit ratings service over the past few months, in this case an August 2002 downgrade to junk status by Moody's Investors Service.