Are the guaranteed returns of regulated utilities really what they sound like?
Typically a private company is hit by demand supply issues and cost of inputs. In effect at times the cost of input may go up, it cannot raise the prices, because this will reduce demand. However certain public sectors companies, typically in Oil & Engery segements the services are offered by Public sector companies, and the price they charge is governed by Regulatory authorities. In essence the PG&E, the agreement for price to customers would be calculated as cost of inputs to PG&E, Plus Expenses Plus 11.35% Profit. Thus the regulated price itself governs that the company makes atleast 11.35% profit year on year. Does this mean that the shares are good buy?  Just to give an example, say the price was $100 at face value, So essentially by year end logically you would have made 111.35/-. Assuming the company did not pay dividend ... Now lets say you began trading this share, there would be quite a few people who would say I am ready to pay $200 and even if I get 11.35 [on 200] it still means I have got ~6% return. Someone may be ready to pay $400, it still gives ~3% ... So in short the price of the stock would keep changing depending how the market percieves the value that a company would return. If the markets are down or the sentiments are down on energy sectors, the prices would go down.  So investing in PG&E is not a sure shot way of making money. For actual returns over the years see the graph at http://www.pgecorp.com/investors/financial_reports/annual_report_proxy_statement/ar_html/2011/index.htm#CS "No. That return on equity number is a target that the regulators consider when approving price hikes. If PG&E tried to get a 20% RoE, the regulator would deny the request. Utilities are basically compelled to accept price regulation in return for a  monopoly on utility business in a geographic area. There are obviously no guarantees that a utility will make money, but these good utilities are good stable investments that generally speaking will not make you rich, but appreciate nicely over time. Due to deregulation, however, they are a more complex investment than they once were. Basically, the utility builds and maintains a bunch of physical infrastructure, buys fuel and turns it into electricity. So they have fixed costs, regulated pricing, market-driven costs for fuel, and market-driven demand for electricity.  Also consider that the marginal cost of adding capacity to the electric grid is incredibly high, so uneven demand growth or economic disruption in the utility service area can hurt the firms return on equity (and thus the stock price). Compare the stock performance of HE (the Hawaiian electric utlity) to ED (Consolidated Edison, the NYC utility) to SO (Southern Companies, the utility for much of the South). You can see that the severe impact of the recession on HE really damaged the stock -- location matters. Buying strategy is key as well -- during bad market conditions, money flows into these stocks (which are considered to be low-risk ""defensive"" investments) and inflates the price. You don't want to buy utilities at a peak... you need to dollar-cost average a position over a period of years and hold it. Focus on the high quality utilities or quality local utilities if you understand your local market. Look at Southern Co, Progress Energy, Duke Energy or American Electric Power as high-quality benchmarks to compare with other utilities."
"It's not my title. It's the original title. I was pointing out that as a headline, it makes more sense to point out that the businesses are apparently against this regulation. Rather than have the headline be formulated as a tautology, i.e. ""Consumers win after CFPB opens door to thing that benefits consumers""." I'm not 100% familiar with the index they're using to measure hedge fund performance, but based on the name alone, comparing market returns to *market neutral* hedge fund returns seems a bit disingenuous.  That doesn't mean the article is wrong, and they have a point about the democratization of data, but still. "Genuine (nearly) passive income can be had from some kinds of investing. Index funds are an example of a mostly self-managing investment. Of course investment involves some risk (the income is essentially paying you for taking that risk) and returns are reasonable but proportional to the risk -- IE, not spectacular unless the risk is high. If someone is claiming they can get you better than market rate of return, look carefully at what they are getting out of it and what the risks are. Fees subtract directly from your gains, and if they claim there is no additional risk, they need to prove that. You are giving someone your money. Be very sure you are going to get it back. If it isn't self-evident where the income comes from, it's probably a scam. If someone is using the term ""auto-pilot"", it is almost certainly a scam. If they are talking about website advertising and the like, it is far from autopilot if you want to make any noticable amount of money (though you may make money for them)." "Let me see if I can restate your question: are speculative investments more volatile (subject to greater spikes and drops in pricing) than are more long-term investments which are defined by the predictability of their dividend returns? The short answer is: yes.  However, where it gets complicated is in deciding whether something is a speculative investment. Take your example of housing.  People who buy a house as an investment either choose to rent it out (so receive ""rent"" as ""dividend"") or live in it (foregoing dividends).  Either way, the scale of the investment is large and this is often the only direct investment that people manage themselves.  For this reason houses are bound up in the sentimental value people attach to a home, the difficulty of uprooting and moving elsewhere in search of cheaper housing or better employment, or the sunk cost of debt that can't be recovered by a fire-sale.  Such inertia can lead to sudden sell-offs as critical inflection points are reached (such as hoped-for economic improvements fail to materialise and cash needs become critical). At different levels that is true of just about every investment. Driving price-volatility is the ease of sale and the trade-offs involved.  A share that offers regular and dependable dividends, even if its absolute value falls, is going to be hung on to more frequently than those shares that suffer a similar decline but only offer a capital gain.  For the latter, the race is on to sell before the drop neutralises any remaining capital gain the investor may have experienced. A house with a good tenant or a share with stable dividends will be kept in preference for the quick cash-return of selling an asset that offers no such ongoing returns. This would result, visually, in more eratic curves for ""speculative"" shares while more stable shares are characterised by periods of stability interspersed with moments of mania. But I have to take your query further, since you provide graphical evidence to support your thesis.  Your charts combine varying time-scales, different sample rates and different scales (one of which is even a log scale).  It becomes impossible to draw any sort of meaningful micro-comparison unless they're all presented using exactly the same criteria." Ok, the point you're missing is that installed base is irrelevant.  