I’m not sure if the stock market has reached its ultimate low for the Great Bear Market of 2007-9.  But even if additional declines lie ahead, there are probably a few stocks worth buying anyway.

In 1932, the U.S. floundered around in the depths of the Great Depression. What to do about it was a question on most people’s minds. The New York Times edition of August 14, 1932, reported on the solution offered by Henry I. Harriman, then president of the Chamber of Commerce. “H.I. Harriman Gives Recovery Program,” boomed the headline in big bold type: “Urges Beer at Once.” (Thanks to James Grant for sharing this headline.)

Well, this was during Prohibition. And why suffer the ills of a financial calamity stone-cold sober? Harriman also suggested a 25% cut in “all governmental budgets” and an overhaul of the tax system. Times do change, after all. It is hard to imagine such a person of prominence making that kind of proposal today.

In any event, the investor today finds himself in the worst stock market since the early years of the Great Depression. Unlike his forebear, he is free to drink beer. But like his forebear, he is likely wondering what to do. I have no political solutions to offer, but I have a portfolio recovery plan of sorts – some ideas as to what areas may do well in the years ahead, even if the economy continues to struggle.

I would invest in those areas of the economy for which there are real physical bottlenecks and scarcity issues: like ports, roads, pipelines and energy. At this very moment, investors are entering a window of opportunity to profit from global infrastructure construction and renovation.

President Obama plans to spend tens of billions of dollars on infrastructure projects. And he is not the only one. The U.K. recently announced a $30 billion stimulus plan – with huge chunks of money for infrastructure. Argentina quickly followed with its own big plan. The news agency AFP calls it “a massive public spending plan to pump more than $21 billion into Argentina’s infrastructure.” China has its own $586 billion New Deal, too, as we’ll see. Where is all that money headed?

A lot of this cash is targeted for public works projects to repair crumbling infrastructure, or build completely new projects. China’s stimulus plan will also include a fresh infusion of cash to promote alternative energy and green technology. Already, China’s infrastructure spending has grown at a pace of 20% annually for the last 30 years.

(The impact on China’s economy has been transformational. For example, new highways now connect small far-flung rural towns to much larger booming cities. As a result, the economic activity between the two areas is in full bloom. The amazing developmental transformation in China reminds me of the effect canals had on trade in the U.S. during the 1820s and ’30s. The Erie Canal alone cut transportation costs by 90%, according to Tomorrow’s Gold by Marc Faber. It linked the Great Lakes grain markets to New York. Canals more closely knit the interior part of the country with the Eastern seaboard, resulting in explosive growth in trade.)

How to pay for these stimulus plans is a question almost no country seems all that concerned with at the moment. There is this belief that you must stave off economic contraction at any cost. And so it has come to pass…

The U.S. government’s fiscal position is atrocious, with a deficit topping $1 trillion and the federal debt approaching $10 trillion. China is in much better financial condition. But China’s stimulus plan is also a very big bet. It’s about 14% of the Chinese economy. As The Wall Street Journal reports: “The central government likely will have to significantly boost its own debt sales to fund the stimulus.”

Both big expansion plans will probably end badly…from a monetary and fiscal standpoint. Often, these governmental infrastructure programs plans lead to wasteful spending and overinvestment. In government intervention, as in an Argentine steakhouse, everything gets overdone…Nevertheless, there is money to be made before the steaks turn to charcoal.

The infrastructure-spending plans around the globe have become a kind of contagion. Soon every government with a slowing economy from Capetown to Moscow, from Brasilia to Bangkok, could follow suit. All of which spells a possible golden age for those companies that make asphalt, water pipes, wind towers and the like.

This infrastructure idea is right in the wheelhouse of the investment themes we have been pursuing in Mayer’s Special Situations. Astec Industries (ASTE:nasdaq), for one, ought to benefit from the road-building efforts. Northwest Pipe (NWPX:nasdaq) has the U.S. water pipe niche nailed down. And ABB Ltd (ABB:nyse) should grab a share of any money for new power systems, wind or otherwise. It should be a nice ride for investors who get in now, especially as prices for these stocks have become so cheap.

Source: Portfolio Recovery Plan