Brooksie’s Daily Stock Market blog – an edge before the open
Friday, September 9, 2011 9:16 am EDT
DJIA: 11,295.81 S&P 500: 1185.90
President Obama unveiled the American Jobs Act last night. Economists at Macroeconomic Advisors estimate the combination of tax incentives and infrastructure spending would create 1.3 million jobs in a matter of a few months, and 800,000 jobs next year, a total of 2.1 million jobs and a reduction of one percentage point from the unemployment rate.*
Obviously, that estimate will have its detractors, but it is a start, and it is loaded with dangers politically, so maybe it will get more support than expected.
Apparently certain economists believe Europe’s economies are at risk of recession. The Group of Seven central bankers meet this weekend in Marseille, France to address ways to boost growth and head off its Euro-zone debt crisis.
Yesterday, I said the stock market would love to run, but is hobbled by Europe’s problems and our own slumping economy.
I also said, “Unless President Obama pulls a huge pink rabbit out of his hat tonight, his speech will be met with selling tomorrow (today).” Time will tell if he achieved that, but it is an aggressive initiative and that’s a plus. If there was an inkling that Congress could objectively address the spirit of this proposal, I think the market would have a chance of running higher. Time will tell.
The nation is conditioned to believe, Congress will obstruct any program put forth, I think we MUST be prepared for a surprise, that both parties will dig their cleats in and get the job done that the American voter sent them to do and worry about the elections next year.
That would be very, very bullish.
The market remains within a consolidation that ranges between DJIA 10,600 and 11,740 (S&P 500: 1100 and 1220) that could provide a base for an assault on the May 2, highs of DJIA: 12,928 (S&P 500: 1376). Failure to resolve the problems mentioned above and a drop below DJIA 10,000 (S&P 500: 1050) is likely.
Infrastructure Spending: Housekeeping 101
Note: I will repeat this section from time to time for new readers.
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
*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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