Yes, if you spend a trillion dollars, it’ll stimulate something. But where will the money come from? How does the U.S. government plan to raise the money? Do you have a spare trillion dollars lying around, brothers and sisters?

I don’t know about you, but to me, a trillion bucks is a lot of money. It’s almost twice the national defense budget, which is a really big number in its own right. For a trillion bucks, the Navy could buy something like 133 Nimitz-class aircraft carriers. Except at current construction rates, it would take 500 years to build all of them. So just on the numbers alone, the U.S. is about to do something very, very strange in its historical arc.

Speaking of which, let’s look at some history. We’re a far cry from the olden days of a U.S. customs house in every port town. Back then, the U.S. Customs Service collected tariffs and imposts on foreign goods that landed ashore. The old customs houses were the national cash register, sending wagons full of gold down to the national treasury. If trade and commerce were good, the federal government collected more in taxes. When times were tough, the government experienced the lean economy along with everyone else. So in the olden days, the federal government was institutionally inclined to support the growth of business.

(And as an aside, those customs houses made important cultural statements about how the nation viewed itself, as well as just collecting taxes. There are some fine examples of federal customs houses, like the Greek Revival edifice built in the 1830s near the waterfront of New Bedford, Mass.)

That was then. This is now. Things have changed, like night and day. Today, the federal government balances its accounts via funds raised through taxation, borrowing and just plain creating currency out of the ether.

Congress collects a lot of funds through taxes. But not nearly enough to pay for all the spending. It’s not even close. So will Congress raise taxes? And do it during a recession? I don’t think so. Herbert Hoover tried that in 1930. Didn’t work too well.

What about the federal government borrowing? OK, it borrows a lot. But can it borrow even more? Trillions of dollars? From whom? Who has an extra trillion dollars lying around that they want to loan the U.S.? Will China and the oil-exporting nations continue to buy up U.S. Treasury paper? If so, with what? Chinese exports are down. Oil income is way down as well. (Oil is selling at $34 per barrel today.) So good luck with borrowing.

That leaves the U.S. government with only one choice. The U.S. is about to embark on the greatest currency-creating binge in modern history (excluding that of Zimbabwe, perhaps.) A lot of that trillion dollars is going to come right out of nothing. The Fed is just going to monetize the debt. So we’ll have new dollars chasing the same amount of goods. That’s the basic definition of inflation.

The bottom line is you need to own precious metals. Own gold. How much? For now, the more, the better. Own coins, if you can get ‘em. Own bullion, if you can get it. Own shares in good miners with reserves in the ground while you can buy ‘em. Just get some gold.

Source: Brother, Can You Spare $1 Trillion?

This from Justice Litle:

“You can’t put a percentage figure on the market drop. In fact, there isn’t a market at all.”

“The scary thing is, they’re nowhere close to facing reality… the official listings have only reduced prices by 10-20%, even with no buyers in sight, and builders are hoping to build more…”

Meanwhile, in the United States, the S&P has completed 6 quarters of negative growth and is now registering it first quarter ever of negative earnings. That’s right, dear reader, put all the S&P companies together. Add up their earnings. Subtract their losses. Result: net losses.

MarketWatch reports:

“A sixth quarter of negative growth ties the prior record set when Harry Truman was president, running from the first quarter of 1951 to the second quarter of 1952.

“‘Next quarter, we’re expecting a new record of seven quarters of negative growth,’ said an analyst.

“As of the close of business Thursday, [he] calculates S&P earnings per share, on a reported basis, at a loss of $10.44 for the quarter. If financials were taken out of the equation, that deficit would drop to $2.35 a share.”

We are in a period of price discovery. Many shares, businesses, and credits are on offer. Typically, people are reluctant to make bids until they have a clearer idea of what these things are worth. What are they worth now that we’re in a post-Bubble world? No one knows. And no one seems in a hurry to find out.

Even in Japan, the search for the bottom continues. It hardly seems possible. The Japanese economy was already in a deep hole after 19 years of recession/depression. Now, it’s digging deeper.

The latest figures show the Japanese economy falling at a 12% annual rate – faster than ever. Well, faster than at any time during its 19-year slump. The last time the economy in Japan slumped this hard was 35 years ago.

What to make of it?

