This from Taipan Daily:

If you drive on U.S. roads, you probably don’t need to be told – the country’s infrastructure is in pretty bad shape.

As a nation, Americans like to look forward. We prefer to spend our money building new things (rather than fixing up old things). Issues like repair and maintenance are back-burnered for other priorities in state and federal budgets. Over time, the cost of neglect rises.

In 2007 we were hit with a long overdue wake-up call: a Minneapolis bridge collapsed. Thirteen drivers were killed.

A Serious Problem

I don’t know about you, but I routinely drive over bridges and interpasses without worry (just as 200 million other U.S. drivers do). The bridge collapse was seen as a freak occurrence, a one-off… but imagine if that changed. The climate of fear could cripple our roadways, and that would be disastrous.

Dale Reiss, vice chairman of the Urban Land Institute in Washington, believes that “at some point, the system could grind to a halt” if we don’t do something about the crumbling state of our highways, roads and bridges.

In Atlanta, Ga., for example – the city where your humble editor went to high school – rush-hour trips are projected to take 75% longer by the year 2030. (If you’ve ever braved Atlanta traffic, you know that’s no joke.)

The estimated repair bill is staggering. A report titled “Infrastructure 2007: A Global Perspective” argues that the U.S. faces a $1.6 trillion deficit for repair and maintenance through the year 2010.

It may not seem like it these days, but $1.6 trillion is still a serious chunk of change. (Unless your name is Hank Paulson or Ben Bernanke, that is.)

Keep in mind, too, that the $1.6 trillion repair bill estimate is only through 2010. When you look at the long-term estimates for needed infrastructure and repair costs – stretching out into decades – you get a repair bill in the tens of trillions.

Keynes to the Rescue!

So, given the above news, the logical John Q. Taxpayer reaction would be something like, “Holy smokes, that’s a lot of dough to spend on repairs.”

But in Washington, D.C. – where everybody and their brother is a John Maynard Keynes fan – the reaction is “Hooray! Something huge to throw money at!”

Deflation fears are all the rage now as you know… the Fed just cut rates to zero… Chrysler is hurting so bad it’s shutting down operations for a month… and President-elect Obama is getting ready to swoop in with the mother of all stimulus plans. Money needs to be spent… and by gum, we’re gonna spend it on infrastructure.

The total amount of “Obama stimulus” seems to yo-yo up and down, like a mood ring attuned to the general anxieties of U.S. taxpayers. The initial amount being bandied about was $600 billion. In recent days the whispers have expanded it to a cool trillion – the big T word – or maybe even more.

On Dec. 6, President-elect Obama put some flesh on the bones of his stimulus plan, pledging “the largest new investment in roads and bridges since President Dwight D. Eisenhower built the interstate system in the 1950s” (according to the Wall Street Journal).

President-elect Obama also promised, in his own words, to “launch the most sweeping effort to modernize and upgrade school buildings that this country has ever seen.”

(Side note: why do most public schools look like prisons? Have you ever noticed that? I don’t get it.)

“Use It or Lose It”

When Obama unveiled his five-point plan earlier this month – encompassing energy, roads and bridges, schools, broadband and electronic medical records – the thing that really made my ears perk up was the “use it or lose it” provision.

Here is the President-elect, again in his own words:

We’ll invest your precious tax dollars in new and smarter ways, and we’ll set a simple rule – use it or lose it. If a state doesn’t act quickly to invest in roads and bridges in their communities, they’ll lose the money.

Have you ever seen the movie Brewster’s Millions? It’s a classic 80s comedy in which Richard Pryor, a minor league baseball player, has to blow 30 million dollars in thirty days – without telling anyone why – in order to inherit $300 million more from an eccentric relative.

The use-it-or-lose-it provision made me think of Brewster’s Millions… perhaps updated here as Obama’s Trillions. In order to meet the stimulus-driven desires of Washington, the states are going to have to shovel this road-and-bridge cash out the door, pronto.

You can almost hear the CEOs of the big construction companies doing a Homer Simpson: Woo-Hoo!

How to Play It?

So we know that the state of America’s infrastructure is a real and serious problem – one that will take years, if not decades, to fully put right.

We also know that Washington is bound and determined to drop a money bomb on that problem, in order to stimulate our sagging economy and create millions of new jobs.

So the obvious question is, how to play it?

Here’s a quick look at some of the major players that could benefit (all traded on the New York Stock Exchange).

