anyone know why utilities have been getting slaughtered?

Discussion in 'Trading' started by robbie380, Aug 4, 2008.

  1. is it just obama potentially getting elected? or could it be apart of the margin call santelli was talking about earlier?
     
  2. guess not....oh well
     
  3. Brandonf

    Brandonf ET Sponsor

    Typically speaking the utilities are heavy borrows and if the market is anticipating higher interest rates they struggle. Historically they have had a very high degree of accuracy in fortelling higher rates.
     
  4. thanks! i didn't know they were that historically accurate in predicting rate changes.
     
  5. Brandonf

    Brandonf ET Sponsor

    You should make yourself aware of these types of things. They do not always produce actionable trading opportunities, but they do help you see the bigger picture.
     
  6. Not sure I buy that argument. As history shows something quite different. Utilities rose long before the upturn in the fed rates after the 02-03 bottom. Opposite to the relationship you are implying.

    If anything, I would simply say that they are expressing uncertainty. One could argue that they have been flat along with the mesa in fed rates, but could continue to track downwards in response to the long trend decrease in rates (see 2000 response).
    But of course, that would be simple conjecture.

    Most predictions (fed models and options) are predicting no change (to an extremely small likelihood of hike). My experience has been that they are pretty good predictors. Considering most of the backdrop, I'd side with no change.

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  7. i do know about the bigger picture but it looks like dtrader posted more correct info. thanks anyway....anyhow... i didn't think we were in for a surprise rate hike tomorrow. possibly more dissenters wanting a rate hike but this move was somewhat excessive in certain utilities like NRG, FPL, and such. obviously not all utils were down so that does throw a wrench into what you were stating.

    either it was some news that i completely missed related to the guys i got near the close or it was part of the rumored margin call. i am inclined to think it was the rumored margin call because there were some odd moves that felt like forced selling.
     
  8. Brandonf

    Brandonf ET Sponsor

    I dont think i implied we are in for a rate hike tomorrow, and I know I did not mean to. I dont really think this fed has the balls to do anything but offer short term fixxes.
     
  9. Power for delivery in PJM (pa, nj, md) in august went from $150 to $95 in the past month. Others have followed. Just a thought.
     
  10. that could make some sense. oh well...it's a little too late now since i am in :D

    these late day panic-type moves had been gold for me in the reits last month...hopefully it will pay off again. if not i should be able to get out close to flat. ::::crossing fingers::::
     
    #10     Aug 4, 2008