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Commentary

Feb 27
0

Fun With Math: Reliant Free Weekends 24 Plan

By | Commentary

First off…the disclaimers…this is my analysis, based on my understanding of my scenario, after discussing with two door to door salesmen…and reading about the plan on Reliant’s site here: I’m not a Lawyer, but in my opinion, the whole thing is intentionally hard to understand. That said…here goes.

So, I get home from work, and just as soon as I sit down for dinner….doorbell rings, and 2 door to door salesmen from Reliant/NRG show up. First off…seriously? Everybody in the whole world hates door to door salesmen…come on Reliant….stop going out of your way to make people hate you….. But the guys were nice enough…. so I humored them for a few minutes.

They were trying to sell me a 24 month electric plan….and give me a free NEST thermostat. It would save me a ton of money they said….and…Weekends are free….from 8PM Friday to Midnight Sunday…. They went on for a while, before I ultimately send them packing….and decided to figure out whether or not this was really a good deal or not.

Spoiler alert!!!…it’s not.  Here’s how it works….Weekends aren’t actually free, you still have to pay the delivery charge, which is 4.1 cents per kwh. In exchange for the “Free” weekends…you pay a much higher rate(roughly double the going rate) during the week…the 4.1 cent delivery charge, plus an 11.6 cent energy charge, for a total of 15.7 cents per kwh. The advertised blended rate is 12.4 cents….which I suppose looks about right.

Now, obviously energy usage varies quite a bit depending on the month and the time of day….I could do a lot more detailed analysis, but I doubt it would come up with much different of an answer, so I’ll keep it simple.

I use about 20,000 kwh per year, or 40,000 over a 2 year contract. Using straight average usage, about 31% of that would be at 4.1 cent per kwh…or 12,381 at a total cost of $508. The remaining KWH, 27,619 would be charged at 15.7 cents per kwh, for a total of $4336. My total charges over the 2 year contract would be $4844, which works out to $202 per month and 12.1 cents per kwh.

There’s just one big huge friggin problem. If I go over to www.powertochoose.com …. in about 30 seconds I find a 2 year fixed price plan for 8.4 cents per kwh, meaning the Reliant “Free Weekends” plan is 44% more expensive. (but you do get a free nest…) This option pencils out to $3360 over 2 years, or $140 per month. The reliant plan would cost me $62 a month more….$1,484 over 2 years. If I read it right…there could be about $10 additional fees in the Reliant plan that I wouldn’t pay with the other plan…but I’m not 100% sure on that…so just ignore it or go read the fine print…. maybe you will have better luck than me.

Now….the door to door salesman would probably say…yeah, but the NEST will save you a ton of energy off the bat, and if you do all of your laundry on weekends….you can shift power from high price weekdays to cheap weekends. I call BS on that the savings…my old school programmable thermostat works just fine, and I doubt I could shift that much usage without it becoming way more hassle than it’s worth.

So for me….this plan doesn’t even come close to penciling out for anyone except Reliant/NRG and my friendly, but extremely annoying and time wasting salesmen, who I assume get a decent sized commission for the task of trying to convince you to make a nearly $1500 mistake (in my case…your mileage may vary)

So the lesson is….don’t be stupid people….It looks to me like Reliant/NRG has gone out of their way to make an overly complicated electric plan to make a huge profit margin from people who aren’t so good at math. Just get a regular old fixed price contract…save money, and run your dishwasher whenever the damn thing gets full 🙂

Feb 24
0

January 2015 Update: Social Security Enrollment

By | Commentary

It’s been 7 months since my last SS update, so first a quick refresher. SS is a broad program best known for the retired worker program…..where you pay in a portion of your paycheck each week, and in return, will hopefully get a monthly check once you reach~65….for the rest of your life. As of January, there were 39.1M retirees collecting an average of $1,331 per month, which pencils out to $52B per month, or $625B per year. This population is growing at about 1.1M per year…that is new retirees less deaths of existing enrollees = 1.1M per year.

Moving on…the second largest piece of SS is Disabled Workers, with 8.9M people receiving an average of $1,165 per month. The balance is about 10 smaller categories of children, spouses, widows etc…. of retirees and disabled workers. Each month, the government releases a report here that details the new monthly totals, their average monthly benefit, and even the Male/Female split if that interests you.

