An Investment-Led Economic Recovery

Summary

• "There are decades when nothing happens; and there are weeks when decades happen”.
• The political response to the coronavirus has dramatically proved Lenin to be right.
• Unfortunately this has been in negative ways for most but other lessons from the past could pave the way for a better future for many.
• That paving will be via massive infrastructure investments leading to a new Industrial Age.

Foreword

This is not an article about specific companies to invest in. It is about the new normal the world economy must head for in the future and that has enormous implications because the past norms will not return for some sectors including retail, office space, hospitality and aviation. The internet has for several years been creating change in retail and the virus has become the catalyst for rapid and possibly permanent, adverse change in the others. It could also be the catalyst for much needed positive change for much else in the economy and thus for the lives of many. That also means investment opportunities in certain sectors and I shall mention some of those later.

First a word on where we are.

Economic Decline

Even before the, in my view, unbalanced response to the virus problem incomes for the middle class were being squeezed in most western countries and debt - corporate, government and household - was going up in a failing attempt to maintain living standards.

There is more on that situation in the US in this Bloomberg article and that does not include student loans that are now approaching a record high of $1.6 trillion and for many all that gained was a worthless degree leading to a worthless job. A study by the think tank Demos shows that debt burden alone resulted in an overall lifetime wealth loss for a married couple of $208,000. There has been much political talk over several years about canceling student debt but nothing has yet been done. My first article on SA, published nearly 5 years ago, expressed my ideas for a way forward on this via Fed Student Property Bonds That - or something like it - would be a boon even more so today.

It worth noting also at this point that the US is the world’s number one economy and that economy has depended for several decades on consumer spending thus today’s US economy is built on consumption with much of that being funded by debt.

This article in the Financial Times shows the situation generally for most of us around the world and the unequal redistribution of wealth and debt in the US.

As can be seen from that the gaps started in the 1980s. During that time infrastructure neglect also started; both new build and maintenance of existing. Likewise education systems starting the long road of decline through failure to keep up with technical education need changes. Manufacturing in the west - and especially in the US and the UK - declined. Vast bureaucracies have grown on the back of an outpouring of rules and regulations intended to prevent the productive from making mistakes. Mostly they achieved nothing except stopping many from making anything! This can be seen dramatically in Germany where a once world leading road system is decaying and overcrowded due not to lack of money but to bureaucracies stopping anything from being done. It is similar in the failing economy of Italy. Yet the seemingly unstoppable growth of this continues with the recent announcement by the British government that 18,000 corona virus contact trackers will be recruited to solve that problem rather than doctors and nurses and 50,000 customs officials (box tickers/checkers!) will be appointed to handle the increased paperwork that will be required when Britain leaves the EU at the end of this year. Presumably similar is occurring on the other side of the Channel in France - the world’s 6th largest economy - where a massively bloated state already spends 56% of GDP. The US figure is 38% and there is no lack of bureaucracy in the world’s number one economy. Cross channel exporting companies will have to have many more people to prepare that extra box checker paperwork from January 1 next year yet nothing changes from the day prior - the goods are the same, made to the same standards by the same people etc. So cost is added but absolutely no value is added. And economists will wail about low productivity but will not point to the cause.

Interestingly the influence of bankers also increased during this same post 1980 time period; rentiers overtaking the productive! Others more knowledgeable on these things than I can decide if the latter was pure coincidence but the trend of none of these things can be considered healthy for economies and society as a whole if it is to prosper in future years.

One outcome of a combination of these things is that both business and government investment has plunged.

Unfortunately that situation has continued to worsen since that FT linked in article above was published and there is little doubt that the political groupthink reactions to the virus will have worsened this awful picture exponentially. All we read is of job losses hitting people at a greater and faster rate than at any other time on record and the Bank of England recently forecast a downturn for Britain worse than any other since the 1700s! Britain is the world’s 5th largest economy!

