Concrete and solid Steel Points to Obama's Stimulus Package

I found this in an investment newsletter I am a member of and thought you all might be interested in this. Remember, one must always read between the lines. What goes up must come down, and what has gone down must come up again... One cannot listen ONLY to FOX Noise, but should also listen to MSNBC. One must be able to see both sides of a story in order to make the appropriate decisions. Obama does this, and quite well.

There are numerous investment ideas within this article. I will say herein, that you must do your own due diligence for your investments and I make no claims as to their legitimacy. I do not personally recommend these investments and they are the views of the writer solely. Although, some investors feel that this is one of the most opportune times in our lifetime in which anyone, and everyone will be able to capitalize on.

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Written by Sara Nunnally, Senior Research Director, Taipan Daily



President Obama Pours Billions Into U.S. Infrastructure Projects

Barack Obama’s massive stimulus package has billions of dollars in funds waiting to be spent on the nation’s aging infrastructure. Once the American Recovery and Reinvestment Plan is passed, these three companies could reap the benefits of the U.S. Infrastructure Boom of 2009…

On Aug. 1, 2007, in the heart of rush-hour traffic, the 64-foot I-35W River Bridge in Minnesota suddenly and dramatically collapsed. Whole sections of concrete slabs and twisted metal fell into the swift waters of the Mississippi. Tragic photographs and video show a school bus just a few feet from a break in the bridge that would have taken the lives of 50 children returning from the Waite House Neighborhood Center Day Camp.

The collapse did take the lives of 13 people, and searchers spent days looking for missing people. Cars were trapped under the mangled wreckage of the bridge, and in the strong currents of the Mississippi River, the treacherous water was choked with debris.

In Maryland, on Dec. 23, 2008, at 8 a.m., a 66-inch water main broke and sent a 5-foot wall of water rushing down the ironically named River Road, trapping 15 people in their cars.

Helicopters were sent to rescue the stranded motorists, whose cars were being pushed down the road in the torrent. More than 135 gallons of water per minute was pouring out of the break…

These incidents aren’t unique, and can happen in any state in the nation.

Is Your State Safe?

The U.S. Department of Transportation’s Federal Highway Administration listed 73,764 bridges as structurally deficient in 2006, with four states showing greater than 20% of their bridges as structurally deficient:

Iowa: 20.75%
Pennsylvania: 25%
Rhode Island: 25.37%
Oklahoma: 26.85%

Each and every state has bridges listed as structurally deficient, and these episodes will serve to highlight the growing neglect of our nation’s infrastructure.

Our water system? That water main in Maryland was installed in 1964 – 45 years ago… In fact, this wasn’t the first time that the system had a problem. In 2007, there were 2,129 recorded leaks. In 2008, more than 1,357. All of our infrastructure is just as bad as the bridges and water systems, but we haven’t yet seen a large amount of money poured into fixing the problem.

Until now.

The American Society of Civil Engineers estimates that we may need $1.6 trillion over the next five years to repair and restore the nation’s infrastructure. That’s not including new projects… That’s just making current infrastructure work.

Billion-Dollar Boost

Now, $1.6 trillion is more than double what President Obama has planned for the full stimulus package, but here’s what he’s focused on:

NPR reported, “Every $1 billion the federal government commits to roads, bridges and other infrastructure helps to support some 35,000 jobs.”

One idea that Obama has put forward is a National Infrastructure Reinvestment Bank that will disperse $60 billion over 10 years for highways and other infrastructure projects. And don’t forget the $150 billion over 10 years for alternative energy investment projects. Efficiency is a key factor in that plan, and transmission updates and power plant overhauls are sure to be on the list to get funds.

With Obama’s stimulus package estimated to cost more than $700 billion, investors are getting excited about what could be the Infrastructure Boom of 2009.

Folks are already starting to sift through the beaten-down companies that will see a boost from President Obama’s plan. That means we should be looking at two things: cement and steel.