Well, the simple answer is this: while Americans consumed too much, the Japanese produced too much. The United States had far too many retail shops and service industries. The Japanese built far too many factories to stock their shelves.

And now, well…you know the story now. No shoppers. No merchandise needed. No orders for Japan. So how much are the shops worth? How about the factories? What about houses? We’d all like to know what they’re worth so we could get on with business. But Mr. Market is playing it cool. We’ll just have to wait until the bids come in.

*** Strategic Short Report’s Dan Amoss offers his two cents on Geithner’s Financial Stability Plan, or ‘TARP 2.0’:

“Part of the new Financial Stability Plan involves an unspecified ‘public/private’ partnership to buy up toxic assets. Apparently, the idea for a public/private partnership was a last-minute development leading up to Tuesday’s announcement. Word is that several prominent hedge fund managers met privately with Larry Summers, one of the administration’s top economic advisers, just days before Tuesday’s announcement.

“Here’s my guess at how this arrangement might develop in the coming weeks: Long-term financing from the Treasury to distressed debt hedge funds is a very creative way to hide a government subsidy. The potential cash-on-cash return for hedge funds interested in cheap toxic assets is probably not enticing enough for them to pay what the banks are asking. But if the Treasury acts as a prime broker by providing, say, 10-year financing at 4%, so hedge funds can lever up their equity by five times, maybe the funds will be willing to pay a bit above the banks’ asking price and still earn a decent five- or 10-year return. This is a backdoor way to recapitalize stressed banks and get toxic assets into stronger hands without exposing taxpayers to too much credit risk. Combined with a major new mortgage refinancing initiative, this might have a shot at success.

“One thing is clear: The authorities are not going to just sit by and do nothing. I’ll be looking closely at the details of the Financial Stability Plan as they are revealed in the coming weeks.”

*** At least the Japanese have an orderly society with plenty of savings to lather over their hurts. The Land of the Rising Sun is also the land of an aging, shrinking population. These old people can just wait out the slump…knowing that it might last longer than they do.

Cross the straits into China. There, same story. Different ending. China has too many factories too – at least, too many set up to produce too much stuff for too many people who can’t pay for them. China has a huge, growing population. The rate of population growth is not at high as it used to be, but the raw numbers of getting larger all the time. If you have a population of 100 million and you grow at 6% per year, you add 6 million new people to the world’s population each year. If you have a population of a billion people, and you grow at half that rate – just 3% per year – you add 30 billion new people each year.

China’s economy needs to grow at nearly 10% per year just to provide jobs for these people, say the experts. Doesn’t seem very likely – not in today’s incredible shrinking world economy.

The New York Times:

“From lawyers in Paris to factory workers in China and bodyguards in Colombia, the ranks of the jobless are swelling rapidly across the globe.

“Worldwide job losses from the recession that started in the United States in December 2007 could hit a staggering 50 million by the end of 2009, according to the International Labor Organization, a United Nations agency. The slowdown has already claimed 3.6 million American jobs.

“High unemployment rates, especially among young workers, have led to protests in countries as varied as Latvia, Chile, Greece, Bulgaria and Iceland and contributed to strikes in Britain and France.

“Last month, the government of Iceland, whose economy is expected to contract 10 percent this year, collapsed and the prime minister moved up national elections after weeks of protests by Icelanders angered by soaring unemployment and rising prices.

“Just last week, the new United States director of national intelligence, Dennis C. Blair, told Congress that instability caused by the global economic crisis had become the biggest security threat facing the United States, outpacing terrorism.”

“Millions of migrant workers in mainland China are searching for jobs but finding that factories are shutting down. Though not as large as the disturbances in Greece or the Baltics, there have been dozens of protests at individual factories in China and Indonesia where workers were laid off with little or no notice.”

The Chinese have built their factories to sell things to foreigners – notably, the most feckless consumers on the planet, Americans. It will take time to re-jig factories and marketing channels to the needs of its own market.

Remember, this is a depression. A depression requires structural changes to an economy. Those take time. The Japanese can wait. But on both ends of the U.S.-China shipping lanes there are big, big problems.

*** On the U.S. end, the pols can’t leave bad enough alone. The voters won’t stand for it. They’re going to ‘do something’ – if it kills us all. What they are trying to do is obvious – inflate away America’s debts. So far, the market has been ahead of them – wiping out more money than the feds can replace. Sooner or later, they’re bound to turn the situation around.

