Ingredients for Major Buying Opportunity Shaping Up

George Brooks |

Wall Street Stock MarketBrooksie's Daily Stock Market blog   -  an edge before the open

Tuesday, September, 13, 2011     9:12 am EDT

DJIA: 11,061.12    S&P 500: 1162.27

Big week for U.S. economic outlook  -  Big week for Euro-zone debt stability.

We have the ingredients for a major buying opportunity shaping up within 2 – 6 weeks, depending on the magnitude of fear that is generated by problems here and abroad.

Once again the 10,600-10,700 level in the DJIA (S&P 500: 1110 – 1140) has attracted enough buyers to head off another leg down in the stock market. Failure to hold calls for a drop below DJIA 10,000 (S&P 500 1050).

Uncertainty is the demon in all this. The Euro-zone debt crisis has been plaguing global markets for more than three years. Perhaps a Greek default would clear the air, as it would force conclusive action by Europe’s leading countries and remove a lot of the uncertainty.

This situation is highly complex. I don’t have an answer for you. From what I read, no one else does either. While I have first hand experience with crises in U.S. markets going back to 1962, international finance is not my specialty.

My experience tells me, extremes of fear create opportunities for the gutsy and investors who can afford to take chances. The problem most investors have is, they have limited capital and may see opportunity, may even know what to do, but can’t afford the risk.

Risk here is hard to measure, we haven’t been here before – defaults by countries – yes, a default by Greece and the potential for a domino effect – no.

Recession, or no recession.

A light may be shed on concern that the U.S. economy is headed for another recession this week with a host of economic reports.  Tomorrow we get Producer Prices and Retail Sales at 8:30, and Business Inventories at 10 o’clock. Thursday is the big day with Jobless Claims, Consumer Prices, Empire State (N.Y.) Manufacturing  Survey, and Consumer Price reports all come at 8:30. Industrial Production follows at 9:15 and the Philly Fed (area activity) Survey  at 10:00.

A survey by the National Association for Business Economics (NABE) reveals 54% lowered growth forecasts, with the GDP expanding 1.7% for 2011( vs 2.8% in May), and 2.3% in 2012 (vs 3.2%).

Economists expecting another recession jumped to 13% from 3% in the May survey.

I don’t think current prices discount a recession, a slowdown to a crawl – yes, but not the uncertainties and drag of a recession.

   Today: Once again, it looks like a soft market at the open.  Reassurance out of Europe  could stabilize  global prices, even prompt sharp rallies.  More uncertainty, puts this consolidation area with  support at DJIA 10,600-10,700 (S&P 500: 1110 – 1140) in jeopardy. A major buying opportunity is shaping up.

Infrastructure Spending:  Housekeeping 101

Note: This subject is gaining interest, albeit a delayed reaction

As the recession and bear market were intensifying in the fall of 2009, I speculated that  infrastructure spending would get a high priority for a recovery. I wrote articles for Equities Magazine and compiled information I anticipated would be useful.

I was wrong, infrastructure spending  got a low priority, and today I am sure the administration has its regrets.

What is attractive about this kind of spending is it stands to employ a lot of people and it can be funded by some government spending, but to a great degree by private investment.

When I did my initial research on the nation’s infrastructure I was surprised  to find it encompassed 15 different categories: Aviation, Bridges, Dams, Drinking Water, Energy, Hazardous Waste, Inland Waterways, Levees, Public Parks and Recreation, Rail, Roads, Schools, Solid Waste, Transit, Wastewater.

In 2009, the American Society of Civil Engineers gave each category a “grade” (A through D-)

I was shocked to learn the GPA for all categories averages a “D,” with an estimated need for investment of $2.2 trillion !

Their 140 page study is available on the following web site.  (Some pages are in full color, so copy with care or it’ll chew up your color ink)

http://www.infrastructurereportcard.org/sites/default/files/RC2009_full_report.pdf

These infrastructure categories  encompass most of the United States. Addressing their vast deficiencies would employ a significant number of workers at all skill levels for many years. Every politician  in both Houses should drool at the potential in the districts they serve.

With all categories of our infrastructure begging for attention, it is beyond comprehension that  our nation’s priorities are squandered abroad. Time to come home.

There is a move afoot to establish a facility for funding infrastructure projects sponsored by  Senators John Kerry (D), Mark Warner (D) and Kay Bailey Hutchison (R).  The vehicle would be the BUILD Act, introduced earlier this year by Senator Kerry and modeled after the  Export-Import Bank Created during the Great Depression.hgh

Whether this will be a facility for funding infrastructure investments is unknown.  Whether Congress approves  additional infrastructure spending is unknown. I thought the following information would be helpful in the event our government decides to pursue this route for job creation while addressing an enormous need.

