Markets Overly Optimistic About Obama's Infrastructure Plans - JP Morgan

President-elect Barack Obama's massive plan to invest in infrastructure may not be the near-term boost that markets are hoping for, according to JPMorgan analyst Marc Levinson.

He wrote in a note to clients:

We think the markets are overoptimistic about the speed with which these funds will be expended, and we caution that a large portion of the funds may not go into bricks and mortar.

Mr. Levinson told clients that the infrastructure plan, which may top $150-billion, remains a top initiative and one that new Congress will tackle early on when it returns on Jan. 6, 2008. But he said that the new administration must decide between stimulating employment quickly and rebuilding infrastructure.

Mr. Levinson said:

The types of projects that can begin almost immediately will do little to achieve longer-run objectives, such as better movement of passengers and freight. We discount claims about the number of projects that can get underway within six months.

He told clients he expects the infrastructure package to benefit aggregate and cement companies the most due to increased road building. He also said the package is essential for a near-term recovery in the machinery sector.

The analyst added that engineering & construction companies will only benefit modestly from the package, while steel stocks will not see the benefits of a new infrastructure program until late 2009 at the earliest.

TSX-listed companies who have attracted considerable attention from investors due to Obama's plan, are SNC Lavalin Group Inc. (SNCAF.PK), Stantec Inc. (SXC) and Aecon Group Inc. (AEGXF.PK).

Comments

[carey_jim:]

The best way to stimulate the economy is to get more money into the hands of the consumer.

The majority of workers' wages have been kept low and falling by weak unions and illegal immigration.

The higher salaries of management and the very wealthy don't stimulate enough spending because there are only so many cell phones, computers, ipods, SUVs, boats ..... they can buy.

Higher taxes don't help because, as J.P. Morgan said when he was Secretary of the Treasury in the 1920s and cut taxes for the rich, "the rich wont pay higher taxes. They will find loopholes."

How do we get around the problem of falling wages and unwillingness of the very rich to pay more taxes and, basically, to give more of their money to the poor to spend?

Raising wages seems to be a better solution than taking money from the rich through taxation, even if it is in the form of government work programs for the working class. Henry Ford recognized that in the 1920s even without being prompted by unions. He needed someone to buy his cars!

But bringing illegal immigration under control and resuscitating the unions will take time.

In the "mean" time we'll probably have inefficient changes brought through social unrest and confiscatory policies.

Unless someone can find a better way that most Americans agree with.

[Curtain rises. Obama enters, stage left, accompanied by Pretorian Guard.]

2008 Dec 16 12:10 PM

[Terry Mock:]

Sustainable Infrastructure: Building a Bridge to a New Global Culture
www.sldtonline.com/con.../

In answer to the worldwide call for sustainable development to combat the current financial crisis, Sustainable Land Development International (SLDI) respectfully offers a solution that balances the needs of people, planet and profit - for today and future generations.

SLDI, a developer-led and cooperatively-owned technology and information resource organization, is now fully positioned to transform the industry that creates the very infrastructure of our civilization. Sustainable development starts with our global infrastructure. If it is unsustainable, ultimately nothing else can be. Featured products and services include clean energy technology, carbon sequestration technology, soil enhancement technology, water purification and retention technology, sustainable land development best practices systems and certification programs.

Your participation and comments are welcome.

Terry Mock
Executive Director
Sustainable Land Development International
SLDI.org
SLDTonline.com
SURmag.com
LDBreakthroughs.com
SLDI Newsletter - www.sldi.org/newServic...

Promoting and enabling land development worldwide that balances the needs of people, planet & profit - for today and future generations.

2008 Dec 21 09:50 AM