Utility Stocks as an Indicator

C

chasinfla

My concern about Utilities is not only that they seem to have become 'growth' stocks, but that they seem to be saying interest rates are due to rise. I wonder, in that event, what will make Utilities a desirable sector again...nothing but growth?

<img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=137802"width = 600 height = 350></img>

I don't have a great feel for the way Utilities interact with the market as a whole. Hopefully someone else here does.
 

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Chas,

I keep a chart of VGSUX which is the vanguard Utilities index. Over the past 10 years 2 of 3 times it yielded 6% (according to Big Charts) there has been a nice upswing. It is currently a hair over 5%. However, with deregulation and XEL, TXU, AES, ILA, etc, etc. who at this point can say what the yield will be in a year or two?

But at some level, I think there is a pretty compelling reason to buy a basket to flip when the prices rise.

Mac
 
thanks trader--I hadn't thought of that though it's obvious now that you mention it.

The implications for the big picture are still of interest.
 
Originally posted by chasinfla

The implications for the big picture are still of interest. [/B]
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This crosses my mind, and I don't know a whole lot about utilities business structure. But if you look at what has happened to T after they lost the monopoly on long distance, spun off the bells and the once high flyer lu.

Now companies that never really had to compete are dealing with open markets, it would seem that the stock market is pricing some death and consolidation in.

Considering that energy can be bought and sold in blocks, what is to stop (hypothetically) walmart or home depot from setting up a small power station to supply electric? Seems silly, but so does paying .30 a minute for long distance.

Just a thought
 
deregulation, enron type manipulation, and the stock bubble all came together to create overcapacity. It could be a decade or more until it works itself out, especially if the economy grows slowly. In the mean time, I think credit ratings and dividend yields are the name of the game.
 
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