Our current stock option trading portfolio. November 2015

This is our trading account stocks.  We look for value stocks that have little downside risk. Rarely do we trade stocks with over a 15 PE.  These are not suggestions for purchase, just a listing of stocks we prefer to trade at this time. 

AAPL..One of largest positions.  We continue to favor Apple for it's customers addiction to their products. Safety with little downside risk.  

AGN..  Biopharma with a solid cash position and low PE.  Has been sold off recently making it attractive. 

AMGN..Note comments above, just Amgen is a older company with even better base of support. 

BAC..Huge bank, one of big four, that is selling for less than actual book price with lots of upside potential. 

C..Another of the big four banks that is selling for less than book value. 

CHL..We like this Chinese telecom that is the worlds largest cell phone provider. 

CSCO..No one does much in networking without using something Cisco makes in routers. 

FB..Facebook is the future of the advertising platform.  The only stock with a high PE we own. 

GILD...Another biopharma that has sold off making for a nice entry point. 

JPM..The largest of the big four banks and selling at the lowest PE. 

JNJ..This is the largest pharma stock by market value and we like the safety. 

MRK..Large pharma that we like at this low PE. 

NEWM...We have been disappointed in this stock.  It has all the right ingredients for capital gains.  Good business idea, buying at good value, and making the most of efficiency in operations.  A nice high dividend too.  The only problem is that the market has not though the same. We continue to own it long for the nice dividend and possible capital appreciation. 

NNC..Our largest long position.  Closed end bond fund that has produced capital gains and steady tax free income for some time now.  We might lighten just a bit here if we sense a rate hike. 

ORCL..The biggest business software company in the world at a low PE. 

PFE...Large undervalued drug maker. 

T..Telecom provider that we like for the fact people who hooked to their phones. 

VZ..Telecom provider that we like for the fact people who hooked to their phones. 

WFC..Price has sold down for reasons we find silly and we really like it now. 

WMT...We believe Walmart has sold off too much for the world's largest retailer. 

              

Oh where, Oh where have the Doom and Gloomsters gone?

Fish gotta swim, birds gotta fly, girls gotta text, and if there is a 1000 point sell off in the market the Doom and Gloomsters will come outta their caves.  Only a few weeks ago the D&G crowd came out and announced the end was near and the market was going down more thousands of points.  Ahh...well today it is well ahh...up about 1000 points from the point it was announced it was going down for the count.  What happened? 

Remember when your humble blogger, OK well not your so humble blogger, was pounded by numerous posters on Facebook and elsewhere that we did not know what we were posting about and should go away and shut up.  That the market was going down and our advice for investors should be to sell everything, put it under your mattress, and hide under the bed.  Can not tell you the number of inside messages we got from registered representatives who could not rebuke such talk and wished they could but due to RR rules had to remain silent.  Well your humble blogger here has not such rules since we trade and invest in our little private account and private hedge fund we can say it loud and clear,  "YOU DOOM AND GLOOMSTERS WERE WRONG AGAIN !!"  

These D&G creatures come out because frankly they do not have the experience and most importantly a history of personal former mistakes in the market.  They do not listen and read intently to a sizable audience of market and financial opinions to understand what they do not understand.  We would expect they get much of their so called knowledge from such sites as Zero Hedge and Peter Schiff etc.  We too take a look at these sites regularly, but only for amusement and to see if we missed anything important.  On the other hand we daily kept abreast of other bloggers such as Doug Kass, Larry Kudlow, John Tammy, and a couple dozen more diverse opinions.  We use over 36 years of market experience which includes a combinations of technical and fundamental analysis to daily trade and lifetime invest.  In the end our lifetime of results speaks for itself and that is the steady compounding of investing and reinvesting to produce a build up of wealth that is tax advantaged. 

So where is the market going from here?  We got that down too and unlike the D&G crowd we will absolutely positively guarantee we will be right.  There are two scenarios.  One, we are in a market that resembles the late 1930's in America. Interest rates are low and will stay low for a good period here, we are talking years maybe decades below 5% mortgage rates. Just not much economic growth and not much reason for business to reinvest profits.  Therefore profits are being reinvested into their own stocks via dividends and stock buy backs.  That means anyone who is invested in mega and large cap mutual funds or ETF's will do just fine and grow their investments about 6% to 7% for as far as the eye can see.  Not bad if you just leave it there and let it compound over a lifetime.  We suggest a cheap expense Vanguard 500 fund or ETF.   Just add to it in a regular savings via an IRA or 401-k and it is even better since it is tax advantaged.  Anyone who bets against America long term is a fool and has been made a fool for some over 200 years. 