The bad news keeps piling in and millions in the US now also face having no health insurance, according to another article in the Financial Times

Compounding things is talk of “despair” deaths from suicides, alcohol and drugs that might approach those killed by the virus. If one adds that to deaths from others who could not get hospital treatment because the virus had priority then the situation for society is truly tragic. Deaths are but one sign of that; broken families are another.

One could go on endlessly about the consequences of this long growing wealth gap and shockingly ill thought through chain reaction to the virus that will worsen things for the majority, but that gets us nowhere.

We cannot bring those jobs and lives back but this grave situation can be converted to make a better future for most that includes rectifying that squeeze on the whole of the middle classes that began in the 80s and has pushed many once in the lower end of that class into poverty from which they cannot escape.

We can hope for but not expect visionary leadership however the political groupthink that got us into this mess will work the other way round as well and get us out. Political leaders in many countries have long been talking about investments in infrastructure. If one starts now we will have....

The New Industrial Age - the 4th

One thing is certain given the awful imbalance in wealth distribution and consequent rise in inequality the last chart above shows, and that is; we are not going to see a consumer led recovery because the consumer needs several years to recover before he/she spends again as before. And when they do I suspect spending patterns will have changed.

This means that once the virus panic is over the solution will lie in investment focused fiscal policy and not in a continued reliance on monetary policy. Fiscal stimulus in areas such as infrastructure - in all its forms - will provide an rapid payback on the additional debt load required and the better jobs and concomitant productivity increases will enable a steady reduction in the debt burden for all.

First a word on the first Industrial Age.

The Original Industrial Revolution and the Chinese copier

The Industrial Revolution started in the north of England 250 years ago and brought wealth to the rest of the country with the beginning of the rail system that also led later to the development of the US and other countries. It has been shockingly neglected in both countries and in the UK no new mainline rail has been built north of London since the late 1800s! The UK’s national electrical power grid was completed in 1933 and little has been added since despite enormous new demand coming on stream.

As those lines were built people clustered together along them and formed the foundations for most of today’s cities and small villages too. Crazily some 8,000 miles of those tracks and over 2,000 stations were closed in the 1950s and 60s to save money and leave just intercity lines. That left the UK with just over 10,000 miles of track today. Most of those were branch lines that linked small villages with larger cities and had thriving small local businesses. Those died when their rail connection with the world was taken away for economic reasons! It is surely no coincidence that Britain's decline from being the world’s leading exporter in those times to becoming an unimportant one, started then.

It was probably a coincidence that those years also marked the start of China's long march of 1,000 miles with the first step and, once started, it completed that march much faster than any other country in the world. In manufacturing export terms this video shows the changing times dramatically as does this photo show it in building construction terms.

The building just to the right of the smallish building near the centre of this photo of Hong Kong is the Mandarin Hotel. It is around 24 stories high. I was there for its grand opening in 1963 - celebrated by fireworks invented thousands of years before in China - when it was the tallest building in the whole of Asia!

The difference between China today and those earlier developments in the rest of East Asia is the sheer scale and speed of what is happening there that few in the west can comprehend and this provides both threats and opportunities.

One example: Rome might not have been built in a day but Shanghai almost was as is dramatically shown here.

When Japan became the first East Asian country to industrialise it set a record for the fastest sustained rise in living standards, smashing the 60 years time taken by the U.S. and the 50 years by Britain to reach industrial status. The other Asian dynamos did it even faster with South Korea taking 11 years to double its GDP compared to Japan's 35 years.

As recently as the 1980s, China was poorer on a per capita basis than Ethiopia and Mali in Africa. No one had a refrigerator, few had TV and even fewer had cars. In 2008 6.7 million cars were sold there, in 2017 24.72 million and the fast drive continues with 2.66 million cars sold there in March this year. This was achieved by then premier Deng Xiaoping setting a target that was considered madness and unachievable by western economic "experts"; quadrupling GDP in 20 years and again in the next 50, thus increasing it sixteen fold by 2050. Ignoring the views of those "experts" China supported those objectives with some simple strategies; learn how to make things (it did not matter whether ethically or otherwise), make them and sell them.