Name	Symbol (all NYSE)	P/E Ratio	Market Cap
Fluor Corporation	FLR	11.52	8.98B
Jacobs Engineering Corp.	JEC	14.35	5.98B
Caterpillar Inc.	CAT	7.16	26.16B
The Shaw Group Inc.	SGR	12.47	1.74B
Chicago Bridge & Iron	CBI	n/a	1.13B
URS Corporation	URS	16.03	3.34B
McDermott International	MDR	4.20	2.27B
Perini Corporation	PCR	6.10	1.16B

If you pull up charts for the above names, you’ll see that every single one is in some form of uptrend – as is wholly to be expected, given the Obama news and the longer-term prospects for fattened construction company coffers.

Which of them to buy, though? Another option is just to go with an ETF, like the PowerShares Dynamic Building & Construction ETF (NYSE:PKB).

As you can see, PKB is headed in the right direction. The ETF saw a surge in volume on the “Obama breakout” when the stimulus plans were announced, and the price action is strong.

But PKB has a few problems that make it a less than ideal choice.

For one, PKB’s average volume isn’t so hot at less than 100K shares per day. The volume is doable from a trading standpoint, but getting down to where lack of liquidity starts to be a concern.

Even more of a concern, from our perspective, is the fact that PKB’s top 10 holdings include Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW). We’re not interested in DIY (do-it-yourself) retail or anything aimed at the consumer here, so that’s a real drawback.

Here’s where I turned to the man with the micro plan, Zach Scheidt (a.k.a Cash McDash), to get his take on how to play the Obama infrastructure boom.

Smaller Is Better

The first thing Zach pointed out to me is that, in terms of getting the most bang for one’s trading and investing buck, smaller is better as a rule of thumb.

Here’s what he means…

The major go-to names (the ones in the list noted above) should do well as a result of Obama’s big plans. In fact, they could very well offer double-digit returns in the coming years – nothing to sneeze at.

But, in Zach’s view, most of those multi-billion-dollar market cap names are too big to see the needle really move as a result of this road-and-bridge cash flood… the way it could with some of the smaller, less well-known infrastructure names.

“Think of an 18-wheeler semi-tractor trailer versus a sports car,” Zach told me.

“You can certainly cover ground in a big rig… but you just can’t get up to speed all that fast. So just as a fully loaded 18-wheeler can’t accelerate all that quickly (even on a brand new Obama highway), the big, well-known infrastructure names aren’t set to deliver the velocity of returns that some of the smaller names can.”

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“Think of a Porsche,” Zach continued, “or maybe a Corvette, out of respect for the ailing Big Three. An infrastructure play with a market cap of just a few hundred million – as opposed to billions – is like the Corvette. The Obama plan’s impact on revenues will be that much greater for these smaller players… and in terms of shareholder return, the Corvette should leave the 18-wheeler in the dust.”

I asked Zach if he had any names in mind. He responded as if I had just insulted his honor. Of course he had some names on his roster – what self-respecting trader wouldn’t want a piece of this trend?

“In particular, I’m looking at one company that has a market cap of less than $300 million,” Zach said. “I haven’t pulled the trigger on it for Taipan subscribers yet, but my preliminary research suggests it could be a double or a triple within the next 12 to 18 months.”

Lawyers and Bulldozers

I then asked Zach what readers should look for as they scout for these infrastructure “Corvettes” themselves.

His response: “One thing that’s really important is to look at the lines of business. In particular, I like names that have the ability to make money on the construction side and the consulting side.”

“You can think of the two lines – construction and consulting – as the ‘bulldozer team’ and the ‘lawyer team.’ Before a structure can be upgraded or a new bridge can be built, a number of assessments have to be made. Sometimes there’s a lot of red tape – especially when NIMBY interests (the ‘Not In My Back Yard’ people) get involved.”

“So the smaller infrastructure names with dual lines of business – like the one I’m zeroing in on for Taipan subscribers – can make money on both sides of the coin. During the assessment period, while the project is being held up by red tape, they send in the lawyers and the guys with the clipboards. This allows them to make fat profit margins on their consulting fees.”

“Then, when the project actually gets underway, the ‘lawyer team’ packs up and the ‘bulldozer team’ rolls in… allowing the company to make another big chunk of profits on the construction side. Nobody likes red tape, but it’s a beautiful racket – a way to make money coming and going.”

Source: How to Play the Obama Infrastructure Boom

One of the potential market movers this week – for both
the UK stock market and the forex markets – is the Bank
of England rate decision tomorrow.

My learned colleague, Ben Traynor, picked up on this in
today’s Fleet Street Daily e-letter…

—————————
Will there be a cut at all?
—————————

“The doves are out in force. The Bank of England’s
Monetary Policy Committee (MPC) meets tomorrow, and an
interest rate cut is most definitely on the agenda.