Now there is one other scenario but it is only better.  That is American voters, more specifically the young folks, figure out that voting for gay marriage and free birth control does not fill your gas tank, put food on your table, or grow your retirement nest egg the best. The under 35 year old crowd will discover what the 35 year old to 55 year old crowd already knows and that is we need some leadership in Washington DC that makes me wealthier by growing this economy, creating jobs and making my wages go up.  They together find that leader, vote them in, and experience what the over 55 year old group experienced with the election of Ronald Reagan that lower taxes, lower regulation, and free markets make everyone better off in the long term. In this scenario the young folks experience a renaissance of Free Market America and live a 30 year boom too. Businesses quit increasing dividends, stop buying back stock, start growing their business, the Federal Reserve goes into hibernation, and stocks grow 9% to 12% annually.  If you want to see what 30 years of 6% compounding versus 12% compounding does to your retirement assets go to your online computer and see how the millions, yes I typed millions,  add up. 

So as we opined on our last posting, "Young people this is your economy and you get to choose if you want to live in it". your choice  and your life, scenario one or scenario two.  We guarantee you get to CHOOSE one of the two choices.

              

Young people this is YOUR economy and YOU get to choose if you want to live in it.

Janet Yellen said it all last week in one simple sentence that almost all financial and news reporters just let blow right over their head.  Not surprising of course since 95% of all news people are Democrats and have at most a 6th grade education regarding economic matters that they could care less about learning more about anyway. Actually it comes down to one word she said during last week's press conference after the Federal Reserve meeting.  That word was "involuntary."   As in involuntary part time workers.  

That involuntary workers theme was the primary reason the board left interest rates at virtually zero for about the 8th year running.  Truth is despite the rhetoric from Obama last week about a great American economy our economy "sucks" as the young people would say.  As in there almost no growth and no real job creation, beyond part time.  Not to mention so many people have dropped out of the labor force and on to government welfare of some sort as to depress the participation figure to right at an all time low. 

A no growth economy is not a good thing unless you are in an industry that is basically bullet proof to economic concerns. Only two job types seems decently secure right now,  something in the health care business and on the government payroll.  The first though is subject to economic concerns when things get really tight, but on the other hand a government job is as secure and worry free as they come if you can get one and most can not.  Only the privileged few have one. 

So if you are living in the real world where business conditions are important to job security and for many level of income indeed economic growth is important.  History rhymes but rarely repeats.  We are reliving the late 1930's economy right now in America and now as then it is not a pretty story.  Going back to Ms. Janet and her no go interest rates we too are reliving the late 1930's there in that the rate then had been at zero for many years and finally in 1937 they moved it upward ever so slightly and the bottom feel out of the economy.  So Ms. Janet and her gang are left wondering if they too are going to repeat history with a small push up in rates.  Then World War Two saved the economy, so maybe something will bail us out again, but that obviously is not the best scenario.  We continue to say no interest rate rise until after the 2016 election if for no other reason, political concerns. 

Life cycles repeat about every 80 years on average, since generations are about 20 years long, it takes about 4 generations to forget about stupid mistakes we made in the past and repeat them again.  History is a constant move upward in technology and medical achievement and such, but human nature never changes.  Greed and fear have been constants for thousands of years and will remain so for as long as humans reside on this ball of dirt.  So despite great progress in standards of living human nature forces foolish repeating of forgotten errors in judgement.  

So the response to the Great Depression was a huge growth of regulation, taxation, and overburden of small business where real jobs are created.  The result then was government created jobs where one person was paid to dig a hole and another person was paid to fill it up.  Sounds great huh?  Well remember the only way we got out of that mess was to blow up the world with war for 4 years with lots of death and dying and in 1945 got to sorta start all over again.  So what has been our response to our own Great Recession,  yes you got it more regulation, taxation, and overburden of small business, where now the rhyme to dig a hole jobs has been lots and lots of part time jobs with no benefits and not future.  Even the full time jobs that have come about are based on very shaky business going forward.  