It worked. Today China is the factory of the world producing a quarter of the world's manufacturing output, up from a mere 3% in the 1980s. Its GDP grew at 10% per year for three decades, lifting 700 million people out of poverty. It beat South Korea's world record of 11 years to double GDP, doing it in only 9 years. And Deng's mad, unachievable target to grow GDP sixteenfold in 70 years took 16 years!

In the last 3 years or so that rate of growth has "slowed" to less than 7%, causing many of those western "experts" to predict the Chinese economy was crashing so the S&P's chief economist put things into another perspective. In around 2014 he calculated that 6.3% GDP growth in money terms would have been equivalent to 14% in 2009. GDP growth in Britain - the world's fifth largest economy - would be 22% instead of around 2%! Since California is the world's 6th largest economy it would be growing at around 20% instead of 3%.

The lessons are beyond the learning capability of those experts who instead criticise China's vast investment in infrastructure. In a recent three year period China's construction sector consumed more cement than the U.S. used in the entire 20th century! In 10 years China has built a network of high speed rail that exceeds the total built in the rest of the world with not an inch yet built in the U.S., to my knowledge. It was railroads built before they were needed that led to the Industrial Revolution in Britain and later the U.S. Many of those ancient tracks are still in use and the whole U.S. infrastructure system is now decaying through lack of such far sighted investment. Equivalent visionaries exist today and could get the U.S. moving again but they have political and bureaucratic systems blocking the way.

The virus has changed those statistics for now but the basic picture remains unchanged and will favour China yet again in the future unless the West gets on with infrastructure investment in all forms, as China has announced it intends to do alongside its development of a consumer culture; the Chinese are traditionally big savers. Already in March some leading Chinese heavy equipment makers announced that sales hit a record high and some, such as excavator makers Sany and Zoomlion, increased their prices by 5-10% on the back of that infrastructure construction rebound.

The current National People’s Congress has been reported in the west for the decision to exercise more control over the people of Hong Kong. Not mentioned was the priority also placed on what they called Industry 4 and laying the foundations of a cloud economy based on 5G and the building of smart cities. And, as with so many things before, when China decides to do something it does it fast and its bureaucracies are part of getting things done unlike those in the west that were once like that but now see their role as stopping things from even getting started!

I do not want to gloss over the nastiness of dictatorships but if the West now copies the former copier - China - in those new age investment things we will get:

An Investment-Led Economic Recovery

The 4th Industrial Revolution will be partly founded on that which started the old - steam as energy provider and thus on into rail.

Rail in the UK and US

Those thousands of miles of torn up track in the UK, that I mentioned above, left behind the most expensive part of rail road construction - the foundations. That includes the foundations for the track and the columns that once supported rail bridges over roads. Many tunnels still exist too. They were very well constructed and the cost of repairing them after years of neglect will be minimal compared with starting from scratch and today’s light weight tram/trains that are ideal for smaller link journeys will run well on those and take passengers onto town tram networks as well. My favourite investment that makes those is Swiss company, Stadler. They make a full range of trains but are not listed in the US. I own it on the Zürich home exchange under the symbol, SRAIL. Investing that way gets you an investment in the strong, safe Swiss franc as well.

The rebuilding of those old tracks has already begun. One in Scotland - the link between Tweedbank and Edinburgh - that was closed in 1969 reopened in 2015 and now carries 1 million passengers per year, 40% more than first envisaged.

Bigger ambitions include the new high speed rail - HS2 - that will connect London with major north of England cities

And those trains will link in with another major project; the Northern Power House Rail

HS2 trains will connect around 30 million people. Once completed it will lead to a total regeneration of the major cities in that part of the UK: Manchester, Leeds and Newcastle and onwards into Edinburgh and Glasgow in Scotland. Businesses will relocate from the overcrowded south and companies from other countries will move in too. Some local governments are getting on and doing their own thing after years of control and suppression by the central government in London. Leeds has attracted financials services companies away from that high cost southern city.

