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

This from The Rude Awakening:

In the market, of course, we have endured a sort of destructive khamsin blowing through the market and economy in recent months. The longer it blows, the more it seems to make brittle and destroy. The severe drop in commodity prices, for example, is worrisome for commodity investors. But more worrisome is how long it goes on.

Financial strength is not an unlimited reservoir, and many companies never had much to begin with. Even those that looked okay months ago are now scrambling. So even though the market crash has created a lot of bargains, I think the market still looks treacherous. The biggest risks now are financial, such as the inability of a company to finance itself through this crisis.

Something might look dirt-cheap, but if it can’t make it through the credit crisis, it’ll get a lot cheaper…and might even go out of business. So investors should be looking to buy stocks that are like camels – creatures that can cross the desert without needing to refuel. At least with these stocks, even if the prices go down a bunch, you have a good shot at making your money back, and then some, later. You could still wind up with a good return over a period of years. You can’t do that if the thing dies in the desert.

So financial strength is going to be very important in 2009. I also think it will be crucial to stay in essential industries and/or industries that have a well defined, long-term future, as opposed to businesses that can grind to a near halt.

One such company is Astec Industries (Nasdaq:ASTE). It has no debt at all. And it’s in an area — infrastructure — in which there are clear needs and a bright future. Astec, like most of the stocks of companies that build highways, bridges, water pipes and wind towers, should perform very well, even in a sluggish economic environment.

Astec Industries is in great position to benefit from the rebuilding effort just announced by President-elect Obama. The company just released an outstanding earnings report, posting a 39% increase in earnings per share. Backlog remained healthy. Astec’s “green” lineup of products, like its asphalt recycling equipment, plays well to politically minded buyers – besides saving folks some money and making better asphalt. And remember, Astec is also an international story. Overseas sales grew 37% in the third quarter and made up 43% of total sales.

Then there are natural gas pipelines that require products from Astec. Gas pipelines are not suffering from years of neglect or poor maintenance. Rather, the building boom in natural gas pipelines reflects all the new supply from America’s new shale regions and the nation’s growing appetite for natural gas. This year, we added some 4,400 miles of new pipeline. That’s more than 2.5 times last year’s figure. It is the biggest addition to the network in the 10 years in which we have data.

Those additions help meet a greater reliance on natural gas for fuel. But the pipeline companies are struggling to keep up. It’s not easy building new pipelines, especially in the dense and developed Northeast. Earlier this year, El Paso Corp. canceled plans for a 7.8-mile pipeline in Massachusetts because it couldn’t win approval from local authorities.

Other companies have had similar problems. Take Islander East Pipeline. Local authorities rejected its 50-mile pipeline that was to stretch across the Long Island Sound. Where folks expect to get natural gas, I’m not sure. No one seems to want to build anything, but people complain when prices rise. Anyway, this situation makes existing right of ways and pipelines enormously valuable.

In addition to repairing roads and bridges, the Obama plan will almost certainly direct funding toward water infrastructure projects as well. That’s just one more reason to like a company like Northwest Pipe (NASDAQ:NWPX), which makes large-diameter water pipes.

But even without any help from Obama’s new infrastructure spending plan, Astec and Northwest Pipe are two solid examples of companies that can withstand the khamsins that stock market blow our way.

Source: Shooting Stocks in a Barrel

Chris Mayer says the next “megatrend” will be a $41 trillion global infrastructure boom. Urbanization on a massive scale in China and India requires huge construction projects. And this will create huge demand for building materials (like cement and steel) and basic commodities (iron ore, copper and nickel).

Chris says power-grid builder ABB (NYSE:ABB) and road-building equipment maker Astec Industries (NASDAQ:ASTE) are stocks to watch…

This from Whiskey and Gunpowder:

Investors are always on the lookout for the next big thing. You know the sort, a big-picture idea so powerful and long-lasting that you can confidently ride your investments through the ups and downs that market life presents. Frank Holmes, CEO of U.S. Global Investors, calls these “global megatrends” – “sustainable and substantial growth in capital expenditures in any country or sector.”

Holmes offered a couple of past examples. There was the massive growth of infrastructure in the ‘50s and ‘60s, which included the postwar rebuilding of Europe and the massive highway system build-out in the U.S. There was the 1990s megatrend, which led to massive growth in information technology and data communications. And there is the present megatrend: “Unprecedented change in global growth driven by globalization, urbanization and wealth creation, [which] leads to a global infrastructure boom on a massive, intractable scale.”