Now we can sit here with our Obamacare, Dodd Frank regulation, and taxation of small business or we can do something about it like change leadership in Washington.  The good news is that most states in the country have changed leadership and those states are slowly moving forward even with the heavy handedness from Washington DC.   Young people this is YOUR economy and YOU get to choose if you want to live in it.  However you only get one chance to make a difference as once this no growth scenario is locked in you can stick a fork in it as you and your children must live in your new normal created world.  Maybe you like no growth and hoping to win the lotto game of getting one of those safe and secure government jobs? But most of you will lose that game.  In 2016 you get to choose your fate and your future economy and yes even your future life style.  Make the right choice and life will be more than hand outs and low expectations.  

Voting for Hillary Clinton makes people like me and her richer day by day.  Hillary and I are part of the political economy and financial engineering of the Federal Reserve that keeps the goodies flowing to us with accumulated assets and away from young people trying to accumulate those same assets.  We with assets enjoy lower than low interest rates since our futures are tied to banks and the ALREADY financially secure class and frankly since the current resources are so small we much prefer not to share.  On the other hand you can burst this little rich folks bubble with a pro growth pick as your leader who will not only deregulate, but also lower taxes, and clear the mine field for small business for some FULL TIME job creation, but more important do all this without a world war.   

Your choice, your future.  I will be sitting on the beach watching if you too will repeat history's mistakes.  

             

Heads in Beds or Beds in Heads.

Is it heads in beds or beds in heads?  Honestly, I have used the second one to much laughter for some time and believe myself to be more correct than most people think.

The idea behind tourism in many North Carolina communities is to get travelers off the interstate highways (if you have one) and Johnston County is blessed to have two! The purpose is to get travelers to come, from other states and NC counties within several hours drive of their destination and spend the night.  Yes, it is great to have them spend money shopping and dining, but if you are being funded exclusively by visitors' taxes paid when someone stays at overnight places, then it is crucial to get them to spend the night.

Spending the night creates lots of good things.  It is hotels/motels making money, shopping venues getting extra shopping time, gas stations pumping gas, meals eaten at local dining places, and perhaps a stop at a service business of some sort, and of couse, that hotel visitor's tax of around 6% or so.  More nights equals more money. So yes, heads in beds is the point here.

However, before you get any heads in beds you must get those BEDS in their HEADS! More precisely, you must get them thinking YOUR beds in their heads, not someone else's beds in their heads. Trust me. Almost every county or city in the country is currently doing the same thing since tourism is a high spending and low infrastructure cost.  Visitors stoping and spending the night in your area results in hotel tax, sales tax, and not to be forgotten, property tax as in a vibrant visitor economy means those shopping center, those hotel, and those restaurant buildings are more valuable.

So to get your beds in their heads someone must figure out how to do it. Advertising, marketing, and dedicated professional people are required to get the job done. Tourism Authorities are supposed to do just that and the Johnston County Tourism Bureau has been doing just that for some time now, successfully!  In fact, JCTB has one of the best growth records in the state and honestly, Johnston County is not exactly on the tourist maps, so to speak. Other than the Carolina Premium Outlets the list shortens quickly as to an overnight draw. Remember, we are speaking "overnight" draw. And yes, we are blessed by having the Bentonville Batteground, Ava Gardner Museum, and Tobacco Museum. 

Over the years, the JCVB has performed first class work getting people to stay in Johnston County.  They have done so with Advertising in out-of-state magazines and some in-state publications that have wide circulation.  Being at out-of-state traveler's trade shows where prospective tourists go to find ideas of where to visit is important. Visiting the state border visitor center, building relationships and informing the workers there about what Johnston County has to offer, making a regular stop at the NC Visitors Call Center in Raleigh (where people call for information on planning visits in NC), and much more to mention here add so much value. Lately, JCVB has been doing yeoman's work with social media such as Trip Advisor, Facebook because such is where the younger (and older) set go to find out where to visit. JCVB posts ads and put up websites, and more importantly monitor any bad references that might kill an entire exit's businesses with one post.  So, the key here is to keep the older tourists coming while creating desire in younger tourists, too. JCVB has their job cut out, yes? 