Yes, there's much more total installed natgas than solar/wind, but that's not important for calculating the impact on coal retirements.  To displace coal, you need to install something new.  That new generation means coal needs to be less profitable or get turned off.  So the real question is how much solar/wind have been installed in the last 5 years compared to natgas.  These new installations replace coal that used to be burning.  Again, early in the thread you stated that solar/wind had very little effect.  That's not true, they have a very significant effect.  Natgas deserves significant credit, but certainly not all of it. Yes, but the move to regulated monopolies is tactical. Duke's deeper strategy is to prepare for the coming rise of distributed generation. Hiding behind regulatory barriers is a way to do that, and it gives them a stronger lobbying platform from which to attack DG, pushing for grid connection surcharges that will cripple rooftop solar. It's a copy of similar utility strategies in places like Spain and Australia. "Yeah, I guess the entire report is probably false because of that. What you're saying is applicable to the renewable industry too. There's all kinds of other investments made on behalf of renewables that aren't calculated into dollar amounts. Most obviously is the money that never even hits the books by subsidizing through consumer/corporate tax breaks.  For example: the company you work for more than likely has a recycling program. It doesn't make money because it's not profitable to recycle anything but aluminum, but if they didn't have the program they would get penalized (not directly necessarily but would lose out on ""green"" initiative funding).   The rest of what you are saying is as intangible as the first thing. If you think solar panels on your roof is going to keep the military out of other countries, you're clinical. And if you can't notice a correlation between the total lack of production coupled with the massive amounts of money being wasted then there's no discussion to be had.   By the by, that article has no citations and the link to any additional sourcing is broken." I actually deal with the regulators, and am familiar with the regs. So no, I'm not getting my information from the news.  There's a really strong bias there. The news is only going to mention things that seem objectionable. Believe it or not, everyone in government is not crooked. That's not at all what I said.   I said regulation is inevitable. The question is, in whose favour we regulate? Employers, owners of capital, or workers.   Deregulation usually favours owners of capital and employers, and ends up concentrating wealth in the hands of the few. Because surprise surprise people would rather invest their money in something that just goes up in value rather than put all the effort into creating jobs or paying workers more. Since there are no laws to encourage them to do so. Returns: Variable, as with all investments. Legitimate: Contact the usual major investment-fund houses. "&gt; all we need to do is show that such a thought process is theoretically sound in order to throw that premise into serious question  Not really.  You're splitting hairs.  If you want to suggest that Wall Street enjoys tax paying, the onus is on you.  &gt; But if the actuaries can't figure out a way to do it, then wouldn't that be cause to reevaluate the blind faith many people place in markets?  I feel like I'm a freshman in college again.  There are *plenty* of examples of market failures.  The temptation is to say that merely because there *is* a market failure, that therefore control by means of bureaucrats is necessary, without considering whether there is also a bureaucratic failure or whether the possibility of failure is as high as the original market scenario.  A power plant causes pollution, leading to reduced air quality and quality of life for the surrounding population.  This is a problem!  The power plant is imposing a cost on me and I deserve to be compensated.  ""Therefore, bureaucrats!""  Fine.  But now you've shifted the problem from simply compensating for pollution to figuring out how on earth to do it fairly.  And you've introduced a means for abuse of the system, incentivizing people to live closer to the problem or claim damages they don't have.  Power plants still require a profit to operate, so costs will rise.  We're now charging people more money to go to the company to then go back to the people with the additional inefficiency of a government watch group.  Is the original scenario a problem?  Absolutely.  It's a failure of the free market to correctly provide according to individual's rights since everyone's air is collectively polluted.  Is the alternative better?  I don't know.  It's certainly more complicated.  &gt; which is an asinine thing to do if you're concerned with actually changing the system  Why do you think this, exactly?  I agree with you, but I'm curious if we agree for the same reasons.  I agree for the same reason I don't give my alcoholic family members any money at the end of the month." Hey, sorry man, I didn't mean to come off as so argumentative. This is clearly an issue that rustles a lot of jimmies. Thanks for the article, I'll read it over.  I used to work in HFT and the people I worked with were some of the brightest people I know and the work was extremely fulfilling, so I have a bit of an emotional soft spot for it that can cloud my debate skills. It's clearly not as one sided as I believe but I encourage you to keep learning as I am. *Dark Pools* by Scott Paterson is another book that while it leans towards Michael Lewis' position, I found it to be a much more historically accurate account based on what I've learned from people in industry, you should check it out! You'd have to investigate, ask the right questions. I'd say that's a speculative bet since the electric companies would see that coming a mile away and would have a plan so that it didn't materially affect their business. I don't think it would affect securities or derivatives market significantly enough to bring certain profits. Once again I'm no expert though, it all depends on what your research uncovers and how confident you are in your prediction. Just to be clear, I've been in the industry, specifically in government and regulatory affairs, seven years.  In the US, there is generation, transmission, distribution, merchant function/retail function, and government impositions (fees, taxes, environmental regulations, etc), *just like presented in the image.*   In my experience, attributing approximately 50% to T&amp;D and 50% to everything else is pretty accurate (in fact, T&amp;D costs are often higher than all the others). I'm sure our overall rates are lower (depending on location -- Hawaii's rates are astronomical), but I don't think these percentages are that off. The site you link to suggests the majority save on this plan. AC is tough, but most other power hogs are in your control, washer/drier, dish washer, etc. This is part of a bigger picture of power transmission, and management. The utility cost is the highest for peak demand, i.e. they need to have capacity for the peak use, but only selling average use, on average. This billing plan matches what you pay with the true cost, and you save by avoiding the peak times.