Stock market is freaking out - something is going on

[sub_thug]

Any disruption is decades away. Private utilities invest infrastructure and return a set rate on that, cost of delivery, and operating expenses. It's statutory. Think 8-10%. Provided the utilities maintain their return with timely rate-case filings, it's a guaranteed profit. Even if people use less of it, the standby-charges will adjust to maintain that rate of return.

tl;dr: Regulated monopoly.

Shell oil company just sold its holdings of the tar pits in northern Canada. They have said that they are getting out of the oil business and into the energy business. I’m curious to see what they mean in terms of business models, as that’s going to be a huge differentiator. I think if you jump into the utilities sector now, depending on what you invest in, you might be left holding the bag.

 

[Lord Commander Palis]

All well and good, but if you follow this or not, there is a simple way to become modestly wealthy through the markets.

The real money is in what is boring.

Long term investments with solid returns that pay off over many, many years.

I got my chesapeak and groupon stocks, siri and twitter lol

 

[andnowweknow]

I love these sort of financial SD discussions.

I live in a very expensive market, rent and do pretty much whatever I please with money (within reason) with very little discipline. Two kids and a wife. I also don't save much due to my non frugal nature and instead of swimming against the current of my family's natural tendencies...my philosophy is simply, make more money. Which I will.

 

[IdahoCBR]

Anybody else like utilities as a basic long-term play?

I haven't bought but I have watched Nextera Energy(NEE) since the were sub $100. I believe they're the 3rd largest utility in the US. I started watching them mainly because of their dividend. I read that they have never decreased it in over 40 years and is currently at a 2.7% yield.

 

[Cubo de Sangre]

I agree and disagree. Regulated monopolies are nice but I do think disruption to the grid is a decade away not decades imho

What makes you think that within a decade people will be on 100% renewable and no longer hooked up to a grid? You realize that water and wastewater are utilities too?

Shell oil company just sold its holdings of the tar pits in northern Canada. They have said that they are getting out of the oil business and into the energy business. I’m curious to see what they mean in terms of business models, as that’s going to be a huge differentiator. I think if you jump into the utilities sector now, depending on what you invest in, you might be left holding the bag.

What's their timeline for transformation? Also, if you really believe this then you should be all in on solar, right? People gonna stop wanting water piped in and out of their homes?

I haven't bought but I have watched Nextera Energy(NEE) since the were sub $100. I believe they're the 3rd largest utility in the US. I started watching them mainly because of their dividend. I read that they have never decreased it in over 40 years and is currently at a 2.7% yield.

That's pretty much the game. Keep the stock price up. A dividend decrease send the price in the wrong direction. I talked to the CEO of one of the nation's largest private water utilities. He said he spends half his time talking to fund managers. I was shocked to hear that. I guess the business runs itself.

 

[hitcher]

What makes you think that within a decade people will be on 100% renewable and no longer hooked up to a grid? You realize that water and wastewater are utilities too?




What's their timeline for transformation? Also, if you really believe this then you should be all in on solar, right? People gonna stop wanting water piped in and out of their homes?




That's pretty much the game. Keep the stock price up. A dividend decrease send the price in the wrong direction. I talked to the CEO of one of the nation's largest private water utilities. He said he spends half his time talking to fund managers. I was shocked to hear that. I guess the business runs itself.

CEOs of big companies generelly do not have anything to do with the day-to-day business, but rather setting a long term strategy for the company.

 

[Cubo de Sangre]

CEOs of big companies generelly do not have anything to do with the day-to-day business, but rather setting a long term strategy for the company.

Not like I imagined him out their repairing lines and shit. Sorry if the quip distracted you from the substance.

 

[hitcher]

Not like I imagined him out their repairing lines and shit. Sorry if the quip distracted you from the substance.

Of course you did not.

 

[sub_thug]

What's their timeline for transformation? Also, if you really believe this then you should be all in on solar, right? People gonna stop wanting water piped in and out of their homes?

I’m going to wait and see about what Shell’s business model will be.

As for water, there’s a lot of infrastructure stuff to be worried about. Same with testing for chemicals. I’m hesitant to jump into that market without having a clear vision of where I think it’s going.

 

[Cubo de Sangre]

As for water, there’s a lot of infrastructure stuff to be worried about. Same with testing for chemicals. I’m hesitant to jump into that market without having a clear vision of where I think it’s going.

Infrastructure stuff to be worried about? You gonna stop needing water?

Utilities are like bonds with a potential upside.