We are blessed in Johnston County to have a local, professional woman at the helm of our tourism authority, one who has in her heart a passion to grow tourism in this county.  That cannot be replaced by just another professional.  Donna Bailey-Taylor leads a team that works well together and, as a whole has some years of experience in working with local businesses and government to get people to stay in Johnston County's overnight venues. Ms. Bailey-Taylor serves at the pleasure of the JCVB board and acts in accordance with what they direct. 

Ms. Bailey-Taylor and the staff have done an outstanding job over the last two decades with honor and recognition, with Ms. Bailey-Taylor being one of the the best at her craft. They have won awards, spent tourism tax wisely and effectively, and yes, produced almost an unbroken record of continuing increases in heads in beds.  They succeeded in this by discovering how to get JOHNSTON COUNTY HOTEL BEDS in prospective visitors' HEADS! 

How do I know all this?  For twelve years I participated as a JCVB board member and to note I am currently not on the board. I personally have watched the staff work. I personally have participated in spending decisions.  I personally have objected to some ideas, but accepted what the board decided in a majority vote.  Ms. Bailey-Taylor is NOT compensated by governement money nor is anyone on the JCVB staff. The entire operation (staff, marketing, everything) is funded by tourism tax, not a tax from local taxpayers' pockets. So, whatever they do to create more demand for heads in beds comes from using only the tourism tax revenues to do so.  Let me repeat that. NO Johnston County taxpayer pays one cent for any part of the operation of the JCVB.  It is completely funded by visitors' tax on hotel stays.

Let's go back to just who are the people JCVB is trying to reach here.  It is NOT Johnston County residents who frankly use the motels here very little.  It is NOT close by counties since those visitors might come and shop and dine which is wonderful but few, if any, stay the night.  It is NOT someone, while traveling, by some remote chance, read a local newspaper or listen to a local radion station while in their car or stopped to get gas or eat a meal.  It IS the people in NC counties and other US states who need to spend the night. Remember, you must get visitors to spend the night for them to pay visitor's tax.

One of the largest budget items has been interstate and major highway billboards.  Billboards along the interstate (in my opinion and most hotel owners' opinions) create more bang for your advertising investment.  More heads in beds, if you will.  My years on the JCVB included a steady diet of saying, "Can this money be better invested on another billboard?"  Of course, billboards on US 70, Interstate 95, Interstate 40, US 701 and US 301, where most visitor traffic comes from, makes good sense to me and others. Of course, our competitors along those raods were interested in acquiring those same billboards and looked for ways to get up on them instead of Johnston County, as there is a limited number along those roads due to regulations.

Here is one example of spending most of you do not know about.  The newly formed Sports Authority in the county is a direct offshoot of the JCVB and is targeted at a demographic some may not consider for overnight stays in the county. The Sports Authority is going after many of those baseball, softball, swim, football, and other such youth sports leagues who have tournments across the state to use our sports facilities. The kids who participate bring their parents and others, many who dine out, shop, and spend the night since tournaments generally last over an entire weekend. Talk about a home run - getting one of these tournaments pays for itself over and over with no cost to local residents.  Add in all that sales tax money they leave behind as well. The JCVB staff puts together a welcome bag for these players with gifts, goodies and offers to encourage spending more money while in Johnston County.  Much of that so called "questionable" money spent at Wal-Mart was for those bags being given to players and their parents, at NO cost to local taxpayers. 

The Johnston County Tourism Bureau is governed by a board selected by each of the local chambers of commerce, some at large members, and some local people involved in the tourism business.  Those member slots are required by a state law governing the board and must be approved by the Johnston County Commissioners. No member of the JCVB gets paid a dime. They do get a lunch when they meet monthly. Frankly, most of these people on the board work day jobs and the lunch provided at the meeting makes it so they can do the board's work during lunch break and go back to work.  The lunch is usually a sandwich and drink or a catered meat and vegetable meal from a local restaurant, keeping that money local.  Not exactly fine dining but much appreciated. The JCVB work is hard and the board can meet up to twice monthly, if needed, for committee meetings.  There is also a state law that governs the board and how they must collect and spend the revenue.  The board is the fiduciary agent that makes sure that happens. Each member is required to sign a document annually that states they know nothing was done illegally during their tenure.