And Obama headed to Denver, Colorado to sign the $787 billion stimulus package.

Our guess is that the next time we come to Nicaragua our dollars will no longer get the admiring glances they bring now.

“You can pay me in dollars,” said the woman from whom we bought a watermelon yesterday.

Next time, she’s likely to want cordobas…

Source: Living in the Post-Bubble World

My long time friend, and sometimes colleague, Ed Bonawitz, sent me a note yesterday showing the rot on the vine… This stuff isn’t for anyone under 13 to view, folks, it’s nasty… Here are some facts to make you cringe… “Ireland’s external debt, at $1.8 trillion, equals 900% of the country’s $200 billion GDP. The United Kingdom’s external debt of $10.5 trillion equals 456% of its $2.3 trillion GDP. Switzerland’s external debt of $1.3 trillion equals 433% of its $300 billion GDP.”

So… Now that the credit markets are locked tight, renegotiating the terms of these loans is virtually impossible… The IMF will need to step in Big Time, and as badly as I don’t want to even say this, but have to, the Bundesbank, Germany’s Central Bank, will have to step in also.

There’s news this morning that Germany will take over Hypo Real Estate Holding, Inc. thus paving the way for the first German Bank nationalization since the 1930’s…

So… Here’s the deal folks, the way I see it… These countries are dealing with their own problems, and soon they will move to protectionism measures to keep trade at home… This will happen all over the world, and for my money, it will be akin to pushing Trade over the cliff. No way trade is able to recover from a blow like global protectionism, until it ends…

So, again, there’s “uncertainty”… And the Uncertainty Hedge is here to help! Yesterday, I watched Gold move higher all day to the tune of $28 bringing the price of Gold to $970! This morning, there has to be a ton of profit taking, as Gold has backed off by $6… I’ll say this again for anyone missing class on two different occasions last week… It appears that the large investors are moving to hard assets, like Gold and not to fiat currencies…

The TIC Flows data yesterday surprised on the upside, with a total of Net security purchases by foreigners rising to $34 Billion, while the previous month’s negative -$21.7 Billion was revised down to negative -$25.6 Billion… So, if you average out the two months, we have a net of around $9 Billion, which is not enough to finance the deficit… And that just gets added to our financing needs down the road.

So… Europe is having problems with banks, just like here in the U.S. But keep in mind that at least Europe was dealing from a position of strength when this all materialized, and the financial meltdown began, while the U.S. was already deep in the deficit hole…

Today in the U.S. we get Housing Starts, Building Permits, Industrial Production, and Capacity Utilization all for January… And all should continue to show bad things for the U.S. economy. But as I said yesterday with the deficits rising, and everyone becoming comfortably numb with the numbers, they have long been comfortably numb with the rot on the data’s vine here in the U.S. It’s not that people don’t care… It’s that they see it, and realize they can’t do a darn thing about it!

OK… GM was at the back door begging for more drugs, I mean bailout money yesterday… Here’s what the Wall Street Journal had to say about it….

“General Motors plans to ask for access to an additional $16.6 billion in federal aid. The company said it will run out of money by next month without additional aid. GM also said it would close 14 U.S. plants, five more than previously planned. GM also would cut 47,000 global hourly, salaried jobs.”

If I were “the man” doling out the bailout funds, I surely wouldn’t want the closing of 14 plants and the loss of 47,000 jobs on my conscience… But! I wouldn’t write the check, until GM gave me something in writing… 1. a plan to pay it back 2. why they believe this $16.6 Billion will “do the trick” for them. 3. what are their plans to get back in the black given the U.S. is in a recession, and not buying automobiles!

Well, the President signed the “new and improved” Stimulus Bill yesterday, and I totally misread what stocks would do with that news… I was fully expecting stocks to rally with the news… But instead we got a 300 point sell off in the DOW… Don’t look now, but the Dow is now within less than a point of its November 20 closing low of 7552.29… Financials led the way for the stock losses yesterday as they too the Nestea plunge once again.

Good thing I’m not even your last pick for a “stock jockey”…

Yesterday’s move pushed the Dow to near a -14% loss year-to-date. Even with the large investors trading in fiat currencies for hard assets (read Gold!), these currencies are still in better shape year-to-date than the DOW… And most of the red in the currencies has come in the past week.