One of my favourites to benefit from this is Jacobs (J). Jacobs has an important contract with Network Rail on rail projects around the country and in many other countries too.

And if history repeats itself new town and village or similar clusters will grow along those main lines and branch links as well as bringing new life back to old ones destroyed when the rail network was pulled apart back in the 1950s and 60s. The need is huge because since 1960 the population has grown by 15 million people needing to live and travel in a very small country. Maybe the new investment will cause a migration from London to the regions. Some 900,000 people spend 2 hours each day on train commutes (source: TUC) made stressful by the awful overcrowding of existing trains. One wonders how today’s coronavirus physical distancing requirements of 6 feet/2 metres will get these people to work in future!

Obviously something very big in terms of more investment needs to be done in the UK and the present government is committed to do that to spread wealth from London to the northern regions. Those rail programmes are an important start and bring instant jobs with them while creating future new ones long into the future.

There are ambitious rail plans in the US as well. The Gateway Program is one of those - this from Gateway's website:

The Gateway Program is the most urgent infrastructure program in America.

Gateway is a comprehensive rail investment program that would improve reliability, resiliency and redundancy while creating new capacity for a critical section of the Northeast Corridor (NEC) the most heavily used passenger rail line in the country. That may one be the first or one of the first high speed rails in the US.

Photo: Amtrak – Northeast Corridor

The US rail passengers association has even bigger ambitions as this network plan from their website shows:

Most of the present rail system of 140,000 miles is used to carry freight. It is not commonly known that true high speed rail can do journeys city centre to city centre of up to 500 miles faster than planes. That is because there is less time for security needed plus there are no long commutes required at each end to and from out of town airports. Additionally those trains can serve several large towns along the way within that time. As yet the US has not even built one inch of high speed rail while China continues to add to its more than 21,000 miles/35,000kms of such track!

In Europe inefficient rail systems drove freight onto the road. Now the reverse is happening - truck trailers now leave the road to get from Germany to Latvia by rail.

Photo: railwaygazette.com

I will leave the last word on rail to the people who live in this village in Wales

Following the arrival of the first train at their station above the population increased from 300 to 3,000. Imagine what would happen to a place with a pronounceable name like Hicksville!

I have written at length on rail because I believe it will provide the backbone of the new Industrial Age but many of the trains need electrical power too.

We take our electrical power for granted but we should not as it also needs..

Massive investments in power infrastructure

I write extensively on this in an article headed Pass the Candle, Please so will not repeat those many words here. Suffice it to say that 2 years on little has been done in any western country to build new supply to meet ever increasing demand. New additions to demand will come as people switch in this new age from planes to electric trains to videoconferencing, as banks digitise etc., etc.

Priority must be given to this in order to power our future. That urgent need also provides the opportunity to build new power stations that replace the old, filthy coal burning power stations and thus help clean up our environment.

China again! It has 23,000 miles/37,000 kms of ultra high-voltage cable either laid or under construction (source: Financial Times). It is using technology from Swiss company ABB (ABB) and German company Siemens (OTCPK:SIEGY).

Housing, schools and other construction needs

The UK’s housing crisis with over 8 million people living in poor conditions needs to be fixed. Like so many other things that started in the 1980s and is due to insufficient new building to meet growing demand forcing buying prices out of the reach of most in the squeezed middle class. This has been exacerbated by a population increase of around 400,000 for the past ten years. That meant 4 million in need of housing which most could not get. But it also means much more - whole new towns were needed with schools, hospitals, railways, sewerage and water supply systems, police stations and courts etc. Virtually nothing has even been started and the virus exposed the weaknesses caused by that with Britain having one of worst death rates in the supposedly “advanced” world.

