Often it’s the fine print that makes all the difference in the world. If you need any more proof of that fact, just ask the millions of Americans trapped in a sub-prime, Adjustable Rate Mortgage.
With half a million jobs lost in November alone and no one predicting an end to this recession any time soon, Mr. Obama hinted (read “fine print”) that $500 billion in spending is not out of the question.
He would like to see a plan that creates 2.5 million jobs. His interview on Meet the Press this past Sunday indicated that he wasn’t afraid of big spending to stimulate the economy, but that mindless spending should be avoided…
“We are not going to simply write a bunch of checks and let them be spent without some very clear criteria as to how this money is going to benefit the overall economy and put people back to work”. The new administration’s plans will be based on what is “going to make the biggest difference in the economy and what will have some long-term benefits.”
Obama emphasized that the spending will be on “infrastructure” - projects to build roads, modernize schools, expand Internet access, improve buildings’ energy efficiency, put better technology in hospitals.
“We’ve got to make sure that the economic stimulus plan is large enough to get the economy moving,” Obama said in the interview. And even with a $1 trillion budget deficit, Obama said, “We can’t worry short-term, about the deficit.”
This perspective is clearly shaped by the experience of the pre-Roosevelt Depression years, when (as some economists believe) stinginess in monetary policy and a failure to effectively target government spending led to disastrous results.
Infrastructure spending has a further advantage, in that it will direct the fiscal expansion to state treasuries. Most states are required to run balanced or almost-balanced budgets. Many states, without help from the federal government, will have to cut spending or raise taxes next year. The federal fiscal stimulus needs to deliver enough help to the states to offset this.
State-directed infrastructure investments, which are “shovel ready”, are a fitting part of the mix. Last week, the nation’s governors presented $126 billion in highway, public transportation, airport and waterway ready-to-go projects to Obama.
So where should we look to profit from this huge amount of money that is going to “stimulate” the economy? Just look at the fine print…here that means all the highways, bridges, airports and waterways. These will be major construction projects that will use a lot of steel, concrete and equipment.
There are a number of good infrastructure ETFs out there, but most of them are global in scope. Reading “the fine print” you have to guess that President Obama will make sure that our public tax dollars will flow to U.S. companies. If you want an all-domestic infrastructure play, the closest you can get is the PowerShares Dynamic Building & Construction Portfolio ETF (NYSE: PKB ).
The index bottomed twice last month at about $7.50 per share and has recently rallied above its 50-day moving average to about $11.50. If you were to decide to buy in, do not chase it…$10 looks to me like a price that could yield you some big returns and as always keep you stops pretty tight.
$12.16 (01/05/09)