Norway leads the G-10 currencies VS the dollar so far this year…

Someone asked me, (they are always asking me about Swiss!) to talk about Swiss again… Well, from the above note about loan loss problems Switzerland is not going to go Ollie, Ollie Oxen free… They’ve got some real banking problems, and that’s the reason the Swiss franc has seen a -9% decline this year…

I got a chance to talk to an old Mark Twain Bank colleague yesterday… Craig Caringer called to check up on my health… What a great person always was, and apparently still is! Craig is a bond trader/ sales guru down in Florida… He tells me there are scant signs of liquidity returning to the markets, but scant for sure… Craig was the absolute best golfer I ever played a round of golf with. He is a Mizzou alum, and we had a blast talking about our Missouri Tigers ranked #10!

OK, I’m watching the euro trade higher this morning, than when I first came in… The range is small though, so it will be interesting to see if it can add to the gains I’ve seen already this morning. The trading pattern for some time now is for the overnight markets to push the currencies higher, and the U.S. markets to pull them back down.

There’s a writer out there in writer-land, that wrote a piece this last weekend, saying that the banking problems in Europe were too big, and that the euro was doomed… WOW! Those are some strong words! I saw the report, and I just cringed… For we’ve heard these wild forecasts before… There was the so-called collapse of the euro right after its issuance in 1999… There was the so-called collapse of the euro right after Denmark voted “no” to joining the euro… There was the so-called collapse of the euro, after France voted “no” to accepting the constitution… And now this…

I’ll say this now, just like I said during those previous crisis… The euro is here to stay, folks… The level of the euro VS the dollar may lose ground because of this problem, but it’s here to stay… So, don’t let yourself get all caught up in the sensationalism going on… Which reminds me of the Y2K stuff… Remember that?

OK… This went on a little longer than I anticipated… So let’s go to the Big Finish together…

Currencies today 2/18/09: A$ .6385, kiwi .5115, C$ .7920, euro 1.2610, sterling 1.4210, Swiss .8525, rand 10.21, krone 7.01, SEK 8.81, forint 242, zloty 3.8350, koruna 23.09, yen 92.60, sing 1.53, HKD 7.7545, INR 49.97, China 6.8375, pesos 14.66, BRL 2.3390, dollar index 87.66, Oil $35.02, Silver $14.05, and Gold… $963

Source: Bank Losses Mount, Globally

Now, if you think like me, no wait, most people don’t want that burden! But… We think in similar circles, you probably chuckled a bit when you heard that G-7 “praised” China for their continued flexibility with the renminbi… Doesn’t that almost sound like an Eddie Haskell? “Why, Mrs. Cleaver, you sure look nice today” Is G-7 “kissing up” to China? It sure sounded that way to me, for China hasn’t allowed the renminbi to move higher VS the dollar with any kind of consistency for some time now!

So, G-7, Schmee 7! I just don’t think they can deal with these things in a macro environment… In other words, each finance minister, Treasury Sec. or other official needs to go home and take care of their own house! There was one thing that came out of the G-7 meeting… Each country “promised” to not resort to protectionism to help their economy… I’m sure that while they promised they had their fingers crossed behind their respective backs!

The shot across the euro’s bow this time is coming from the rot on the vine of the Eastern European countries… These Eastern European countries are taking on water from bad loans, or loans gone bad, and you know who the lender of last resort is on these loans don’t you? Yes, Eurozone banks… This opens a whole new can of worms folks… The euro has taken hits from Spain, Italy, and Italy in this round, and previously took a major hit from France in 2005, and survived all of them. And it will survive this round… But not until it sees more weakness VS the dollar. I would look for the euro to revisit its previous low of a few months ago in the 1.23 handle… This could get ugly, as this Eastern European bad loans scenario has just popped up, and we’ve got to work through all the rubble to get to a base, before the euro can come back even stronger.

This will obviously represent some cheaper levels to buy, and diversify… Or average cost in… Or anything other reason you might have for taking advantage of this soon to be cheaper opportunity.

