A Risky Bet

I've been giving some thought today about how I have been consistently too optimistic even in my own dire predictions. I therefore offer a risky bet for those who feel that I continue to be too optimistic.

Before I do so, I want to remind everyone that I am a random anonymous blogger on the Internet. Taking investment advice from such a person would be fool-hardy to say the least, not that this is investment advice. I am not a financial advisor. I am merely pointing you to several related articles. How you connect the dots is your business. Further, since I avoid risk, I am not going to make any bets based on the following information. I have nothing to gain or lose regardless of what you do.

California Pizza Kitchen (CPKI)

Current Price: $10.42
P/E: 30.29
Dividend & Yield : N/A
Short Percent of Float: 20.3%

California Pizza Kitchen Inc. Q4 2008 Earnings Call Transcript

An old saying that a major developer told us 20 or so years ago, still holds true, "At least will all have good Saturdays." And it is still true, even in this economic environment. We also know there's been a concern expressed that CPK is highly exposed to the weakened economy in California, where indeed we do have 42% of our base, but as I have emphasized before, despite this softness, California remains our strongest profitable market, with average unit volumes and profit margins well in excess of the rest of our restaurant base.

UPDATE 1-California Pizza Kitchen profit tops Street

The pizza chain and other restaurants in the middle of the market have reported weak same-store sales as falling home prices, rising unemployment and a credit crunch have forced diners to become more frugal.

Restaurants see progress but expect difficult year

"It's like a football game," Derrington said. "We're going on a hope and a prayer."

California unemployment rate reaches 10.1%

Reporting from Sacramento -- Lackluster spending on clothes, cars, legal services and most everything else has left California's economy listless, just about guaranteeing that the state's 10.1% unemployment in January will march upward until at least the end of the year, economists predicted.

I'll be tracking California Pizza Kitchen in the years to come. I've been watching California's economy. I've been watching the restaurant business. I'm ashamed of myself for not thinking of it sooner.

The risk as I see it depends on whether this is a cyclical downturn or a secular downturn. I didn't start a blog based on the former, but I could be wrong of course.