Any one report isn’t all that useful, but by compiling them and tracking the monthly and annual changes, one can squeeze some useful, or at least interesting data out of them. I track them for two primary reasons. First, SS is a huge part of the cash deficit, …$773B over the last 12 months ending in January, good for 20% of cash outlays, and growing at 5% per year. Supposedly, at some  point over the next 5 years, we should start hitting the meat of the Baby Boomers, resulting in a notable increase in enrollment and cost….I want to see it in real time.

Second, as you will see in the charts below, there is a noticeable correlation between the state of the economy and the SS enrollment rate. In the “Great Recession”, we saw enrollment rates more than double from 2007 to 2009. Again, this series gives us a real time window into the decisions millions are making…. It may or may not be a leading indicator, but it is certainly worth watching because if we have another spike, whether from the boomers retiring or a recession, it will have a noticeable affect on the deficit.

First up…just the retired workers chart:

2015-02-24 SS-Retired Workers

Here we can see the relationship between the economy and the rate of SS enrollment with a spike in the 2000-2002 time frame and again in 2008. Since then, it has remained elevated, but is slowly trending down over the last ~1.5 years. It’s still pretty bad…at over 1.1M per year, but really no material change since my last report, so i guess that’s a good thing. If…or when we see this swing back around and start heading toward 1.5M….you can be sure trouble’s a’brewin.

Next, we look at the whole program:

2015-02-24 SS-SS-ALLHere’s what you need to know….During the spike we saw in 2009+, most of the categories, especially disability and retired workers were growing in unison, leading to a peak growth rate of over 1.6M per year. However, since then, with the exception of retired workers, everything has more or less stabilized, including disabled workers which had been growing as much as 400k per year at one point. This leaves retired workers as the primary driver in program enrollee growth. So it’s no surprise that the trend is more or less the same…a continued decline in the annual enrolment rate that is still quite a bit higher than the historical trend.

Put it all together, and the truth is…not a whole lot to see here, and that’s a really good thing. If this chart starts to get interesting, there’s a good chance it will be because the deficit is zooming back toward $1T as revenues collapse and expenses spike higher…..just like the good ‘ol days 🙂

Oct 22
0

US Daily Cash Deficit 10/21/2014

By | Commentary

The US Daily Cash Deficit for Tuesday 10/21/2014 was $2.0B bringing the October 2014 deficit through 21 days to $50B and the 2014 YTD through 295 days to $484B.

2014-10-21B USDD

Very little YOY change on the day, so let’s take a look at our new charts….the YTD charts on the bottom. What we are doing is comparing 2006-2014 revenues, outlays, and deficit through the same number of days….in this case 295. The charts used to only go back to 2009…I’ve added in 2006-2008..interesting times if I recall.

Revenues:

Revenues are obviously on track to hit a new record, but looking back to 2006 gives us a good reference. Over the 8 year period, we look like we are averaging about 3% annual growth in revenues….though obviously there we had a large range of change…from ~-10% to the +~15% we saw in 2013. ~3% is a long term # I can believe in…moderate growth in GDP, plus population growth and inflation.

Outlays:

Our chart clearly shows the huge spike in outlays from 2008-2009, followed by going on 6 years of more or less flat outlays. I tend to think 2015 will be the year we start heading back up, but it’s not likely to be a spike…just a resumption of 2-3% growth.

Deficit:

If you pull 2006-2008 out….you could have a graphic for a democratic campaign poster….not that it would help 🙂 (contact me for licencing info…cash only please :)) This is pretty much the story of the last 8 years…a huge spike followed by annual improvement..but still at a pretty high rate. The question is…..where are we headed? Clearly if the trend continues, we’ll be deficit free in 3-5 years, but I wouldn’t bet on that horse. I’ve been wrong before, but my guess is that we are fairly close to a plateau. Over the next 12 months or so revenue gains will slow and cost pressures will mount resulting in a plateau around the $500B range (annual…charts above are through 295 days). For reference, the TTM deficit through September was at $616B. After that…it will turn around and start heading up at a moderate rate. Of course that assumes no shocks….I can’t forecast those, so I haven’t even tried. Looking back to the last recession…TTM revenues peaked in 4/2008 before falling 17% and bottoming out in 11/2009….lets hope we don’t get another one of those.