So what’s the best play ? An ETF may sound like an easy answer, however one of the problems with Infrastructure ETFs is they are generally loaded with utility stocks, ergo not  pure plays.

I compiled a list of 39 stocks  (not recommendations) with exposure to various categories of infrastructure spending. but have not crunched numbers – a massive job and I currently don’t recommend stocks.  But, this is a start.

There is no guarantee that the government will address the issue, or that any of these companies will benefit enough to have a significant impact on its stock. Eight of the ten largest highway builders are privately owned.

For the most part, these are meat and potatoes companies, NOT alternate energy companies.

ABB Ltd. (ABB), Aecom Tech (ACM), Alamo Gp (ALG), Ameron Int’l (AMN), Astec Inds. (ASTE), AZZ Inc. (AZZ), Caterpillar (CAT), Chicago Bridge & Iron (CBI), Cemex (CX), Colfax  (CFX), Deere (DE), Dover (DOV), Eaton (ETN), Emcor Gp. (EME), Gardner Denver (GDI), General Electric (GE), Gorman-Rupp (GRC), Granite Const’n (GVA), Idex (IEX), Insituform Tech. (INSU), Jacobs Eng. (JEC), Joy Global (JOYG), KBR (KBR), Layne Christensen (LAYN), Lindsay (LNN), Manitowoc (MTW), Martin Marietta (MLM), Mastec (MTZ), MYR Gp (MYRG), Pike Electric (PIKE), Primoris Svcs (PRIM), Shaw Gp.(SHAW), Sterling Const’n (STRL), Terex (TEX), Thompson Creek Metals (TC), Transcanada (TRP), Unites States Lime & Mnrls (USLM), URS Corp. (URS), Valmont (VMI), Vulcan Materials (VMC).

George Brooks

Recent Blog Headlines:

“Debt Ceiling Rally to be a Fake Out” July 29  DJIA: 12,240

“ Odds Favor Rally Failure – Another Leg Down.”(August 1 – DJIA 12,143)

“Market Needs a Hail Mary”   (August 2,  DJIA 12,132)

“Short-lived Rebound Likely”  August 3  DJIA: 11,866

“Volatility Ahead – Plunges – Rallies –Plunges”  August 4   DJIA 11,896

“News-Based Rally – Nimble Traders Only”  August 5   DJIA:11,444.61

“Emotional Extremes to Provide Great Trading Opportunities for the Skilled”  Aug. 8  DJIA: 11,444

“Green Light for Gutsy Traders ONLY – Test of Lows in Near Future”  Aug. 10   DJIA: 11,239

“Selling Climax Possible – Friday or Monday”  Aug 11   DJIA  10,719

“Marching to the European Drumbeat” August 12   DJIA:  11,143.31

“Week’s Economic Indicators Key”  August 15  DJIA: 11,269

“All Eyes on Europe and This Week’s Economic Indicators”  August 16  DJIA: 11,482

“Heading for September/October Buying Juncture” August 18  DJIA: 11,410

“Fear Frenzy Mounting – Buying Opportunity – September/October” August 19   DJIA: 10,990

“Fed and Administration May Head Off Drop to DJIA 9.680” August 22   DJIA: 10,817

"Double Bottom Needs Powerful Surge to Confirm”  August 23  DJIA: 10.854

“Betting on the Come” August 24   DJIA: 11,176

“Easy Does It “ August 25  DJIA 11,320

“Key Technical Juncture”  August 26  DJIA 11,149

“Market Wants to Run – Values Are There-Institutions Have Money – Looking for Catalyst –Big Money to Jump Gun ?

August 29,    DJIA: 11,284

“Big Week for Reports on Economy”  August 30   DJIA 11,539

“Technical Breakout Ahead of Obama’s Speech Next Week” August 31   DJIA 11,559

“Big Run in Market – Short-Term Risk”  Sept. 1,  DJIA 11,613

“Traders’ Buy at Open and Last 20 Minutes of Day If DJIA Down More Than 100 points” Sept.2  DJIA 11,493

“Catharsis Shaping Up – Big Buying Opportunity Looming” September 6,   DJIA: 11,240.

“Without a Big Surprise, Obama’s Speech to be followed by a Sell Off” Sept 7  DJIA 11,139

“Consolidation:  Breakout Up …… or Down”  Sept 8    DJIA: 11,414

“OK Congress – Ball’s in Your Court”  Sept. 9  DJIA: 11,295

“European Crisis Setting Up Trader’s Buy” Sept12  DJIA: 10,992

George Brooks

*Reported by Bloomberg.com

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The writer of Brooksie’s Daily Stock Market blog, George Brooks,  is not registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk

 

 

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