The Sunday Brief

Connecting technology, telecommunications, and the internet

Value Creation – Long-term charts, Fab Five vs. Telco Top Five (August 26)

by | Aug 27, 2022 | TSB

Summer gains were largely wiped out this week as the markets reacted to the reality that inflation is not transitory and might be elevated for some time.  As Fed Chairman stated in his speech on Friday (transcript here):

“Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance. Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions. While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”

Meanwhile, energy prices remain elevated (coal here, natural gas here) and gas prices are likely to rise in October reduces their strategic petroleum reserve releases (evidence of the SPR effect and be seen in today’s AAA gas prices – diesel is rising, and regular gasoline is falling – the amounts are small but the trends are remarkably different).  Year-over-year increases in regular gasoline (23%) and diesel (54%) are definitely contributing to inflationary pressures. 

The new focus (besides natural gas) will be corn, up 7% this week and 20% Y-o-Y.  Allowing greater ethanol blends during the summer (see Washington Post article here) not only increased pollution, but it also is anticipated to drive a shortage of corn this fall.  This will not only increase gas prices later in the year, but also soda, cereal, bread, snacks, and the like.  Great news for rural Nebraska farmers (if the fertilizer price increases abate) but bad for nearly everyone else.   

The big news in the telecom world was the T-Mobile/ Starlink announcement (YouTube of the event here).  Great summary from RCR Wireless here and from Light Reading here.  Very innovative, yet pricing (outside of the likely inclusion in Magenta Max) remains to be seen. 

We will publish a Brief over Labor Day weekend (to be published late Saturday as opposed to Sunday) – likely titled “Earnings Roundup.”  Spreadsheet with all of the underlying data is below. Have a terrific weekend!

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