“Pretty much everyone, from homeowners to the
Confederation of British Industry (CBI) wants rates to
come down… the market has priced in a quarter-point
cut… and what’s this? Gordon Brown – the same Gordon
Brown who, as chancellor, granted the Bank operational
independence in 1997 – is also sticking his beak in.

“If you look at this situation, because we’ve got low
inflation we can cut interest rates,” the prime
minister said.

“Hang on, Gordon. Isn’t the MPC is supposed to set
rates independent of political considerations? Naughty,
naughty Mr Brown…

“In fact, there’s some speculation that Brown’s
comments may have angered the MPC hawks, who’ll now
argue more fervently to keep rates on hold. I’ve said
before I’ve got this hunch the MPC might take the
chance to wrong foot the market and boost its
credibility. Now that Brown’s lumbered into the debate,
might that now prove too tempting a proposition?”

Ben follows the UK economy closely for his readers and
tries to piece together events as they unfold,
examining how they affect the big picture… and what
it all means for investors.

Each working day he writes a round-up of the big events
that are moving the financial world – to keep his
readers one step ahead of the crowd. If you have a
second, sign up to Ben’s free Fleet Street Daily email:

http://signup.fspinvest.co.uk/LF/fsd.html?newsourcecode2=XFSDD304

————————————-

Looks like a half-point cut is out…
————————————-

Ben’s right about most people calling for a quarter-
point cut. In fact, 81% of economists surveyed by
Bloomberg have predicted a 25 basis point cut in UK
base rates when the Bank of England announces its
decision on Thursday at noon.

And whilst there may have been an outside chance of a
50-point cut – given the volume of bad news coming out
about the UK economy and the latest housing market data
– this morning’s better than expected UK manufacturing
output data should put paid to such drastic measures.
Personally, I doubt it’s strong enough to keep the Bank
from a quarter-point, though.

And with the European Central Bank likely to keep their
rates on hold, once the UK rate cut is announced, we
could see further pressure on the pound which is
hitting all-time lows against the euro on the back of
all that bad news for house prices and the IMF’s latest
UK growth forecasts.

And if we get anything totally unexpected tomorrow,
then watch for the market moves.

————————-
Gold continues to confuse
————————-

Meanwhile, gold’s not done with sending confusing
messages to traders. Anyone who’s been making lots of
money spread betting the shiny yellow stuff all the way
up from $600 or so must be hating all this indecision.
Gold is no longer a one-way ticket…

I’m still in the bullish camp – even if $1,000 seems a
long way off again. We all know just how quickly gold
can move, once the conditions are right. There could be
some more profit taking still to come… but gold will
likely be higher than it is now in six months time.
It’s just a case of waiting for that next leg higher.

Adrian Ash from BullionVault follow’s gold’s moves
daily. If you’re keen on knowing what makes gold move,
he’s a good guy to know about – here are his
observations today:

“Spot gold prices slid into the London opening on
Wednesday, reaching a four-session low of $903.60 per
ounce before bouncing 1.4% to recover the day’s losses
on news that US gasoline prices have reached a new
record high for consumers.

“The average price of regular unleaded has now risen to
$3.343 per gallon according to the AAA survey, almost
20% higher from this time last year.

“International commodity prices meantime reversed an
earlier 0.5% fall, while the US Dollar fell on the
currency markets and Wall Street stocks opened lower
from Tuesday’s close.

“The subprime crisis presents a strong case for gold,”
said Philip Klapwijk, head of the GFMS consultancy, at
the launch of the group’s Gold Survey 2008 today
in London.

“Pointing to growing risk aversion amongst investors,
negative real rates of interest on the US Dollar, and
sharply falling earnings from S&P equities, Klapwijk
also noted a hitherto overlooked threat – a “sharp
deterioration” in the United States’ fiscal position as
a result of “the Federal Reserve’s largesse” in bailing
out Wall Street banks.

“We’ve been told by pension and other institutional
investors that they’ve been looking at gold for a long
time,” Klapwijk said.

“Now they’ve taken a position – or they’re just about
to – they say they won’t be distracted by short-term
moves in the price.”

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————————————————-
Will margin calls lead the property market lower?
————————————————-

The key to the property market – and whether this
latest headline-grabbing 2.5% fall statistic has more
serious implications – looks to be buy-to-let
investors, specifically the ones who stumbled into it
late, when the party was in full swing. I’m talking
about all those people who got sucked in over the past
two or three years by the “Become an armchair property
millionaire!” newspaper ads for property seminars
promising spectacular gains.

A rush to the exits by these “greater fools” as they
start receiving margin calls from their buy-to-let
mortgage lenders and we’ll start seeing a new surge of
supply in the market and lower or at least
stagnating prices.