During my tenure on the board, I do not know a single time that money was "wasted" or there was "questionable" use of funds.  During the five years time frame of the recent local news investigation I was the Secretary/Treasurer for three of those years and the Vice Chair for the last two, so if anything happened I would have known about it and frankly signed off on it.  As of now, not a single board member has come forward to say otherwise either.  Each year we were audited and never did an audit come back saying money was being misappropriated.  For the record, at no time was I ever interviewed during this local media inquiry. 

There are other opinions out there regarding if the room tax has a real value.  As in, if we just drop the room tax completely would the resulting assumed decrease in room rates bring more visitors to spend the night in our hotels?  If the room tax was the only variable in the heads in beds then a lower tax or no tax at all might very well make a difference in where travelers stay the night. However, one must take in location, how close are hotels to the main roads, the cost of doing business locally, the local property tax rate, does the area appear safe to stop and spend the night, are there places to dine nearby, and other such factors. So, the room tax is part of a dynamic environment that has lots of moving parts.  If a lower price was the only reason for where travelers stay, then all the lower priced hotels would be full every night. 

So, Johnston County citizen, next time you pay your local property tax, consider that it is lower by about $200 each year because the JCVB does their job, does it well, and at no expense to county taxpayers but brings a reward, visitors, and promotes the county we all love. They get OUR beds in people's heads!

               

Getting and keeping wealth in America 2016

The talking heads talk and the doom and gloomsters make yet another appearance. Both will be back in their caves soon having made little profits and learned nothing despite what they might say. We are revisiting the 1936 economy and the only way to create wealth now is like some of our fathers did then. 

We had what in our opinion will be called at some point down the road a stock market temper tantrum this week. Do not be surprised if the adolescents more commonly know as stock traders have more tantrums down the road.  Traders who only think in short term decided it was time to abandon the market since the Chinese economy appeared to be sinking and sold with out thought and created some serious long term buys in stocks such as Apple, Citigroup and JP Morgan all of which we who are the adults in the room and have a long term investing approach scooped up at the near fire sale prices. For about a 48 trading hour period fear overcame greed in the stock and bond markets. Our opinion long term the economy and stock market have changed little and when wiser heads assess the roller coaster of the past week they will come to that conclusion as well.  Let's note one factoid that Warren Buffet uses for stock value. The 10 year US Treasury is yielding 2.1% and the S&P 500 forward earnings is about 6.2%, so owning stocks gives you about 4% more than holding bonds,  a fair value for the small extra risk involved.  

China finally came clean just a bit and noted that to all except those who did their homework earlier their economy is not growing at 7% plus annually and is more likely not growing at 5% reported either.   China used several tools in their socialist tool box last week to try and stabilize the stock market to almost no effect. Note we said they tried to stabilize the STOCK MARKET and not stablize the Chinese economy. The reason is simple almost all large companies in China and shares of stock are majority owned by the Communist Chinese government.  The only control they do not have is the part of the stock market where they have allowed Chinese citizens and some outsiders the chance to own shares.  So when the Chinese were found to be over speculating in Chinese stocks the government stepped in to try and keep the panic down, it had little or no effect because when one tries to merge capitalism with socialism, in an effort to bail out socialism's huge faults it does not work, never has and never will. Socialism fails every time it has been tried throughout history and leaders in China and now many in the US have never learned the time honored lesson.  For the record we own one Chinese stock, unlike others we know who own many, and that stock is China Mobile since we are of the belief mobile phone service is a no brainer in China as much as it is in the US. 

We in the US have one own brand of command and control economy going right now. We have defined this ad nauseam in our postings as the political economy and financial engineering.  Like it or not until someone or some Congress comes along and changes the path of Obama's huge federal spending we will continue to have out of control federal spending and lots of largess filling the mega corporations money pots.  Like it or not until the Federal Government changes fiscal course the Federal Reserve is being forced to keep rates near zero since that is the only thing propping up the slower the slow growth US economy.  We continue to say no rate increases until late 2106 if then and if they do move forward expect a 25 basis point move and back to a sleep that would make Rip Van Winkle jealous. 