Interestingly, 81% of the U.S. cement market is met by foreign companies. The three main companies are France’s Lafarge SA (LG:Paris), Holcim, Ltd. (HIM:London) out of Switzerland and Cemex SAB (CX:NYSE) from Mexico. Each holds about 13% of the U.S. market.

Let’s take a closer look at Cemex.

Discounts South of the Border

Here are the bare numbers:

* Annual production capacity of more than 96 million metric tons of cement
* Annual production levels of more than 80 million cubic meters of ready-mix concrete and more than 222 million metric tons of aggregates
* 67 cement plants, more than 2,360 ready-mix concrete facilities, and a minority participation in 18 cement plants
* 564 aggregate quarries, 274 land-distribution centers and 97 marine terminals

I won’t try to cover up what’s been happening with Cemex here in the U.S. Its fourth-quarter numbers are pretty hard to ignore. The company announced a 25%, 39% and 43% drop in operations in the U.S. for cement, ready-mix and aggregates volumes. For the full year 2008, cement volumes are expected to decrease by about 14%, ready-mix volumes are expected to decrease by about 13%, and aggregates volumes are expected to decrease by about 3% versus the same period in 2007.

Here’s what Cemex has to say about Obama’s infrastructure plan:

Momentum is building for a major fiscal stimulus package to create new jobs in the U.S. economy, which would include substantial funding for public works construction. President Barack Obama is working with Congressional leaders on an economic recovery program that would include the largest public works funding program since the creation of the interstate highway system over 50 years ago. We are cautiously optimistic about these developments, especially in view of the fact that public works construction, particularly for highways and bridges, is substantially more cement and aggregate intensive than other types of construction activity.

Most recently, the company announced it received approval of a debt-refinancing deal from the banks. This news caused Credit Suisse to upgrade the stock from “underperform” to “neutral.”

With the positive atmosphere here in the States for a stimulus plan, Cemex has turned a corner. Since hitting a low of $4.01 on Nov. 21, 2008, the stock has rebounded strongly, and traded as high as $10.11 on the first trading day in 2009 – a gain of 152%!

This could be the beginning of a great comeback for the stock. It traded as high as $32.61 in 2008, and could reach $18.50 by the end of the year, as this infrastructure boom really heats up.

But cement isn’t the only commodity that could be jump-started by Obama’s Recovery and Reinvestment Plan.

Reinforcing the Trend

Bridges make up about 5% of U.S. steel demand, or about 7 million tons. That percentage was consistently growing prior to the economic belly flop in 2008. So with any significant push to update and improve existing bridges, steel demand could get back on track.

It wasn’t that long ago that nearly every commodities blog was touting the rise of steel. Over the past 10 years, steel demand was growing at an annual rate of 6%. International companies were raising prices by the month for consumers greedy to fuel their industrial growth. Now, demand is at a 26-year low.

Here’s the prognosis, from the Financial Times: “Global steel production could easily plunge by 10 per cent or more next year.”

But an interesting blog paints a different picture. Tony Taccone, a consultant to steel companies with 20 years under his belt has this to say:

While these projections may prove to be right, they seem overly pessimistic to me. First of all, the latest forecast of global economic prospects published by the World Bank, and discussed by James in a recent post, calls for the world economy to grow by 1.9% (PPP basis) in 2009. As I’ve argued in the past, there is a correlation between global GDP growth and the change in steel demand. If we plug 1.9% GDP growth into the model, the predicted decline in steel production for 2009 is -3% not -10%... Don’t forget that developing economies, which now account for close to 50% of global GDP and whose demand for steel typically grows faster than GDP, are still projected to grow 4.5% next year. They have been driving the global growth in steel production and will continue to do so in 2009.

The gist? An infrastructure boom beginning here in the U.S. with Obama’s Recovery and Reinvestment Plan will begin to put steel back on the right track.

We’ve already seen a bit of a turnaround in some steel companies, most notably with Nucor (NUE:NYSE).

Relative Outperformance

In a bit of a surprise move back on Jan. 6, 2009, one analyst downgraded Nucor from “buy” to “neutral” citing limited upside potential because of “relative outperformance” of its peers.

Let’s take a closer look at this steel producer.