So, with the Big Dog, euro getting taken to the woodshed for its indiscretions with Eastern European loans… BUT REMEMBER I TOLD YOU THIS… The European bank losses are NOTHING compared to those in the U.S. My friend, John Mauldin, said that they “Dwarf those in the U.S.” And… Remember, The Eurozone began this meltdown in a position of strength! The U.S. was on its knees begging for foreign investment to finance their IOU’s… The rest of the dog pound is getting taken to the woodshed too! Shoot Rudy, even Japanese yen, which didn’t get mentioned by G-7 for its strength, is losing ground to the dollar this morning. There’s not a currency anywhere on the scorecard that’s not going 0-for 4 against the dollar today… UGH!

OK… I take that back! Not a fiat currency that is! But the currency that a lot of people don’t consider a currency, but I do, Gold… Is kicking some dollar rear this morning and taking names later! Gold is up $24 this morning to $965! And why do you think Gold is on the rally tracks this morning? Well… Things are uncertain these days aren’t they? Then if you answered yes, then you know that the “uncertainty Hedge” is here to save the day! Gold is the “uncertainty Hedge” … Oh, and Silver is like the Super hero’s sidekick… Like Robin to Batman, Silver to Gold… Silver is trading within spittin’ distance of $14…

When will traders and risk takers stop and look at all the debt the U.S. is taking on? That’s the question I keep asking myself… The massive amount of debt that just keeps going on the books, is crazy stuff folks… It’s gotten to be so massive, that I believe it has pushed everyone to become “comfortably numb” That’s got to be the answer, because if it isn’t, then I think we would see people screaming bloody murder at the Gov’t! They are amassing these massive debts and we’re paying for it! Don’t believe me? Well… Let’s listen to former U.S. Treasury Sec. Paul O’Neil, who quit because he didn’t believe in the tax cuts without cuts in Government spending… “The federal government doesn’t have any money that it doesn’t first take away from the people.”

But, as long as no one complains to their Senators, and Representatives, then they believe they have Carte Blanche to spend your money, your kids’ money, and your grandchildren’s money… Sometime in the future, someone will find a year’s worth of these Pfennig’s, and they’ll say… “Hey! Why didn’t we listen to this guy?” OK, I’ve gone too far there… That’s crazy imaginary stuff there, and has no place in this “professional letter” HAHAHAHAHA!

Well, we get a look at the how well the foreigners are keeping up with the financing of these debts this morning, as the December TIC Flows will print. Keep in mind that this is a fancy name for simply stating that this is the “net security purchases by foreigners”… Also, keep in mind that we need about $40 Billion per month (yes, it has fallen, but that’s long before we calculate the budget deficits that will be mounting this year)… In November the net was a negative of $21 Billion… Whoa! December’s total is forecast to be a positive $20 Billion… Which is better than a negative $21 Billion, but still doesn’t meet the required amount to finance the deficit… So, we just keep pushing that forward, and forward, and forward, until someone “calls” us on it, much like De Gaul called the U.S. on the debt, back in 1971, and demanded to be paid in Gold for the IOU’s he held… So… Now, we wait for the time when foreigners say “no mas”… And you now see why this is not a good idea for a country to be at the mercy of outsiders…

That’s when Nixon closed the Gold window… August 1971… And the world that we knew with a Gold standard was to be no more… Sort of like Puff the Magic Dragon when Jackie Paper came no more, and Puff that mighty dragon, he ceased his fearless roar!

Ok… Enough of that! The Japanese Finance Minister Nakagawa, is going to resign after Japan posted an economic report that showed Japan’s economy contracted at the its fastest pace in almost 35 years during the 4th QTR of 2008. Of course it didn’t help that he was reported to have been under the influence of alcohol during the G-7 meeting… He denied that his behavior was due to “being drunk”, and instead blamed a combination of alcohol and cold medicine…

So… Not only did Nagakawa have to deal with the bad economic report upon returning home, he had the press all over him about his behavior… So, he announced that he will resign… In Japan, this is called, falling on a sword…

The economic report has caused some slippage in the Japanese yen. This is the first real slippage we’ve seen in yen in some time… There are no reports of intervention by the Bank of Japan and the finance ministry, so one has to believe that this is simply profit taking after seeing the rot on the economic performance’s vine…

But, as long as the Bank of Japan and finance ministry keeps their finger off the intervention trigger, Yen should not succumb to heavy selling, and losses VS the dollar… Not yet…

The “new and improved” $787 Billion Stimulus Bill is on the President’s desk for his signature today… The markets will get all tingly, especially stocks… So, let’s hope for at least a day or two, the connection between stocks and currencies remains… But it can drop soon after, and go back to the way things have always been!