So how does one play this new US command and control economy?  Once again we have changed little in our advice.  Despite the roller coaster movements in the stock market this week we are basically back to where we began and that after finding out the almost all large companies in the US are affected little and have low exposure to the Chinese economy.  Imagine that China is not the big bad bully we have been lead to believe.  In fact the Chinese economy, like Brazil, like Russia, like Europe, like just about every other economy in the world is dependent on guess who, the United States capitalist economic machine to survive.  The problem is the US economy is subject to too many regulations, too high taxes, and too much federal spending largess, that only helps the biggest and baddest corporations.  We have as in the 1930's over reached in our attempt to make sure everyone is safe from the fact that indeed free markets have recessions.  Recessions that in the end make for better allocation of resources and more high paying jobs. Maybe one day the ingenuity, the American dream, and the sheer powerhouse that the American economy can be will be unleashed once more to produce jobs and wealth for the average American citizen.  Until then, until we change policy in Washington DC, as we have opined seemingly now forever keeping your investments with the mega corporations benefiting from all this crony capitalism is the way to go. 

As Warren Buffet has opined about where to put his wife's money after he passes you too should do the same.  Try the Vanguard 500 Index fund or ETF.  Invest and forget about it, well at least until the American voters change politicians and policies in Washington DC.  This is not what we prefer, but as we told someone else this week "it is what it is" and smart people play the game until the game changes.  If you have assets to invest consider yourself blessed to have the option to ride along with the mega corporations benefiting from the spending of the federal government and the low Federal Reserve rates that allow your mega corporation to sell cheap tax advantaged bonds and buy back more stock pushing up that share price even more.  In a slow growth economy why reinvest in your business that is not adding customers or customers buying more of your products when your profits can be plowed into stock buybacks making your shareholders and managers wealthier and wealthier. If you have assets enjoy the ride.  If you do not and need a job or maybe some real hope and change, change your vote. 

What a Ride...Is it Over?

We got on this trading ride just over 3 years ago and it has been one great ride. As we have opined in the past we were foolish enough to allow our dislike of Obama and his policies to cloud our mind to the objective of making some profits.  So for 2 plus years we fought the battle thinking sooner or later people would wake up to the situation unfolding.  Then in early 2012 we saw the light.  The crony capitalism of Obama and the political economy of out of control federal government spending was upon us in full force.  Add in the financial engineering of lower that low rates of the Federal Reserve and you go yourself a gravy train.  A profit gravy train for investors and most importantly traders.  We are both.  So we will acknowledge we were late getting on this train as like it or not we are still not the absolute sharpest knife in the drawer and those in more exclusive financial circles got on the profit train some two years before us.  

So for three years and about two months we have traded and invested WITH Obama and Democrats crony capitalism.  That is stay with the 100 or so big corporations feeding at Obama's federal spending and using those profits to buy back stock with cheap rate bonds offered up by the Federal Reserve.  Add in some nice and growing dividends and you got yourself on that gravy train.  We have profited handsomely in the seven figure category and smiled all the way to the bank caring less what these policies were doing to the jobless and poor just like the controlling political class. The question now has this free for all investing and trading ended? 

During those three plus years we have not had one single trading loss and our S&P 500 investments have gone up and up.  Then in late July of this year things changed.  The market stalled and we are currently sitting on some three trading losses.  Yes we will admit two of them are our personal mistakes and they are currently paper losses, but each day they stare us in the face when we open our trading platform saying you lost your hedge.  Now in the overall scheme of things these three paper losses are not significant, but traders really do not like to lose.  We take losses seriously above a certain size of a few thousand dollars that we consider the cost of doing business.  It is personal competing in this big boys game of hedging.  Here on our trading side we have decided to sit on these losses and see what happens as we believe most of the damage in our holdings has been done and besides there are those nice juicy dividends rolling in from these positions.  Remember that financial engineering again.  At some point the market will stabilize and realize what we have already stated there will be no rate increases until late 2016.  The economy can not stand it and the democratic party will not tolerate it.  Love investing with the rich democrats. 

So what to do about those investments, that are not trading positions.  Simply put, like Warren Buffet, we believe America will right itself at some point here since even young coffee drinking metrosexual parent's basement dwellers eventually decide to grow up and need a job.  When young folks wake up to the need for economic freedom instead of social foolishness like all generations the need for the vibrancy of free markets will become clear and we will have a economic boom. All the things are in place except the end to the political economy being run by Obama.  Keeping healthy numbers of assets in stocks and the S&P 500 makes sense going forward if you got a couple decade time horizon. Buying more here and if the market goes lower are good choices for buying low and selling high. Betting against American capitalism has been a sucker's bet for some over 200 years and we like the odds here  If not we always have the possibility of Hillary Clinton winning in 2016 and the political economy of crony capitalism gravy train starting up again.  If this next train gets started we will not be foolish enough to miss the longer ride. 