Sep 10
0

43% Pay No Income Taxes!! Well…not exactly…also-Fun with Math (Reposted from 8/29/2013)

By | Commentary

I stumbled across some old posts I thought were worthy of putting up top again…enjoy!!:

_________________________________________________________

They pop up every couple of months…today by Jeanne Sahadi  at money.com. Now quite honestly, this one…if you bother to read it is better than most(but I’ll pick on it anyway), but the headline still blares out….”43% Pay No Income Taxes“. That’s terrible you probably think….nearly half of the population is getting a free ride. Those lazy slacking  (and literally) poor SOB’s…. Except… there’s just one little thing…these numbers always exclude employment taxes…for social security and medicare. As I detailed a few months back in Social Security: Crappy Deal…Getting Worse …Fica is a bona fide income tax of 15.3% of all income earned up to like $110k or so. So…that guy making $50k may not pay a lot of “income tax” as defined by the study, but he does pay $7500 a year for something that looks like an income tax, walks like an income tax, and smells like an income tax.

So let’s just cut the crap. FICA is an income tax…I laid out my hypothesis in Proof (well…circumstantial evidence) Social Security Implemented As Stealth Income Tax. Anyway…the bottom line is that these articles get me riled up because they are generally intellectually dishonest and just try to rile up tension between different income groups… If you want to play those kind of games fine…but do it for real and include the 15% FICA as income tax. Of course, nobody would click on that headline…”8.25% pay no income taxes”.. but I digress :) So let’s skip over that and look at some math.

Lets take a typical family of 5 with an annual income of $50k. We know they pay $7500 of FICA taxes a year…but what about “income taxes.”

Right off the top…take off $12,200 for the standard deduction and another $3900/person for exemptions ($19,500) and you get down to $18300 of taxable income. The 10% tax bracket runs to $17,900, so if this was it…they’d be on the hook for about $1,800. But…take out some for medical, maybe some modest 401k and HSA contributions, maybe some business losses on a not so popular blog…getting down to $10k of taxable income could happen without too much effort, so $1k of income taxes.

But wait…they have 3 kids….and are almost certainly eligible for a 1k per kid credit…so they are eligible for a $2k refund (1k -3k=-2k) as it stands. Depending on the circumstances…they could probably push their income up to $65k or so before they technically started paying taxes, and this is a pretty cookie cutter scenario. No judgement here…but that’s the math….it’s pretty damn simple. So odds are, a good chunk of families making under $65k per year technically don’t pay “income taxes”. All I’m saying is that I’m not amazed, and this shouldn’t be a story at all….if these writers were capable of basic math, they would see that it actually makes a whole lot of sense. In fact, I’m surprised it’s not quite a bit higher…. Clearly…you don’t need to be a tax cheat to avoid “income taxes”…just the ability to do 3rd grade math.  Oh well…I’m sure our journalist’s sentence diagramming skills are impeccable.

Aug 07
0

“Treasury Wants To Hold More Cash” 8/7/2014

By | Commentary

This article over at Yahoo caught my attention…apparently Treasury is interested in increasing its cash balance in order to:

“help Washington pay its bills during a crisis”

-according to a senior “official”

They are looking to build the cash balance up to about $500B. So what does that mean? Well…Over the last 12 months, the average cash balance was about $65B. The high was $162B and the low was $17B….so this would certainly be a departure from the status quo.

2014-08-05 Cash Balance

Looking back a bit further…the above chart shows daily cash balances going back to 2005. Notice anything interesting? Back in early September 2008, the balance was low as ~$10B…before spiking to over $700B by mid October….before being siphoned off by TARP and other spending. But ultimately, the balance came back down and has averages about $75B since 1/2011…though it clearly fluctuates with the day to day/monthly, and annual cycles.

Going back to $500B would be a huge departure, and I’m not sure it makes much sense. At 2% average interest..adding $500B of debt comes at a cost of $10B annually…not much in the big scheme of things….but why?? The whole thing sounds a bit shady to me, but what do I know…