Germany can proudly claim a good hospital system - that has proved its worth in handling the unexpected virus - but the country has little else. The once renowned autobahn system where one could fly along without speed restrictions is now decaying and so overcrowded that speed restrictions are not needed because much traffic goes no faster than a crawl. And its high speed trains have to slow down over poorly maintained bridges or even divert onto slower lines because of danger of bridges collapsing. Many more homes are needed in Germany too. School roofs leak in Britain and Germany! Crazily there is money available in Germany but bureaucracy stops anything from starting. German remains the world’s third largest exporter and is dependent on exports yet it has invented almost nothing since the diesel engine was invented by Rudolf Diesel in the 1890s.

In Italy construction of new roads and schools has in many cases been approved with money made available many years ago but nothing has started due to bureaucracy.

In the US it takes many years for new projects to get started due to regulatory hurdles and roads and bridges are in a shocking state of disrepair. The American Society of Civil Engineers (ASCE) gave the U.S. a D+ rating as recently as 2017. Additionally, the ASCE estimates that the country needs around $4.5 trillion by 2025 just to repair roads, airports, bridges, dams, schools and more.

Also in virtually all large western countries the education is mired in the 1980s and not teaching the subjects needed today when we are 20% of the way through the 21st century already. Any simple search of jobs available in engineering and technology shows plenty available and too few qualified to do them. And they are mostly well paying jobs - exactly what is needed to gradually ease the squeeze on the middle classes!

That takes us into the...

New Tech Age and Jobs

The First Industrial Revolution used water and steam power to bring us rail and to mechanise production. The Second used electric power to create mass production.

The Third used electronics and information technology to automate production. That age also brought on the consumer age. Now a Fourth Industrial Revolution is building on the Third; the digital revolution that has been occurring since the middle of the last century. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.

There are three reasons why today’s transformations represent not merely a prolongation of the Third Industrial Revolution but rather the arrival of a Fourth and distinct one: velocity, scope, and systems impact. The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance. And all places massive demand on electrical power generation systems.

Modern style rail is essential to connect/reconnect communities. Equally essential is broadband yet in the US BroadbandNow estimates that over 40 million Americans - over 10% of the population - remain without any internet connection at all. Most of what exists is slow. Large swaths of Germany have citizens who are “lucky” to connect to a 4G signal. In the UK only 8% of homes can connect to a full fibre line and many rural communities have little at all. Many of those without are also poor and no internet will also exclude them from new age online education ensuring they will get left even further behind. New fibre cable could be laid at the same time and alongside the same tracks as new or renewed rail. There are positive signs of change in the UK with the government announcement in March that £5 billion will be spent to bring “gigabit” capable broadband to all homes in the country by 2025 including the roll-out to the hardest to reach parts of the country. That will bring new life to those parts.

The virus has already changed some things and many of those changes will be permanent. They include working from home, video conferencing, online shopping, tele doctoring and education.

And while the EU is talking of getting into 5G via regulation - more suppressive bureaucracy! - the US and China are doing it with innovation and, as with high speed rail, China is leading the way on this too. Thinking positively, maybe followers can learn from mistakes they make and do it better! It will bring jobs and better ones.

Jobs

We constantly hear economists and other such "experts” proclaiming that the new tech age means low paid and fewer jobs. This, for the most part, is pure nonsense. Some certainly lose jobs, many of whom are already low paid, but other, better jobs are created. In the early stages of the original Industrial Revolution one man guided horse drawn single furrow ploughs became replaced by tractors that have evolved even further today...

Photo: farmersguide.co.uk

Jobs lost? That horse and driver made way for jobs for well paid people working on the tractor design that led to jobs in iron ore mines extracting the mineral required by others to make steel required by yet others to convert into parts for the tractor that one day would require skilled mechanics to maintain. Most of those new jobs were better paid and thus we had the beginning of the middle classes that created more jobs with their pay in many sectors.

Technology is now taking those things further and - if that is a John Deere (DE) tractor - it and several others located anywhere in the world will be “driven” by a single person sitting comfortably in a Deere control room in Moline. Others will do the programming. Recent news from John Deere is that farmers are mostly buying their latest technology machines. So the driver on that tractor will be redundant.

