Electric Short

Published on
June 8th, 2018
16 minutes

Electric Short

Trade Ideas ·
Featuring Steven Bregman

Published on: June 8th, 2018 • Duration: 16 minutes

Steven Bregman, president of Horizon Kinetics, presents his long-term bearish trade on the utilities. He explores the factors pressuring utilities ETFs, and explains how to offset the negative carry, in this interview with Justine Underhill. Filmed on June 4, 2018.


  • TD
    Tony D.
    8 June 2018 @ 17:10
    I pity the Girl interviewing this Guy , I amazed she didn't fall asleep , this guy must be a riot at parties
    • rc
      ryan c.
      28 June 2018 @ 04:33
      Wow, def showed your true colors with that comment. If you pity anyone who gets the rare opportunity to interview Steve Bregman, than you my friend are just way too cool - I suggest you stick to your parties and to listening in on TSLA earnings calls for your excitement. The only way you could make yourself look any more “I don’t know wtf I’m doing” with your comment...? Actually, there is no way - it’s already obvious you don’t know wtf you are doing....
  • JC
    Joe C.
    21 June 2018 @ 14:44
    Impressive in-depth analysis that's way over my head. I arrive at long-term bearish Utilities for a much simpler reason... utilities have generally traded in lock-step with bond prices (interest rate sensitive). Yet they are also equities. If you are long term bearish on risk parity strategies (ie you see bonds and stocks falling together in the future), I can't think of a better short than utilities. Rising rates and falling equities are a deadly one-two punch for this asset class.
  • DW
    15 June 2018 @ 15:48
    Like hearing from Bregman and have enjoyed his interviews - thoughtful and interesting. That said, his "analysis" of the CEFs made me question this view. Only a minor part here, but wow... stating that a leveraged, high quality bond portfolio may not be adversely affected by rising rates? Because he doubles the discount (?) and doesn't consider funding cost. Not trying to sound trollish, but if the one of the core theses of the interview is "rates are rising", how can you argue bullishly for one of the absolutely most duration sensitive securities?
    • ZP
      Zachary P.
      20 June 2018 @ 20:07
      He seemed to argue that the 150bps spread between YTW and YTM is a proxy for the cushion as rates rise. Since "some bonds must be trading at the yield to worst" (now this I'm not sure how he gets, particularly for the second CEF with bonds at .90), the embedded calls go to zero as rates rise, and the investor can realize more of the YTM.
  • RA
    Richard A.
    14 June 2018 @ 03:14
    Good content but ... I was left wanting, because the Emmy Award winning portion of this interview was CLEARLY left on the cutting room floor. That would be when Justine asked him to summarize his trade in 30 secs or less, and his head first started to shake, then smoke, then explode, like Nomad after Kirk pointed out his 3 errors.
  • CM
    C M.
    12 June 2018 @ 14:51
    Great interview. Not a guy who likes to short, but the two muni fund recommendations were excellent.
  • CC
    Carlos C.
    11 June 2018 @ 01:02
    This is a solid trade. Not really in my Bailywick, but it’s well thought out.
  • KK
    Kiriakos K.
    10 June 2018 @ 09:08
    Rising interest rates alone is more than enough to drive investors out of this XLU and I think he is totally right on that. Let alone the individual problems some of these companies face. I doubt that these companies face a real threat for the shift to LED bulbs or from individuals who produce energy from solar panels or wind generators. At least not for the near future. Bare in mind that these companies enjoy so massive and have such economies of scale in production that they can match many times the price of any individual producer if they are forced to do so. On the demand side there are electric cars on the way, more powerful computers, huge increase in industrial production, farming, cryptomining, huge population increaseand and so on.... (this list is endless)
  • WP
    William P.
    10 June 2018 @ 03:44
    Clear, concise and actionable. Excellent discussion.
  • OC
    Otto C.
    10 June 2018 @ 00:49
    Great and clear argument to short electricity!!! Electric cars are here to stay, I wonder if that would balance the electric demand lost.
  • RH
    Rick H.
    9 June 2018 @ 20:57
