The Trade of the Century

The Trade of the Century

beforeitsnews.com

It may be an exaggeration, but not by much. Since 2007, the Metropolitan Water District of Southern California has increased its water rates from $574 an acre-foot to $781 an acre-foot - a 36% increase. (An acre-foot is the amount of water needed to flood a plain of one acre to a depth of one foot - or about 326,000 gallons.)

More increases are on the way. The MWD has approved an increase to $811 an acre-foot by January 2010 and another increase to $985 by 2011. That would mean a 71% increase

(visit the link for the full news article)

Seeing commodities go up like that tells me there must be a reason behind it. When I see food go up in price I have related that to the price of oil, or the price of corn because corn has been used for a fuel. Seeing water going up the first thing that I think of is that its being manipulated. So I guess you can look at this in a few different ways. Its time to start buying swatter securities, or get ready to stop using water.

beforeitsnews.com
(visit the link for the full news article)

Seeing commodities go up like that tells me there must be a reason behind it. When I see food go up in price I have related that to the price of oil, or the price of corn because corn has been used for a fuel. Seeing water going up the first thing that I think of is that its being manipulated.

reply to post by RedGolem


Yeh, commodity prices are rising...slowly. Not enough, I'd think. They are probably looking for ways to apply costs to the producers who pass it on. California has a 32 billion deficit. So anyone who has some money can expect to share it with your government. Those who don't pay taxes won't have to worry, just if you do!

reply to post by plumranch


Plumaranch
thanks for posting. It was looking like no one was going to. What I read did not say the government was behind this, by way of collecting more taxes. But I can't say that's not a possible reason.

reply to post by RedGolem


Sorry, the article wouldn't come up the 1st time I posted. I see the water companies are quasi governmental or at least highly regulated by Calif. legislature? probably or maybe locally.

California, by the way, is no longer a hostile state for the water utilities as far as rates are concerned. Those water increases I quoted up top ought to be evidence enough of that. In 2005, California made major changes to its policies, which I wont detail here. The end result: "California is great now," as one analyst - a 10-year veteran of water utilities - put it to me. "It is more likely now that water utilities will earn good returns on capital." The handful of publicly traded California water utilities may well be good investments now. Most trade below the acquisition multiples paid for the last 10 significant takeovers of water utilities. The low end of that range is about 2.5 times book value. The nearby chart shows you the discounts in these stocks based on this estimate of private market value, or PMV:

So apparently government cleared to way for the utilities to raise water rates and shareholders are "in the chips again"!

California produce is competing with everywhere else that raises vegetables so Texas, Florida, Mexico, Peru, Argentina will benifit if CA prices itself out of business due to water rates!

reply to post by plumranch


Plumranch,
it does seem you are right on that, unfortunate.
I wonder how far this will go until the people start screaming?

Public utilities should not be in the profit business, especially water. Cover your costs and your capital expenditures allowance and credit back the surplus at the end of the year.

Moves like this will just give more incentive for people to pick up stakes and leave. Good bye Farmers!

reply to post by RedGolem

it does seem you are right on that, unfortunate. I wonder how far this will go until the people start screaming?

I'd guess the farmers/producers will be the only ones screaming. Most people will never figure out how water costs affect vegetable prices. The blame will instead go to high salaries of agribusinessmen and Obama will make the accusation himself. Somehow thought patterns are more and more disjointed these days!

Years ago, it was illegal regardless to turn off someones water if they idnt pay the bill, also with heat. Business has gotten so powerful they will let you dehydrate and freeze to death.

Public utilities should not be in the profit business, especially water. Cover your costs and your capital expenditures allowance and credit back the surplus at the end of the year.

reply to post by jibeho


Maybe so but they have been private companies since early last century. But they are regulated so there is public oversight.
California Water Utilities are numerous and every one of them have different needs, difficulties, expenses. Delivery of high quality, plentiful water for irrigation a science and a challenge. Take the profit away from these organizations and I'm sure the quality will suffer like any business.

I did research on one of the common stocks, AWK price $36 EPS $1 earning 2% a year in 2008 and earnings were increasing. I wouldn't invest in AWK at these levels. Possible the earnings are tax deductable so that would about the only incentive.