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Advisors for various "off the grid" types.
  • Pondering The High Beta Thrashing To Start The Year 0 comments
    Apr 15, 2014 10:29 PM

    We're well into 2014 now and it would seem that the bulk of the momentum names are now "catching down" to reality.

    This is not an unhealthy thing...although obviously if you're a major shareholder or "on the cum" in the assorted names of, Tesla, Facebook, Netflix, the entire biotechnology space and a multitude of IPO's of late what's going on can certainly feel "non-normative."

    Ask a Jeff Bezos from Amazon or a Reed Hastings from Netflix and they will tell you "we've seen this movie before." (so to speak.)

    So no...there is much that is not normative of the past few years...but much that very much is over the past few months.

    What should be confidence building is how cheap it is to buy protection. Treasuries even at these criminally low interest rates still remain cheap relative not only to stock valuations but also to "recovery valuations."

    Equities have "pushed" recovery going on 5 years now...but clearly the move in stocks has not been sufficient to achieve "escape velocity" for the economy at large...nor has the policies of "priming the pump" by the Federal Government through fiscal stimulus been much of a factor. Indeed many have argued that this Administration has done a terrible job of using the levers of "power" to truly get the economy moving forward.

    So we are where we are right now...innovating at a tremendous rate (solar, cloud computing, three dimensional printing, etc) and yet "wasting away" in a veritable Ocean of liquidity "looking for someone or something to show us the way"

    Certain select utilities have been such clear winners due to the Wall Street mind boggling and seemingly permanent ethical collapse..let alone what appears to be an ongoing financial one as well. Simply put there is no way to roll over the massive pension and healthcare obligations "amassed" under a "no growth" regime. "Financial engineering" can only go so far.

    I think a good argument can be made that the Crazy KGB Colonel, President Putin, offers up a solution to a myriad of these fiscal "dilemmas" but simply put this Administration appears incapable of articulating let alone carrying out much in the way of policy activities. This is rather striking as nothing is truly more heroic in an American Presidency than to "take on the Russians and win."

    So we talk tough, do nothing...and I imagine the President himself has to wonder "what an odd job this President thingy is."

    In the meantime "the slowdown grinds on."

    I would remain long treasuries at least through the summer. My "spyglass" tells me we will know by then whether or not commodities had set themselves up for massive double dip "that no one saw coming last summer" (let alone this one) and that could present some compelling buying opportunities in those areas of interest.

    Right now WEC (Wisconsin Energy) remains a truly compelling buy in spite of it hitting one record high after another going on three years now. I remain especially committed to Entergy (even though I do not like nuclear energy personally) as it so clearly is the best relative to its peers and the cost of generating nuclear power once these plants are built is so compelling it's almost impossible to rate this particular energy company a sell.

    The same is true of Duke Energy...despite all its problems. Obviously they're a "bad coal producer" but this Administration has had such a profound hatred of the coal industry...ironically maintaining that position in spite of the coldest Winter in decades...that "even Duke Energy had a great year."

    Another interesting play is American Electric Power (NYSE:AEP)...they're a major provider of grid power in Latin America which is an interesting play right now as well.

    And that's about all i see as far as something other than cash and something other than convertible debt.

    I look forward to offering up my views on what covertible debt is, how one does the math to see if there is value in the offering and offer some recommendations for said offerings should they be forthcoming.

    The most recent example was Tesla's quite substantial offering this Spring so they could build their "giga factory." I look forward to offering up that offering as an example of the "good, the bad and the ugly" of the covertible debt space.

    Good luck trading!

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