I posted a comment over at TheStreet.com’s RealMoney today on the market’s reactions to today’s telecom bill.
I have been tracking the telecom reform storm system on our website rutledgecapital.com for some time. I saw the building pressure for a new telecom law from people all around the country who want broadband access to compete with companies in Asia. That new law would raise the return on network-building assets relative to the market, establishing a high-low return weather front, in the same way high and low pressure systems create thunderstorms on a weather map. That return differential would then drive investors to rebalance their holdings toward the favored asset class, which would move prices.
The prices are moving today. I have been holding a position in telecom sector stocks via (IYZ), the Exchange Traded Fund for the Telecom Sector betting that congress will get telecom reform more right than wrong this year. The sector is up sharply across the board today since the new bill was announced.
Getting the law right will trigger big investments in high-speed networks. That would be great for the equipment makers like Lucent (LU), Nortel (NT), Cisco (CSCO), and Corning (GLW) — all of which are up big today. (Corning is up more than 5% so far today.) It’s also good for telecom service companies like Verizon (VZ), BellSouth (BLS), SBC (SBC), Qwest (Q), AT&T (T) Sprint (FON) and Nextel (NXTL). They, too, are up today; Sprint and Nextel are up about 5% at this point.
Keeping my fingers crossed and holding on to my IYZ position.
JR