That’s quite a mouthful, but I believe Holmes is right. Holmes also cites numerous studies – one by Booz Allen Hamilton, as well as ones by World Energy Outlook, the U.S. Department of Transportation, the OECD and a host of other official-sounding places. But the total bill, give or take a few trillion, is about $41 trillion out to 2030 – for water, power, roads and bridges, as well as marine and seaports.

This is your next megatrend. Don’t miss it. We have some ideas at work here, but before we get too ahead of ourselves, let’s look again at some of the key points of the thesis.

First, some mega population shifts. By the end of 2008, half of the world’s people will live in urban areas. Leading the way are some 500 million Chinese and another 540 million Indians. The world’s cities are getting a lot bigger. Beijing alone grew from 12 million to 16 million in the past decade. Plus, there are a lot more souls on the orb than ever — 6 billion of us. Next year, the world’s total urban population alone will exceed the total world population in 1965.

This helps drive economic growth. Asia as a whole, for example, is building five times more homes than the U.S. Incredibly, China alone is constructing 80 percent of them. This, in turn, drives consumption of many commodities, including things you may not think of immediately – like cement. Asia, excluding Japan, uses about 14 times as much cement as the U.S. Asia ex-Japan has also overtaken the U.S. in steel production by a country mile. Asian steel production is more than six times the U.S.’ Electricity consumption is 32 percent more than the U.S.’

I could go on like this for pages…the stats are simply amazing. But I think you get the idea. The industrialization of Asia’s enormous populations has unleashed a torrent of demand for the basics.

There was a lot of discussion at the conference in Vancouver about just how much of Asia’s economic growth begins with U.S. consumers. The answer isn’t clear, as you might expect. But it is clear that trade routes in Asia are flourishing. I’ve talked about the New Silk Road before. It’s one of my favorite themes – the opening of old trade routes that stretch across the Middle East through India and into China. Holmes had a chart that showed that the Asian stretch of that old road is still healthy – despite an economic slowdown in the U.S.

Asian trade is ticking up, even as U.S. exports take a dip. It’s not the only data point, either. Asian retail sales are also trending higher as U.S. retail sales head lower. I think it’s a bit arrogant on the part of some analysts to say that China exists to satisfy our needs for rubber toys and cheap underwear. In their view, a U.S. slowdown dooms most of Asia’s export-driven economies. Plenty of evidence shows that’s not the case, at least not yet.

~~~~~~~~~~~~Special~~~~~~~~~~~~

How They Spotted Lehman and Merrill Lynch

As the markets were thrown into turmoil, many investors were able to spot the disaster before it happened. As most people try to figure out what went wrong, these guys are laughing all the way to the bank.

How did they see it coming when the rest of you couldn’t? Click here to find out…

~~~~~~~~~~~~~~~~~~~~~~~~~~~~

In fact, Asian demand is on the rise for a whole host of goods. In 2008, vehicle sales in Asia ex-Japan are set to exceed those in the U.S. First time that’s ever happened. Sometime in 2008, also for the first time ever, there will be more Internet subscribers in China than in the U.S. I suspect that’s one top spot that the U.S. will never claim again. There are also four times the number of mobile subscribers in Asia than in the U.S.

All of these points come from Holmes presentation, which I think painted an amazing panorama of the truly historic shifts in the global economy.

As fast as the Asian economies are growing, their demand for power is growing faster. You can also expect to see increasing use of aluminum, copper, iron ore, coal and nickel – all basic infrastructure materials.

Holmes offered that to satisfy the global demand for copper, the world would need to mine as much in the next 25 years as it has up to this point in history. These predictions may prove wildly inaccurate. But even if they are only directionally correct, it points to a long bull market in the basics.

I have recommended stocks that are deeply involved in the megatrend of infrastructure. Companies like ABB Ltd. (ABB:NYSE), the world’s largest builder of power grids, and Astec Industries (ASTE:NASDAQ), a leading manufacture of road-building equipment. Plus, I have also recommended companies that own the basic commodities the world will need – copper, oil, natural gas and more.

As we come to learn early in our investing careers, the market seldom moves in a straight line. Years can separate cause and effect. One of the great megatrends in the market today is this idea of infrastructure and all that it entails. So don’t let the recent volatility in the stock market blind you to long-term investment opportunities.

These are the moments to enter the fray, not to run from it.

Source: Where to Invest After the Collapse