Bubbles seem to be a recurring theme on Wall Street. While most folks are still blind to it, there is a dangerous bubble about to pop. Either stand clear and wait for it to blow, or act fast and take advantage of the situation.

Wall Street has a bad habit. It is a very dangerous, costly tradition that it should have outgrown decades ago.

But instead of learning from its mistakes, the collective group of competitive investors that make up the Street continue to have a wicked tendency to see how far they can push things before they will pop.

We had a tulip bubble, an interest rate bubble, recently a tech bubble and, of course, that nasty little real estate bubble we are all trying to repress into the furthest folds of the 90% of our brains we never use.

Even after repeated lessons, we pump and pump the bubble until it bursts and everyone is left blaming everybody else.

The latest bubble is, as usual, another government-fueled creation: the so-called “green revolution.”

Pop it like a dirty zit

Even though we have all been here before (several times), the Obama administration swears this time it is for real. Plenty of investors have fallen for the politically driven propaganda.

Few companies are getting inflated to bubble-like proportions like Itron (NASDAQ:ITRI), a manufacturer of smart-grid technology with a share price of $61 and a P/E of a whopping 293.1.

How’s that for ultra-high expectations?

The company and its smart meters are getting all sorts of publicity as Obama and his gang tout the “dire” need to upgrade the nation’s electrical infrastructure.

Since its lows last November, shares of Itron have soared by just about 80%. Even with high-flying expectations it is hard to believe current buyers are getting anything but an overpriced shot at a hype-driven stock.

I will be the first to admit, the company produces products this country needs (I even have my own smart meter measuring ever watt of electricity flowing into my house), but investors need to see a bubble as a bubble.

Just the facts, ma’am

Itron’s industry is far from mature. The company has a young product pipeline and greedy competitors can smell the cash in the water and are sharpening their claws. They are ready to pounce and knock the company’s shares right back to where they belong.

Besides a growing threat from competitors, one of Itron’s largest threats is a macro-economic force entirely out of its hands… the strength of the American dollar.

With nearly half of its business coming from Europe, a weak dollar increases demand, but it kills the company when it is time to call those greenbacks back home.

In November, shares of the company were a steal. In February, when I last mentioned the shares, the stock was a good value. But now investors are betting on the company’s long-term outlook.

And with an earnings ratio well into the triple digits, I mean the loooonnnggg term.

What happens if a competitor emerges and wipes out Itron’s dominance of the North American market? What happens if new technology eclipses the company’s current product lineup? And what happens when Obama moves onto the next vote-garnering topic?

The what-ifs surrounding Itron add up to a lot of uncertainty. Too much if you ask me.

The only way you should be looking at taking a stake in the company is if you are borrowing the shares now and paying them back in six months.

This is a shorts-only situation.

Itron won’t be spinning generating “electrifying” gains anytime soon.

Source: Itron: The Next Hyped-up Bubble