    One of my favorite contributors. His ideas are clearly thought out and looked at through a systems lens. Like this call. Yes we could be a little late to the party, but it also could just be getting started
  • AL
    Antony L.
    9 June 2018 @ 02:57
    This interview was very insightful, RV keep up the good content!.
  • JB
    James B.
    9 June 2018 @ 01:58
    This already seems to be a crowded trade, especially since the premise is based mostly on rising rates (the most crowded trade of 2018). Another issue with shorting the XLU is that not all of the utilities in it are regulated electric utilities which he suggests may be in secular decline. Many of them are diversified businesses with growth segments like natural gas transportation or even large solar segments. New demand can be seen in large data centers required for the ever expanding world we live in. Some utilities in the XLU are down 25% already, so it feels late. From a risk/reward perspective, utilities like Dominion Energy are beginning to look quite attractive. It seems the market has priced in every worse case scenario already and could be dues for a short squeeze on any turn in interest rates or good news.
  • RK
    Robert K.
    9 June 2018 @ 01:29
    Very nice. Now, this is why I am a subscriber.
  • KF
    Kenneth F.
    8 June 2018 @ 17:44
    love Muni closed end funds here & Steve's take on them
  • MN
    Michael N.
    8 June 2018 @ 17:37
    Just when I thought I was getting smarter... that was way over my head and that's ok! I'll have to watch it again and really dissect. I have shared this view WRT utilities and hold a significant amount of utilities (mainly FE) for my children but the rise in electrical efficiency as well as cheaper alternative energy has always been in the back of my mind as a risk to these longer term investments. Thank you for the insight RV this really hit home for me. I have some home work to do. If anyone can provide me a place to narrow my focus that would be appreciated. Thanks in advance.
  • TM
    Todd M.
    8 June 2018 @ 17:10
    The trade ideas are becoming my second favorite series - I could care less if I agree with the call they make. It's great material to think through. Snappy, quick and direct is best - these have really improved. Justine shines here.
  • SS
    Sam S.
    8 June 2018 @ 14:36
    I would like to ask Mr. Bregman or anyone, if they have has some insight on CCJ as a nuclear fuel provider to China & India and how that plays into the electric short or doesn't???
    • MF
      Michael F.
      8 June 2018 @ 16:01
      You might want to have a listen to Dave Iben's interview from a few years ago on RVTV. Dave has been a fan for some time. I think that you might want to hear MArin KAtusa and Admir Adnani as well for the nuclear and Uranium story.
    • SS
      Sam S.
      8 June 2018 @ 17:06
      Hey MF---thank you, I'll go back and do just that---All the best!
  • PM
    Patrick M.
    8 June 2018 @ 15:08
    Thorough af. Awesome.
  • SS
    Sam S.
    8 June 2018 @ 14:33
    Professional presentation by both! Very lucky to hear Mr. Bregman discuss closed end funds and the effect of interest rates. Please have him back soon!
  • DJ
    D J.
    8 June 2018 @ 14:02
    If RVTV is reading, here’s a funny though. Instead of just thoughing a lot of trade ideas where there is lack of data presented, why not educate people of each individual value chain - equally important how they evolve and cope with globalization, how the contract standards are set up, who stands to benefit from bull and bear markets.
  • KS
    Kashyap S.
    8 June 2018 @ 13:02
    I suppose the RV folks do read the comments. Thanks for fixing the music.
    • JP
      Janusz P.
      8 June 2018 @ 13:43
      They didn't fix the music, they changed the intro entirely. Old into was good enough though, it was just insanely loud (compared to the video itself).
  • EV
    Edmundas V.
    8 June 2018 @ 12:00
    never saw such a detailed wide-audience talk on a listed security but George is right
  • GF
    George F.
    8 June 2018 @ 11:27
    Electric vehicles? The country with the most excess electricity is probably Norway, the leader in EV purchases. Supposedly utilities maintain a reserve for decommissioning nuclear plants. The discount on muni funds might be due to bad publicity about defaults due to pension obligations. US utilities have finally realized electric cars may save them https://qz.com/1230297/us-utilities-have-finally-realized-electric-cars-will-save-them-and-asked-congress-to-put-more-evs-on-the-road/