Or will he/she? I first got involved with computer controlled machine tools in the 1970s - one man per machine became one man operating several machines. That soon led into robots loading and unloading those machines. Few lost their jobs as many were retrained to do better paying jobs.

Twenty years ago I toured a Japanese machinery makers factory that was a “lights out” factory. It worked without human intervention 24/7 and lights were only needed so that visitors like myself could see what was happening - robots and computers to do not need eyes to see! They have sensors in them feeding back signals to a remote control room where well paid, white coated people oversaw things. Around that time I was CEO of a company that made packaging machinery some of which was located in South America and operated by our people in a control room in the north east of England.

Trains and planes can be operated likewise but often trade unions from the old age prevent that.

Those new age jobs are service jobs in manufacturing companies but old age statistics still lump the whole under manufacturing. German machine maker Trumpf makes smart factories and this photo shows their additive (3D) manufacturing machines. New age manufacturing!

Everything communicates with everything in the Internet of Things (IoT). The manufacturing world also benefits from this, because without networking the individual components, economical production is becoming increasingly difficult. The reason: Falling lot sizes and increasing order complexity fundamentally change the requirements for manufacturing companies. In a smart factory, production is intelligently networked and thus drastically optimizes your processes. This gives you a lot of freedom, you see more, know more and get the most out of your production. With TruConnect you open up a modular world of solutions for the concrete implementation of Industry 4.0. With this concept you make your production fit for the new market requirements. Take command! (Source: Trumpf website)

Some 50% of Trumpf’s sales are services and they keep the company intertwined with the customer for the life of the machine earning much more money over that period than the sale of the original machine.

For around 20 years now that company, as with many other SMEs like it in Germany cannot get the right people out of an old age education system to go into their training programmes that span the whole spectrum from apprenticeships to management. Plus they have to work with slow internet and ship their products out on crowded roads that have not been repaired since the 1980s. And those SMEs are the backbone and brains of the German economy.

Perhaps it is no surprise that such world leading companies are not investing in much other than maintenance in Germany and, in recent times, German car maker BMW decided to build its largest car plant in the world, not in Germany but in the US - in Spartanburg, SC:

Photo: Automotive news

That was a $1 billion investment but much more investment is now need by governments to get that plant humming 24/7 once again, exporting nearly $10 billion in cars per year as well as selling many locally.

That BMW plant shows it can be done. In the early 1980s I founded and headed up a German machinery maker in neighbouring Greenville, SC. Greenville/Spartanburg was truly Hicksville with a poor population built on cotton with low paying jobs in the textile industry. Coming, as I originally did, from a city in England that had a pub on every street corner it took a bit of adjusting to get used to Greenville that had a church on every street corner. I came with new age technology jobs, BMW brought more later. Then the whole county was sparsely populated - in recent years it has become one of the fastest growing in the US.

I do not want to gloss over the threat to some jobs - that is real and worsened by the virus crisis. That crisis will drive an investment in robots that will create new jobs for some in a hybrid workforce of robots and people with the right education but robots disinfecting rooms in hospitals, delivering blood samples to laboratories, floor scrubbing the aisles in supermarkets etc., will destroy forever the jobs and lives of the mostly poor people doing those jobs at present. That is, unless they can be retrained rapidly.

That brings us on to:

The Investment-Led Economic Recovery and some investment ideas

I mentioned some things that are already happening but the virus has stalled much and the consumer will not be a driver for a long time to come. Public works will create thousands of jobs in the planning stages alone and neglected systems such as education, transportation and health will be greatly improved - all fundamentals that badly need restoration, expansion and modernisation anyway - plus new age renewable energy and permanent recycling infrastructure will add impetus to ESG investments.

