The Sunday Brief

Connecting technology, telecommunications, and the internet

Value Creation – Long-term charts, Fab Five vs. Telco Top Five (November 18)

by | Nov 19, 2022 | TSB

This was a stable week for the Fab Five and the Telco Top Five. Many factors are driving share prices now, with interest rates poised for further increases and small layoffs beginning to appear in the tech sector. The producer price index data shows continued increases in most intermediate goods, but nowhere near the levels we saw earlier in the year. Oh yeah, we also had a major false flag headline about several Russian missiles hitting Poland and formal announcement that the Republicans now control the House of Representatives.

There does not appear to be any hope of a Santa Claus rally this year as prices will likely remain high. Gas prices are still up 2x wage growth (8% for gas, 4% for wages) and corn is up 17%. Meanwhile housing prices continue to rise per the Nov 10 National Association of Realtors release here. However, the second sub-headline indicates that the cost of a mortgage has gone up 50% in the past year (yikes). With home values continuing to rise, at least for now, look for an increase in equity line of credit usage for home improvements (it may be more cost effective to take that path than to move to a newer home with a higher mortgage payment).

Also, it’s worth noting that the dollar is beginning to return to more “normal” levels which will help with pre-adjusted earnings. A good chart from MarketWatch is here. We still have a ways to go to get to the mid-2021 levels, but continued a sable relative valuation would provide more assurance to the markets.

The Telco Top Five also had a very steady week (+$2 billion wk/wk; +$30 billion over the 2-week period). We posted CNBC’s terrific “exit interview” with Tom Rutledge this week on LinkedIn and also including here. While lengthy, it provides an historical view of cable’s role in broadband, telephony, and wireless.

Speaking of which, we also noted the recent headline where Comcast indicated their costs to upgrade their plant to DOCSIS 4.0 at less than $200 per passing (Fierce Telecom article here). Note that these are costs per passing (likely to the node) and a reflection of Comcast’s current fiber density.

We are going to publish a full Brief next Saturday/ Sunday, and then two additional Briefs prior to the end of 2022. Jim will be attending CES this January and will be hosting dinner for eight at Gordon Ramsay’s Pub in Las Vegas – more details in the first December Brief.

File is below. Happy Thanksgiving to all of the Sunday Brief faithful! We are thankful for you.

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