Are you an O&G bull? XLU puts. EV bull? XLU puts. War monger? Yep, XLU puts. Give peace a chance? Puts. Bearish because of clown market not pricing in rate hikes and inflation? Mmhmm, puts. Bullish on growth? You guessed it, XLU puts.
First I would like you to click on this link.. you don’t need to read shit (I know you wouldn’t anyways), just quickly glance at title.
K, good, you’re back. Now, as you just saw.. Utilities ALREADY, before anything that’s happened the last month, have been actively attempting to raise rates. Just like everyone else.. gotta pass the cost onto the customer, right? BUT, there’s a catch, utilities are a regulated sector. They can only want, ask for and implement so many hikes before they would eventually become “capped” (I guess if you’re a bernie bro or doomer your worst case scenario would be nationalizing the sector .. I’m not that doom & gloom, just pointing it out). So, things have been costing more but they can only charge so much more??? Yes. Now let’s dive a little deeper, not too deep though.. this is WSB.
Are you an oil & gas bull? You think prices are going to keep going up? Sure looks like it.. NATURAL GAS = ELECTRICITY. So, if natural gas price goes ⬆️, input costs for electricity go ⬆️. If General Mills has to pay more for wheat to make cereal.. what do you think happens to General Mills if they CAN NOT CHARGE MORE FOR THEIR CEREAL? They’re profits go ⬇️. Basically, if you’ve got calls on O&G.. why aren’t you buying puts on the publicly traded biggest customer of O&G?
You think EVs are taking off? Own Tesla, Lucid, F stonk? Of course not, you own calls expiring tomorrow. But, I digress, XLU puts are obvious choices for you as well. More EVs = demand for electricity goes ⬆️. Demand ⬆️ = input costs go ⬆️. It’s basically a circle, hope you’re putting that together by now.. Rising costs, rising demand BUT they can only charge so much more! How viable is a business model where the more demand there is the lower your margins are going to be? Not very damn viable.
Oh. But wait. They could pivot to solar & wind & battery and not be hurt by skyrocketing energy (input costs). That takes MONEY. That takes TIME. Rates are going to continue to go higher. So, the more money they need over time is going to cost them more and more. This is not bullish, don’t you think?
You think we’re at risk of being drawn into a war? What’s the ONLY way any country can attack the US lower 48? Uh, we already saw it recently. Shutdown pipeline ring a bell? So, if you’re scared silly.. why don’t you have puts on the ONE sector that is TOTALLY RELIANT on our WEAKEST DEFENSIVE POINT.
You think the war is a little overblown? You think things are going to obviously calm down soon? Cooler heads going to prevail? XLU is HISTORICALLY A DEFENSIVE STONK! Low PEs, high dividends, customer base that can. Not. Go. Anywhere. So, bet against XLU if you think things are fixing to calm down.. BUT WAIT, THERE’S MORE! XLU is a shitty defensive. Yep, that’s right. Low PEs? Uh, the sector is pushing 30.. FB and MANY tech companies have lower PEs.. High dividend? The dividend is shit now. Under 3 for sector and a paltry 1.9 for the sexiest company amongst this burning trash pile (NEE). Value tech, certain consumer staples, o&g, miners, I could go on.. ALL HAVE HIGHER dividends! The customer base can’t go anywhere? Currently true BUT this is changing! NEE just spent big money (and risked executives going to jail on sketchyness) to get net metering changes passed in Florida.. we saw something similar in California.. in Cali, they pushed it as something that was needed to PROTECT customers that aren’t using solar.. in Florida, Florida Power & Light (see: NEE) literally said how they were going to lose hundreds of millions of dollars over the coming years because of solar.. in a state with less than 100k solar rooftops (and that’s in the sunshine state, people!). 🤔 Mmhmm. Residential solar is coming, otherwise you don’t risk jail time to try and stop it. Long story short? For the first time in their existence, utilities can no longer bank on having that customer base in forever and ever. See, told ya, it’s a shitty defensive that trades more like growth.. bearish on anything? Still buy puts.
Not proof reading this or adding more or linking more… I know 98% of this sub is incapable of reading past title anyways. Stream of thought only. FINAL THOUGHTS: as I’ve laid out here.. there is no other sector, no other stock that fits every type of regarded soul here. Bull, bear, pillow drooler.. it doesn’t matter. BUY PUTS ON XLU AND WATCH THE SECTOR BURN. Thank you for coming to my teddy bear 🧸 talk 🗣
-former XLU & NEE bull
Submitted March 24, 2022 at 09:17PM by Jordykins850
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