Sales and earnings increased in the third quarter to $7.45 billion and $1.18 billion respectively. These numbers have been steadily increasing over 2008. Now, Nucor has said it expects its fourth quarter to be much tighter, so we have fair warning of some contraction.

But the relative outperformance comes from Nucor’s break away from the rest of the industry.

Back in October 2008, companies like U.S. Steel (X:NYSE), Arcelor Mittal (MT:NYSE), and AK Steel (AKS:NYSE), along with Nucor were showing a share price loss of about 30% on the year.

But unlike the others, who continued falling (AKS dropping more than 80%), Nucor stabilized. On the year, Nucor is down only about 13%. The others are still down between 55% and 65%.

The company still has a ways to go before it re-establishes its former long-term uptrend, though. And a rise back to those levels could put Nucor back at $60. From its low of $25.25 back on Nov. 20, the stock has already climbed 74.9%. Another 50% could be in the works for 2009.

As good as these gains may prove to be, one of the simplest ways to play the coming Infrastructure Boom of 2009 is with a broad net method.

I’m talking about an infrastructure ETF. These guys have been pummeled lately. Just listen to these losses, as reported by MarketWatch.com: “Losses among ETFs included a 32% decline by the SPDR FTSE/Macquarie Global Infrastructure 100 ETF (GII:NYSE) and a drop of 39% by the iShares S&P Global Infrastructure Index Fund (IGF:NYSE).”

Playing the Field

But here’s the thing. All that private capital that made the companies in these ETFs tick dried up with the economic crisis. That’s the cause of these major drops.

So what happens when countries start injecting government cash into big infrastructure projects? The rising tide lifts all ships. The equipment makers, the engineers, the materials producers all benefit from global stimulus packages.

Why not play the field with a global infrastructure ETF?

Every analyst (and their mama) is talking about infrastructure being a mega-trend in 2009, and it won’t end with the U.S. stimulus package. China implemented a nearly $600 billion stimulus package back in November, and you know that country will do everything in its power to keep growing.

One of the most diverse is the iShares S&P Global Infrastructure Index Fund (IGF:NYSE), with holdings in 22 different countries, though heavily weighted (26.46%) to U.S. companies.

Everything from energy pipelines, to water, to transmission cables, you name it, it’s in the fund… And at a discount!

The IGF has been knocked down some 40% in this economic crisis. But a global infrastructure boom, stimulated by government intervention in the U.S. and China could help the fund begin to turn around.

A rise back to before the mayhem would put the IGF up at $48, a gain of 65.9%.

Not bad for playing the field.

Let’s review…

Obama’s Recovery and Reinvestment Plan

President Obama’s recovery plan could very well spark an Infrastructure Investment Boom in 2009.

With $700 billion out on the table for recovery, infrastructure is high on the list of job-creating initiatives. As we’ve noted before, NPR reported that every $1 billion invested in infrastructure has the potential to create 35,000 new jobs.

That kind of optimism is just what the private sector is looking for before it begins to pump its own money back into the system.

And, the idea that Obama may create a National Infrastructure Reinvestment Bank to disperse $60 billion over 10 years for highways and other infrastructure projects is extremely promising to companies like Cemex and Nucor.

And don’t forget the $150 billion over 10 years for alternative energy investment projects Obama’s got planned.

In all, this type of government intervention will be both well-received and used well. More than 70% of people in one poll said they approved of a $700 billion stimulus plan. And the companies in this report will certainly have no objection to a package that could have their share prices rising 50%, 65% or 80% over the next boom.

Investors won’t be complaining either.




This, the 249th entry in bloggoland! Thanks for reading and coming back. I always enjoy the comments, emails and the banter!!


(c)Copyright 2009 Doug Boggs

The Billionare next door? Or overseas...

I will start today with a quote by Thomas Jefferson in a letter to the Secretary of the Treasury Albert Gallatin in 1802:

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

To truly understand what Bush, Cheney, Bernanke, and Paulson, and the .5% elitists are attempting to do with their "brilliant" ideas to strongarm our House and Senate to pass the "BailOut Package" is to create more unregulated options for the elite to buy stock.