 

[sub_thug]

Infrastructure stuff to be worried about? You gonna stop needing water?

Utilities are like bonds with a potential upside.

The pipes are made to last approximately 50-75 years. At current rate, we will replace all the pipes in approximately 250 years. As such, something has got to give. Either infrastructure needs to be replaced, or these companies are going to have massive problems on their hands because they can’t get their product safely/in accordance with regulations to their consumers. At the end of the day, the water companies have a distribution challenge on their hands that they need to address.

As for alternatives, well water is a viable option, depending on the location. Wells are very viable in places like PA, MT, and WA where the water tables are solid. Obviously, CA and AZ can’t rely on these. There is a lot more to this market than people probably realize, so they aren’t making informed decisions in regard to their investing. But hey, it’s your money. Invest it however you’d like. I certainly hope the best for all investors, as I think it’s great if we can all get rich together.

 

[Cubo de Sangre]

The pipes are made to last approximately 50-75 years. At current rate, we will replace all the pipes in approximately 250 years. As such, something has got to give. Either infrastructure needs to be replaced, or these companies are going to have massive problems on their hands because they can’t get their product safely/in accordance with regulations to their consumers. At the end of the day, the water companies have a distribution challenge on their hands that they need to address.

As for alternatives, well water is a viable option, depending on the location. Wells are very viable in places like PA, MT, and WA where the water tables are solid. Obviously, CA and AZ can’t rely on these. There is a lot more to this market than people probably realize, so they aren’t making informed decisions in regard to their investing. But hey, it’s your money. Invest it however you’d like. I certainly hope the best for all investors, as I think it’s great if we can all get rich together.

There will be no problems for the companies because they'll replace what they need to and the rate-payers will foot the bill (+ 8-10%). Not sure how you think it works.

Personal wells? If that was the best solution we wouldn't have water systems as we know them since wells came first. You hooked up to water and wastewater systems? If so, you got any intention of digging a well and putting in a cesspool or septic system?

I'm certainly not trying to talk anyone into anything. I just don't agree with the concerns expressed so far.

 

[sub_thug]

There will be no problems for the companies because they'll replace what they need to and the rate-payers will foot the bill (+ 8-10%). Not sure how you think it works.

Personal wells? If that was the best solution we wouldn't have water systems as we know them since wells came first. You hooked up to water and wastewater systems? If so, you got any intention of digging a well and putting in a cesspool or septic system?

I'm certainly not trying to talk anyone into anything. I just don't agree with the concerns expressed so far.

The thing is that they aren’t passing on the costs. They just aren’t, and those companies have talked about it. They have said themselves that they’re relying on an infrastructure overhaul to fix the problem for them. Until the issue has some clarity, I think it’s a bad investment. Not to mention that I think there’s an opportunity cost associated with not taking a bigger risk, but that’s another view altogether.

 

[Tylerl90]

Seems just like a market correction to me. It's normal.

 

[Cubo de Sangre]

The thing is that they aren’t passing on the costs.

https://en.wikipedia.org/wiki/Utility_ratemaking

Rate formula
The traditional rate formula is intended to produce a utility's revenue requirement:

R = O + (V − D)r
The elements of the traditional rate formula are defined as:

R is the utility's total revenue requirement or rate level. This is the total amount of money a regulator allows a utility to earn.
O is the utility's operating expenses.
V is the gross value of the utility's tangible and intangible property.
D is the utility's accrued depreciation. Combined (V − D) constitute the utility's rate base, also known as its capital investment.
r is the rate of return a utility is allowed to earn on its capital investment or on its rate base.
The traditional rate formula encourages capital investment because it provides a rate of return on the rate base. The more a utility invests, the more money it earns.

 

[Letssnuggle]

The pipes are made to last approximately 50-75 years. At current rate, we will replace all the pipes in approximately 250 years. As such, something has got to give. Either infrastructure needs to be replaced, or these companies are going to have massive problems on their hands because they can’t get their product safely/in accordance with regulations to their consumers. At the end of the day, the water companies have a distribution challenge on their hands that they need to address.

As for alternatives, well water is a viable option, depending on the location. Wells are very viable in places like PA, MT, and WA where the water tables are solid. Obviously, CA and AZ can’t rely on these. There is a lot more to this market than people probably realize, so they aren’t making informed decisions in regard to their investing. But hey, it’s your money. Invest it however you’d like. I certainly hope the best for all investors, as I think it’s great if we can all get rich together.

Pipe lasts much longer than that. Sections of it will need to be replaced. Which isn’t a big deal. This happens all the time.