Wow! Look at the oil price! $111 a barrel – more on
this and how to play it as we work it out…

That’s all for today.

Until Friday…

Best regards,

Frank Hemsley
Profit Watch

P.S. Don’t forget the deadline for Time Trader. You’ve
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Pretty much everyone, from homeowners to the Confederation of British Industry (CBI) wants rates to come down… the market has priced in a quarter-point cut… and what’s this? Gordon Brown — the same Gordon Brown who, as chancellor, granted the Bank operational independence in 1997 — is also sticking his beak in.

“If you look at this situation, because we’ve got low inflation we can cut interest rates,” the prime minister said.

Hang on, Gordon. Isn’t the MPC supposed to set rates independent of political considerations? Naughty, naughty Mr Brown…

In fact, there’s some speculation that Brown’s comments may have angered the MPC hawks, who’ll now argue more fervently to keep rates on hold. I’ve said before I’ve got this hunch the MPC might take the chance to wrong foot the market and boost its credibility. Now that Brown’s lumbered into the debate, might that now prove too tempting a proposition?

I’m at odds with my colleagues on this one. They, along with most people, expect the base rate to come down to 5% tomorrow. After all, there’s plenty of gloomy news about to prompt a loosening of monetary policy. Halifax has revealed that house prices fell 2.5% in March — the biggest (seasonally adjusted) monthly fall since September 1992, when they fell 3%.

Meanwhile private banks remain reluctant to lend. But there are signs that the market could be starting to find a solution. HSBC, which doesn’t rely on the money markets to make loans, is offering to match homeowners’ existing fixed-rate deals. Some of these mortgages rates are as low as 4.54%.

HSBC will do well out of this, mopping up a lot of new business. It’s benefiting from its strong position, brought about by a solid business model. It’s profiting from its competitors’ weaknesses.

That’s how capitalism works.

US Federal Reserve makes earth-shattering prediction

I’m going to be upfront with you. The headline above is sarcastic. It refers to the minutes of the Fed’s meeting of March 18, which were published yesterday.

The minutes contain such statements as “prolonged economic downturn could not be ruled out” and “many participants thought some contraction in economic activity in the first half of 2008 now appeared likely”.

Also making big waves is the International Monetary Fund (IMF). Today it made front page news (in Metro anyway) by putting a figure on how much the credit crisis will cost.

The figure, printed by the Times in a scary red typeface, is $945,000,000,000 — almost $1 trillion.

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Indeed, the IMF’s Global Financial Stability report, in which the estimate was published, contains the following line:

“The critical challenge now facing policymakers is to take immediate steps to mitigate the risks of an even more wrenching adjustment.”

The air rings with clamours for leaders to “Do something”. It’s what that something is that worries us…

Gold analysts… oil analysts… they’re all wrong!

Gold fell through $909 yesterday, and still looks to be falling. It’s making a few investors nervous about the yellow metal…

“Ignore them!” is the shout from our commodities desk — where Garry White (who’s already done nicely out of gold, thank you) reckons conditions are ripe to send the price much, much higher.

Oil, meanwhile, is around $108 a barrel. Garry doesn’t see that falling much either. Even oil analysts are starting to catch up with him. The Energy Information Administration, and arm of the US Department of Energy, last night upgraded its oil price forecast by a massive amount.

As well as gold, Garry’s got great exposure to oil, too. And he’s got a clever little move that could prove highly profitable — if you get in before 29 April that is…

Where the money is, that is where we shall go…

“This proves what I’ve been saying all along,” said an excited Manraaj Singh this morning, with that trademark gleam in his eye.

Manraaj, our emerging markets hot shot, was telling me about an auction that took place at Christie’s yesterday. Buyers paid huge sums for such artefacts as single leaf from an ancient Koran manuscript. The bids received shattered what Christie’s expected to get.

So why is Manraaj so excited? Because of who the buyers are, that’s why! There’s a huge amount of money out there in the developing world, and conspicuous consumption such as that seen yesterday proves it.

But this money isn’t just being spent at auctions. It’s being invested — and Manraaj is keeping a close eye on where it’s going.

“We’re talking trillions and trillions here,” he says. “If we make the right calls now, we’ll clean up!”

And that’s exactly what Manraaj plans to do! Find out how, with one specific investment, you could clean up as trillions of dollars of Gulf oil money is invested worldwide…

Until tomorrow.