The S in ESG stands for social. Social must encompass the needs of the poor and those that will be made redundant by new age technology. That, more than anything, means education and that can be done by bypassing old reluctant-to-change systems with internet learning. The virus started home schooling for many and that will be expanded. Cambridge - one of the world’s leading universities - will conduct all lectures online in the coming year.

One of SA’s best article contributors, in my view, is LD investments and she recently wrote this article about online schooling reaching out to many in China.

Again let’s hope the US, Germany and many others copy China.

That requires high speed internet everywhere. My favourite investments to benefit from installing that are; fibre cable maker, Corning (GLW); cable layer MasTec, (MTZ) and communications companies Century Link (CTL) and Uniti Group (UNIT). Century Link is connecting thousands more homes with high speed and also recently announced a $500,000 grant to schools to enhance much needed for the new age STEMs subjects; science, technology, engineering and maths. I would add another M to that, standing for management. Management of many top companies has been woeful for a very long time despite the fact that the US has some top management schools. That has led to the many years of underinvestment - except in share buy backs to enrich management themselves! - while Chinese companies have focused on development and growth.

Hopefully those internet connections will get to the poorest too where children cannot access virtual curricula at present while locked out of their lousy schools. MasTec is not often mentioned in SA articles so I wrote about it two years ago mentioning my like for its strength in building communications infrastructure for the new age that many are calling the connected age. A big dig to install broadband fibre could start now as most work is large scale and outdoors.

Another social need will be addressed by online education too. I mentioned earlier the $1.6 trillion mountain of student debt. That is for the US alone. Others countries such as Australia and England have similar problems. Online learning will likely cut those costs massively - some estimates put the saving at 50% of the cost of traditional university schooling with boarding on campus. It should also ensure wider access to learning much needed STEMs subjects needed now and even more so in the new age that de-globalisation will be part of.

De-globalisation

This is the new word for reshoring that started before the trade wars that the current US leadership likes. Strains in long, complex supply chains have been bringing work closer to where end products are made. The need for rapid design changes, smaller production batches and thus the Trumpf smart factories mentioned above dictates the need for domestic supply chains and end to end manufacturing structures similar to old age ones. Adding importance to that are environmental concerns. In Europe, for example, conveyor belts of polluting trucks are required to transport parts from one process in one country to another country for another process then onto another. That makes for low cost end products and to hell with the environmental and health costs.

In the depressed UK Nissan have just announced a £400 million car making expansion programme In the US Apple supplier Taiwan Semiconductor Manufacturing Co (TSMC) is to build a $12 billion chip factory in the Arizona in Arizona. Total spending on the project will be $12 billion with TSMC claiming it will directly create 1,600 jobs.

Such investments might create the new clusters along rail lines that I mentioned earlier and they can be smart clusters that use new era energy supplied via microgrids. That all adds to ESG. The environment benefits from people commuting less and the new communities can mean a new social environment and thus social cohesion reminiscent of society in former times. Lower crime rates being yet another positive outcome of that.

More of this will happen as new age manufacturing evolves but it requires better and differently educated people and online education can help make that happen by opening access to the right teachers wherever they might be located in the world.

China has trained 50 million vocational workers in the past 2 decades and now plans to train 30 million more in the next 3 years (source: People’s Daily). In the early days of its development China prioritised quantity but since has gone deep into quality too often by attracting teachers from the west with higher pay than they could earn at home because such jobs became scorned. Perhaps it is time for the west to attract them to come home so that those teachers can teach new teachers before their skills retire and finally die in the west as is happening in Germany.

As with so many things the blame game wins nothing and the solution to many problems lies at home in the west.

Public investment

There has long been agreement that much needs to be done to repair old and build new infrastructure in much of the west. President Trump promised a big start prior to getting elected last time but US politics - too complicated for me to understand - prevented much from happening. The tragedy caused by the virus brought opposing people together and huge stimulus packages were agreed. Let’s hope that continues to help fund the recovery because private investment will not. The New Deal of the 1930s did wonders for the US economy by building the infrastructure that helped make America great. The Marshall Plan after WW2 did likewise for Germany. The New Deal was a series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in the United States between 1933 and 1939. It responded to needs for relief, reform, and recovery from the Great Depression.

