Wednesday Wealth Recap
- As traders continue to play the GameStop short squeeze, life on Wall Street seems to be imitating art. Unfortunately, as Alexander Green points out, that art is the movie Dumb and Dumber.
- This “Baby Berkshire” company has modeled itself after Warren Buffett’s legendary investing empire. But after beating Berkshire for close to 30 years, its performance has been lagging. Nicholas Vardy explains why investors shouldn’t count this one out.
Is the 5G boom already going bust?
If the headlines are any proof… there’s trouble on the way.
And once again, we can blame the government.
Countless investors have piled into 5G stocks. They’ve been one of the hottest asset classes around.
I’ve largely stayed away from the buzz.
The 5G boom relies far too much on government intervention to really make anything of itself.
I have my eyes on another prize… a prize that went zooming overhead the other night.
As I walked down my driveway just a few minutes into the evening’s darkness, I saw a series of bright white lights heading toward me. At first, they looked like a plane that was making a wide, banking turn.
But it didn’t turn.
Soon, the lights began to separate. One outpaced the other as they inched across the black sky, seeming to race to the distant horizon.
A few minutes later, two more pairs of lights followed a similar path.
I recognized them in an instant. I’ve been studying them for months. (In fact, I recently was interviewed on the very subject.)
They are another creation of that mad scientist Elon Musk.
They are part of his new Starlink project… a notable poke in NASA’s eye and the big threat to 5G that nobody is talking about.
In December, the fine folks at the Federal Communications Commission (FCC) launched a brand-new auction for C-band airwaves. That’s the critical spectrum 5G operates on.
All the big boys of the cellular world have opened their wallets.
Verizon (NYSE: VZ), AT&T (NYSE: T), T-Mobile (Nasdaq: TMUS)… they’re all going after as much spectrum as they can.
They need it to compete.
But here’s the thing. The rights to this spectrum – which were once handed out for free – are not cheap.
So far, the industry has shelled out as much as $81 billion just to get a piece of paper that says other folks aren’t allowed to use the same airwaves.
The spending is so massive that credit agencies are watching it.
All the borrowing it could take to acquire this spectrum could play hell on company balance sheets. The danger is that businesses spend so much acquiring spectrum… they can’t spend on other necessary projects.
Or worse… they spend billions on technology that becomes obsolete in just a few years.
Again, we can thank the government for its part in the mess.
If you’ve been wondering why we’ve been hearing about 5G for years but haven’t seen it come to the market in any real way… here’s a big part of the reason.
This spectrum offering was years in the making. Lobbyists and other industry insiders held things up in court.
It’s been a nasty, slow bureaucratic process.
Meanwhile… Musk and his fellow capitalists are launching one industry-rattling innovation into space after another.
His Starlink satellites are quickly threatening to do what the 5G gods have been promising to do for many moons now. He’s blanketing the planet with a high-speed internet signal.
It’s so promising, in fact, that the government is paying him to do it.
At nearly the same time as the FCC finally opened its boondoggle spectrum auction, it announced it had awarded Musk and his team another $855 million to help stream broadband internet to rural America.
This free money will go a long way toward putting more of those satellites I saw zooming overhead into space. Musk, after all, has plans to put some 42,000 of them into orbit.
Each new launch threatens the existence of that ugly (and dangerous?) cell tower on the horizon.
Starlink’s big win in this FCC handout came as a surprise to many in the industry. Plenty of analysts didn’t expect the satellite industry to get a penny.
But in the end… it got close to a billion bucks.
I hope the 5G crowd is paying attention. The big carriers are surely getting worried.
While that industry got buried in bureaucracy, the free-market mavens lit up the skies.
The satellite industry – and the shadow it casts on 5G – will be one of the biggest tech stories of 2021.