E2219 - May 11, 2022
This week we discuss de-escalation in Ukraine, inflation, monetary tightening, "roll-off", and inflation resistant businesses.
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It is highly likely that Q2 GDP reports will trigger a technical recession1. This, combined with record inflation, monetary tightening and the “roll off” of the Fed balance sheet makes for tumultuous markets. On the podcast this week we discuss possibilities for de-escalation in Ukraine and the impact on energy markets, recent turmoil in capital markets, and some of the things we look for in businesses that ought to be particularly durable in an inflationary environment.
Here are a few other interesting bits I’ve been following this week…
Cable’s Last Laugh (Stratechery)
If there is one industry people in tech are eternally certain is doomed, it is cable. However, the reality is that cable is both stronger than ever and poised for growth; the reasons why are instructive to not just tech industry observers, but to tech companies themselves.
Lithium prices have tapered off (see chart below), but there is still no where near enough capacity to meet EV automaker forecasts. This is a market we are tracking fairly closely. The FT has a great overview of this issue this week: Powering electric cars: the race to mine lithium in America’s backyard.
Crypto currency markets are cracking (see charts below), apparently due to the US dollar stable coin, Terra, breaking its peg. Or is it the other way around? If you remember, critics of USDC and Tether have criticised stable coins for a lack of transparency in their holdings. I think regulation is coming sooner than later.
Supplemental Data
1 SuperCompounders
2 Macro
3 Energy
3.1 Oil & Gas
3.2 Metals Powered
4 Tech
Cloud Multiples - Check out the most recent edition of Clouded Judgement for the latest SaaS multiples.
Semiconductors
Semiconductor Industry Association Global Billings Report
Bureau of Economic Analysis Semiconductor Import / Export
Cryptocurrency
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In 1974, economist Julius Shiskin came up with a few rules of thumb to define a recession: The most popular was two consecutive quarters of declining GDP