Bryan Gomez's  Instablog

There is a $600 billion infrastructure stimulus going on in China and rightfully so, such kind of stimulus do create jobs and "permanent stuff" that can be used in many things that can be productive and create value. Lucky for the Chinese, they do not have that enormous debt and financial mess to deal with that the US has that is why they can easily proceed to growth issues. The Chinese is jumpstarting the boat, while the US is plugging the holes.

With US unemployment rate now running at 9.7%, Americans must now work overseas or be ready to be overqualified in their next job if they want to stay, or be ready to work for the government. Statistics show that government pays well on the average compared to other corporate jobs.

Infrastructure spending do create jobs. Chief Department of Transportation Economist Jack Wells said in an interview at the beginning of this year that 28,000 jobs will be created for every $1 billion spent on highway construction spending. It is really that phase of the market where growth of the economy that came from consumer spending is now being replaced by public spending. It can be expected that as the private consumer postpones his spending and saves, the government will be continuing its spending binge in the next few years that is why it is important that the government spends those dollars wisely in fixed asset investments that can set up the next era of growth.

The engineering stocks that I listed above are some of those infrastructure play stocks that may benefit from the coming construction boom. They are well positioned in booming industries like for example MDR and SHAW who is well positioned in the nuclear infrastructure building industry. Some of them have tremendous backlogs like FLR which has $30 billion worth of future projects.

What investors saw this year is the effect of credit crunch wherein banks are hard pressed to lend to good projects because their balance sheets cannot allow them to. Investors saw a lot of project cancellations early in the year that is why price to earnings ratio numbers for the group in general is not bullish.

Looking forward, as banks get healthy and willing to lend and the next round of stimulus begins, investors can expect infrastructure projects to kick in as the economy looks at restarting its growth engine. By the end of this year, expect the holes to be plugged already. Expect a positive re-rating of this industry before the year ends.