You see, we are currently in the beginning stages of an unprecedented global financial boom. It may be hard to see right now, but that is part of the reason why. This is going to be bigger, longer lasting and with even a greater number of impossibly predictable outcomes than we've ever seen or thought before. The top wealthiest people have been preparing and are currently putting their ducks in a row, so to speak. By doing so, the "average Joe six pack" or "Joe the plumber" is getting left behind. The funny thing is, they have convinced the average taxpayer that is all in their best interests.

According to the highly read and financial industry respected report recently released by McKinsey Global Institute, from years 2005 to 2010 alone, the value of all the stocks, bonds, CDs and other financial assets held worldwide will soar from $118 trillion to $200 trillion. That’s an increase of $82 trillion in 5 years, or 69% in five years!

As I have stated previously in this blog, in the articleThere's a hole in my pocket we are experiencing the largest redistribution of wealth this world has ever seen. It is so profound it will also radically alter the global economic pecking order in a huge fashion.

Right now, Asia and the United States each account for 28% of the world economy. The World Bank estimates that America’s share of the world economy will slip a bit, dropping to 24% by 2030. But Asia’s share will double, reaching a staggering 55%. This simply means that the Asia of tomorrow will be twice as economically powerful as the United States is today. Why is that? And how can we get in the game? Let's take a look.

Our current means of portfolio investment has been coached to us, by our financial industry brokers over the past, you know those people on Wall Street that are the most privy to the rules of the game that helped create and fuel this economic crisis we have found ourselves in, to hold 5%-15% of international funds in ones portfolio. Perhaps you can begin to see that this will be a negative trend in ones future portfolio based on these two paragraphs alone. Keeping this pace, U.S. investor will soon realize that they are being left behind financially. Based on these changing economic indicators and global expansion we need to change our investing practices, not only for an individual investor to survive, but for our country to stay in the game. The questions is, can we?

Jeremy Siegel is a Wharton Professor and best-selling author who recently said investors should should have 40% of their holdings in overseas investments. If the government continues to allow, and pay tax credits (according the the Bush administration and the McCain campaign)for our corporations to send jobs overseas, doesn't it seem prudent to put your money there? It is best to invest in the companies that are the most profitable, right? Not a very American thing to do on both counts, but money has no allegiance to any country.

Doing that though is not as easy as one would think. You see the average American doesn't have the access to the market information that is necessary to capitalize and profit from the Asian boom. Getting your hands on the market intelligence is not as easy as one would like. The seasoned, wealth and well connected investors can and do.

Wall Street has know about this economic trend for a long time, and some could say, are helping to drive this global economic boom. Why do you think there is such a sell off in our stock market today? Perhaps it is partly based because the largest investors and institutions are buying overseas. I mean, have you ever had the chance to be in on an IPO? Chances are NO. These are saved for the wealthiest and largest investors. The rules are different.

Even investors who see and understand what’s happening could end up watching this wealth explosion from the bottom end of the ladder to success. That’s because federal regulations prohibit most American investors from buying many foreign stocks, even though overseas markets clearly will offer the greatest returns in the months and years to come.

Here is why...If a foreign company isn’t registered with the Securities and Exchange Commission, its shares are off-limits to most investors. Due to the costly registration process and myriad of paperwork it is discouraging many of these foreign companies from listing even American Depository Receipts (ADRs), a type of security U.S. investors trust and are willing to buy. These financial vehicles are easy to trade for the average investor, but becoming harder to come by.

Wealthy investors don’t have this dilemma. There is an obscure SEC regulation, Rule 144A, allows them to circumnavigate that rule and form investment pools through investment banks, so they can buy foreign-company shares.

Now, you can begin to see why the $700 Billion is going to the banks and bailing out the wealthy and not the average Joe sixpack...The big question I have then, is when will it reach the little guy? That trickly down thing we all seem to hear about but never see the advantage of?

We'll be looking into this in the coming weeks and bring what information we can muster to the Banter Table. Stay tuned.