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

As a rough guide, peak power is three times more expensive than off-peak power… but it varies a lot depending on the region. As things currently stand, power companies figure out the average cost of power each day and charge every customer the same price, regardless of the time of day they consumed the power.

The power company would like to charge you more for using power at peak times… like the toll bridge or the phone company. By charging more for peak usage and less for off-peak usage, consumers would alter their habits. Peak demand would decline and base demand would rise. Power companies could avoid building expensive peak load power plants. Consumers could cut their bills in half. And it would create spare generation capacity for the future…

In Lee County, Florida, you’ll get a 50% discount on the toll bridge if you travel outside daily rush hours. Economists call this variable pricing. When there’s more demand for your service, you charge a higher price. The railroads use it. The airlines use it. Even telephone companies charge separately for peak and off-peak calling.

But there’s one industry that really wants to use variable pricing: the power industry.

Demand for power in the United States peaks daily at 6 p.m. That’s when people get back from work, heat their ovens, run the laundry, and turn on the air conditioning. Power demand bottoms at 4 a.m., when the whole country is asleep.

Because they have no way to store electricity, power plants must always have spare generating capacity to meet peaks in demand. If power demand spikes and the power company can’t keep up, you get a blackout.

To make sure there’s always enough power, power companies run two types of power plants: base load plants and peak load plants.

Base load plants meet the minimum power demand. Nuclear, coal, and hydro power plants are examples. You can’t switch off a reactor, cool a furnace, or stop a river, so base plants run all day and night. These plants produce the cheapest electricity.

As power demand starts rising at 6 a.m., power companies bring on their peak load plants. Peak plants generally run on natural gas so they can be turned on and off easily. These plants are much more expensive to run, so the power companies use them like pinch hitters: They bring them on line only when they need them.

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As a rough guide, peak power is three times more expensive than off-peak power… but it varies a lot depending on the region. As things currently stand, power companies figure out the average cost of power each day and charge every customer the same price, regardless of the time of day they consumed the power.

The power company would like to charge you more for using power at peak times… like the toll bridge or the phone company. By charging more for peak usage and less for off-peak usage, consumers would alter their habits. Peak demand would decline and base demand would rise. Power companies could avoid building expensive peak load power plants. Consumers could cut their bills in half. And it would create spare generation capacity for the future…

According to the North American Reliability Corporation, United States demand for peak electricity will increase by 135 gigawatts over the next decade… But supply will only rise by 77 gigawatts. If these projections are correct, there will be a major shortage of electricity within the next 10 years.

Variable pricing would save everyone money and ease the coming electricity shortage. But how will the power industry implement variable pricing? Smart meters. A smart meter records how much power you use and when you use it.

The world’s largest smart-meter deployment is in Italy, by the power company Enel SpA (ENEL). Enel says the project cost 2.1 billion euros but saves 500 million euros per year… a four-year payback.

Pacific Power and Gas, the California utility, wants to install smart meters with millions of customers in northern California. And a utility in Texas, Oncor, recently signed a $690 million contract to install smart meters in 7 million households.

Echelon (ELON) and Itron (ITRI) are the two smart-meter market leaders… Variable pricing will revolutionize the electricity industry. I’m going to keep a close eye on the companies that make smart meters… and I recommend you do the same.

Source: This Gadget Will Revolutionize Our Power Supply