Ben Traynor

Editor

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The causes? A tumbling housing market, where prices have fallen for five consecutive months according to Nationwide building society, plus rising mortgage rates, household bills and food prices. Added to these headaches it now seems that our jobs are under threat – the CBI confirmed this week that up to 11,000 could be lost in financial services alone whilst chief economic adviser, Ian McCafferty, opined that the credit crunch, “would remain serious for quite some time”.

So, what to do? Assuming I have not sent you running for a stiff drink already (don’t let me stop you mind), here is a selection of money-saving tips that won’t guarantee financial survival but should help you to save a few pounds. They are all straightforward so only apathy stands in the way of trimming back the cost of four essentials – your mortgage, your energy bills, your food and your car.

Keeping remortgage costs down

According to our regulator, the FSA, around 1.4m homeowners are due to remortgage this year, having struck a competitive deal on their interest rate anywhere between two and five years ago. The problem is that although the Bank of England are tipped to cut the base rate this year, and perhaps as soon as April, the rates at which cash-strapped banks and building societies are prepared to lend to us seem to be heading in the opposite direction.

Only last week for example, the Nationwide commented that things are getting difficult for mortgagees and then, rather unhelpfully, pulled its cheapest mortgage deal, as did the Cheltenham and Gloucester. Standard variable rates are now well over 7% – scary if you are used to paying more like 4.5% on a fixed rate deal.

So, if you are due to remortgage soon, it’s vital to shop around for competitive rates and get organised so you don’t delay the process and end up on your lender’s SVR by default. You can compare deals on sites such as moneyfacts.co.uk and moneysupermarket.com. First Direct, for example, offers a two year fixed offset deal at an attractive 4.95% but with an arrangement fee of £1,498, whilst the Co-op has a two year tracker pegged to the based rate plus 0.09% and a more modest fee of £999.

To ensure the application process runs as smoothly as possible, moneysupermarket.com offers some sensible advice; check you have a clean credit file using an agency such as Equifax or checkmyfile.co.uk, make sure mortgage payments arrive on time, be realistic about how much your house is worth and get an “agreement in principle” from your lender before applying.

One final thought – don’t simply sign up for the life assurance cover offered by your mortgage provider. As moneyfacts.co.uk points out, shopping around can reduce the premium by up to 30%. We chuck away £310m a year by not doing so.Stepping beyond mortgages, consider double-checking the council-tax banding for your home. If your property’s banding has not been confirmed by an inspector recently you could well be overpaying. This is particularly relevant if the previous owner extended the home – The Times reports that adding an extension automatically pushes your home up a council tax band, “even if the extra space does not warrant” it. You can check your banding against your neighbours at voa.gov.uk (saa.gov.uk for Scotland). Do be aware that if you are reassessed for council tax, there is the chance that you could be pushed up to a higher banding.

Cutting household bills

Electricity and gas prices are a sizeable chunk of the average £230 added to a typical annual household bill this year according to the Telegraph’s Patrick Sawer. So, it’s more important than ever to do what you can to keep energy costs down. You can compare what you pay against other suppliers at uswitch.com although bear in mind that changing your supplier if the saving is only small does involve some legwork and may backfire if they subsequently hike their prices. You can also usually extract discounts by choosing the same company for both gas and electricity and also paying by direct debit.

Don’t forget that other money-saving energy trick by the way – turning stuff off when you don’t need it!

Reducing the food bill

If you’ve filled a shopping basket recently you’ll have been cursing food price inflation, which, according to the Scotsman, is now running as high as 11% if you live north of the border. If like me, you buy pretty much the same staples from one of the big supermarkets week in, week out, try comparing what you might pay at another supermarket using mySupermarket and consider switching.

If you already help the environment by using online delivery rather than hopping in the car, here are three simple tips; book ahead to reduce the delivery charge, always scroll down each product page to find the cheaper “own brand” items, and take up any offers (such as “two for one”) on stuff that won’t perish.

Cutting car costs

The typical family car owner spends around 50% more than a decade ago on running costs according to the AA. Obviously the smaller the car the better and not buying new ones saves a fortune in depreciation. But do you need one at all? Whilst I am not suggesting we can all easily hop on a bus, city dwellers in particular could ditch their money munching motors altogether and join a car club instead.

For example, the AA reckons the average cost of owning a car driven twice a week is £2,749 per year whereas Streetcar claim it can be done for £707 with them. You simply join, book a car, turn up and drive it and then get a bill based on the time of day chosen and miles driven. Try Car Clubs for your local club. Finally petrolprices.com can save you 7p or more per litre of fuel by identifying the cheapest garage within three miles of your postcode.

Happy bargain hunting!This article is taken from Merryn Somerset Webb’s free weekly personal finance email, Money Sense. Click here to sign up now: Money Sense