Friday thoughts

I saw an interesting article that talks about Greenspan use the sales of man's underwear as a key indicator of if the economy has bottomed out. And the conclusion is yes, it seems. I find this theory interesting - man thinks their underweare as the first disposal item to go when things go bad because people rarely sees it. And there this is a leading indicator of how other bigger consumer goods are going to behave if the trend continues.

But I am quite puzzled by the fact that utility fund taking a huge hit together with the rest of the industries, this is a commodity that in good and hard times people would have to consumer in order to make ends meet. Tangible hypotheses for how this could happen is mild winter (relatively speaking) and less commercial activities while residential side has less to fall. Utility industry has the interesting issue of de-coupling, which mean the profitability is relatively capped/fixed ahead of time, and utilities are not incented to sell more (therefore generate more green house gas, etc) in order to make profits. The pre-arranged profitability is negotiated with public utility commissions so that any revenue short fall is recoverable from the public as a whole, which implies higher prices, which in turn implies incentives for more energy efficient consumption behaviors. It is a convoluted way of thinking, but it makes sense at aggregate levels. At individual consumer level, unfortunately the "taxation" is flat - even if you may save more than me in terms of consumption, you will be paying the PUC the same amount of "tax" to support the utility's pre-fixed profitability levels.