Eastern North Carolina Electricity Customers are Getting Hosed.

As we opined in our last posting on Eastern North Carolina Public Power we simply do not trust the town councils in communities who use Public Power to treat customers right and lower the rate in complete junction with the just lowered wholesale price. So as the rates are being "adjusted" customers in those towns are getting hosed.  Allowing for some give in the fact most town councils in Eastern North Carolina who are in Public Power towns are nothing more than politicians even we have been blown away by the decisions almost across the board to refuse to pass on the full electricity rate breaks to customers in Public Power towns. 

Seriously here are the facts.  The reduction in rates after the Duke Energy buyout of Public Power/Eastern Municipal Power Agency is 18%, take out the 1.5% for the Electricities management of bonds and contracts and every single town should be reducing their electric rates 16.5% minimum. Only two towns as we can see have come close to that to date, New Bern and Wilson.  The rest who have acted so far are reducing rates in the low single digit percentages.  No other way to say this, but as we opined in our earlier posting, whatever revenue left over is to use for whatever the politicians decide.  In the past that money has been for political favors, wasted on favorite projects, or hire more government employees.  Yes many of these towns councils are giving some lip service to using the money for "needs" in the power depts. Strange that these "needs" just suddenly popped up.   These so called needs where already being met by the capital spending included in the already high rates. Many towns, like Smithfield were using the extra money piling up in electric revenues to keep property tax rates lower.  So yes town council members there is plenty of cash here to lower the power rates. 

So where do we go from here?  Maybe a better question do enough citizens and town council voters care enough to stand up for their what is owed them for long years of higher electricity rates?  We expect many town councils have already decided that by NOT lowering their rates to the correct level.  We also think many ratepayers have and are answering with their feet and moving out and not moving into of these high power rate towns.  Looking at the list of participants I see just a handfull of these towns that are growing, Greenville, Clayton, Apex, Wake Forest, and Louisburg.  So with over three dozens towns in the system the number who can withstand some less than full cut in power rates is minimal.  Let's also add in that when industry and business consider moves they consider high power rates as an impediment to where to set up shop.  But when you are managing your own public fiefdom who cares would be the answer of most town council members in this area.  Many on councils prefer towns not grow so as to protect their business turf from competition, so keeping rates higher helps in that regard. Add in the huge added pressure form town managers and government professionals who want to keep this revenue flowing for governmental reasons.  So be damned with the citizens and rate payers. 

We will keep an eye out here since we live in one of these communities so we have a dog in this fight.   So if you care, REALLY care about these rates and they being lowered to correct levels what do you do?  You attend town council meetings in numbers and tell your council members it is time to lower the rates and you do not buy their hyperbole about other spending "needs."  If they do not do so, vote them out with those who will lower the rates.  Add in that some of your electricity bill is still going to pay down that $500 million left over from the Duke Energy buyout.  Last round they failed to pay off the bonds in time and used the money for other purposes and just extended the bonds lifetime another 20 years or so.  Keep them honest on the bond payoffs getting done on time.  The point  is that all those "needs" and assumed and all those assumed rate increases they are talking about down the road will be to some or all extent not needed since in 10 years ALL the bonds will be paid off.  Meaning rates should come down again due to the decrease in borrowing costs. 

One final thought.  If you really want to end this game there is another better way.  Push your town councils to get out of the power business completely.  Tell them to call Duke Energy and ask them to make a deal to take over the town's power system, poles, lines, and employees all.  End the local crony capitalism, end the games being played with rates, end the uncertainties in costs going forward, and frankly lower the rates even further right now if done right.  Put what should have been business in charge of a business and not governments in charge.  Knowing Duke I can assure you they would love to do so since there will be little capital to spend and large numbers of closely grouped ratepayers to bring aboard their system.  Of course one will have to deal with those bloodsuckers at Electricities who do not want to give up their cushy bureau jobs and being the middleman.  We deserve better.