A New Deal today will get the economy rolling again for the decades to come and instead of trade wars with China I recommend use of the old lesson; if you can’t beat them, join them. They cannot be beaten so joining them makes life healthier and wealthier for all. And that is not a troll’s view, it is a balanced one from having lived and worked with Chinese people for a decade. I wrote on that two years ago and not much has changed since but the virus problem - whoever it was caused by - should mean joining ensures cooperation to avoid such happening again in future. Peace and progress come when people talk together not when they yell at each other!

The EU Green Deal

The clean environment from the virus imprisonment of us all need not be wasted and the EU plan aims for investments of E266 billion/$288 billion. Much of that will go into my favourite gas, hydrogen, and that will be good for Linde/Praxair (LIN) among many others.

Those others include companies that will benefit across the board from virtually all investments such as; Caterpillar (CAT), Jacobs (J) and John Deere (DE). John Deere is mostly know for its farming machines but 3 years ago it aded to its construction machinery activities by acquiring German road machinery maker Wirtgen a company that is very active in the US too.

Conclusions

It was political groupthink that locked down the world. The OECD calculates the debt burden required of rich nations to pay for that will be $17 trillion.

I have not heard a political leader in any one of those nations not agreeing that investments in infrastructure are needed. Such investments - if all decide to get on with them as fast as they all decided to lockdown - will pay back the cost of those investments rapidly and pay off that virus debt mountain too. And that infrastructure will continue paying dividends long into the future just as those from the New Deal days long ago still do today. The New Deal was responsible for some powerful and important accomplishments. It put people back to work. It saved capitalism. It restored faith in the American economic system, while at the same time it revived a sense of hope in the American people.

The need is as great today as then and I have some confidence that it is coming and we will have an investment-led economic recovery. I have put money in all the companies I have mentioned and there is a huge number of others that will do well too such as old and new age material suppliers and data centres.

In order of priority I would put education in the first slot in parallel with new electrical power supply building and high speed internet connections for all. Those are the most urgent. Road, rail, housing can follow in a steady way that will provide jobs for many for many years to come. And those incomes will power a recovery in consumer spending so this next industrial age will become more balanced than the last one.

This outcome is not a pipe dream, it is the long established reality in my home country Switzerland - Land of Milk and Money. We have non-stop building of essential infrastructure in all forms, an excellent education system that has apprenticeships as one of its key foundations, we have high pay and low tax, low crime and one of the best public transports systems in the world linking, together with high speed internet, many towns and clusters that are home to work leading companies - often niche companies such as WEYTEC in my local community of 3,300 people. If you buy or sell a stock today chances are it will go through one of their trading room desks. Other places are clusters for watch makers - Tissot and Breitling in La Chaux de Fonds - and big pharma/biotech companies such as Novartis and Roche in Basel and digitisation is now moving people into the mountains and away from the big towns.

The governor of New York wants to get things moving too:

NY to fast track Penn Station, LaGuardia rebuilds amid virus relief

• NY Gov. Cuomo, in his daily press briefing said that the time was right to accelerate infrastructure projects, using the analogy that one must fix the roof "when the sun is shining."
• Ridership is low, traffic is reduced, and so he is fast-tracking the Empire Penn Station project, LaGuardia airport, and is calling for renewable energy projects to be implemented downstate (NYC region) after projects were successful upstate, including cross-state transmission lines to get power to NYC.
• The efforts, will help stimulate the economy, including creating jobs.
• Other projects, like Cross-Hudson tunnels, air-train to LaGuardia and second-avenue subway should also be revitalized and push politics aside.

So my concluding advice is get on board the right train now or you will be left behind at the station...

Photo: Swiss Tourism

Analyst’s Disclosure: I am/we are long CTL, CAT, DE, J, LIN, MTZ, SRAIL, UNIT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.