I see the time, and realize that I’ve been typing for far too long this morning, I have a ton of stuff to do, since yesterday was a holiday, so off to the Big Finish we go!

Currencies today 2/17/09: A$ .6405, kiwi .51, C$ .7920, euro 1.2640, sterling 1.4260, Swiss .8550, rand 10.20, krone 6.99, SEK 8.70, forint 242.30, zloty 3.86, koruna 23.38, yen 91.75, sing 1.5260, HKD 7.7540, INR 49.66, China 6.8414, pesos 14.61, BRL 2.3050, dollar index 87.38, Oil $37.06, Silver $13.96, and Gold… $963.80

Source: When Will Foreigners say “No Mas”?

• Widespread foreclosures caused home prices to fall in 134 U.S. metropolitan areas. Foreclosure filings eclipsed 250,000 in January, their tenth straight month above that figure, Bloomberg reported.

• Aluminum Corps of China Ltd. (ADR: ACH), China’s state-owned aluminum group, will invest $19.5 billion in debt-heavy Australian mining company, Rio Tinto PLC (RTP). More than $12 billion will be spent on mining assets and the rest will buy bonds convertible into shares, Reuters reported. The deal will give China unprecedented access to much-needed commodities and raw materials.

• Media conglomerate Viacom Inc. (VIA) said its fourth-quarter profit fell 69% as the recession sapped advertising revenue. “It is clear that while as cable network owners we are in a more favorable media segment than most, advertising (comparisons) are likely to get worse before they get better,” Chief Executive Philippe Dauman said on a conference call, the Associated Press reported.

• Fourth-quarter profit for Coca-Cola Co. (KO) fell 18%, but beat analysts’ expectations. The company reported net income of $995 million, or 43 cents a share, down from $1.21 billion, or 52 cents, a year earlier. “They’ve been very focused on taking costs out now that they have a strong product portfolio,” Erin Smith, an analyst with Argus Research in New York, told Bloomberg.

• Sources told Reuters that General Motors Corp. (GM) is talking with China’s SAIC Motor Corp. about selling part of its stake in their decades-old joint venture. The 50-50 venture builds and markets Buick, Cadillac and Chevrolet models in China.

• A $27 billion (A$42 billion) stimulus plan was rejected by Australia’s Senate yesterday (Thursday). Australia is heading toward its first recession in 18 years. Adamant on passing the stimulus, the government will make further concessions before the measure is voted on again, Bloomberg reported.

Source: Global Investment News Briefs Friday, February 13th, 2009

This from Money Morning:

Despite what you might be hearing about a global recession, consumer capitalism is alive and well in China.

And it’s still fueling growth.

Take a stroll through Beijing’s trendy Wangfujing area, a quick walk south of Tiananmen Square or the six-story Shin Kong Place in Beijing’s Dawanglu area, and you’ll find more than 100 top international designer brands on sale, including Prada, Gucci, Bvlgari, Dolce & Gabbana, and others. While you’re on the prowl, don’t forget Xidan Market, which the locals prefer. It’s also bursting at the seams from countless stores, fashionable-clothing shops and, of course, the ubiquitous and ever-present Starbucks (NYSE:SBUX).

In contrast to other global markets, like the Ginza, Beverly Hills’ Rodeo Drive or London’s Oxford Street, for example, where a heavy silence hangs over the once-bustling shopping areas, the sounds of commerce are everywhere.
Literally.

Cash registers clink and clank, and credit-card machines whiz, but not where most people would predict.

With the deepening of the global recession, throngs of Chinese consumers and expats no longer willingly stand for 40 minutes to get into stores selling Gucci, Vuitton and other top-end items. Instead, they’re pushing their way into places with names like Uniqlo (pronounced “uni-clo”), Lavinia, and Blur – all of which were once regarded as the illegitimate children of yuppie-dom, because of their bargain-based orientation.

Lately, though, they’re the unsung heroes. That might strike you as strange because Uniqlo hails from Japan, while Lavinia comes from Italy. Only Blur is a native Chinese operation. But all three specialize in providing high quality at super reasonable prices.

It’s always fun for me to shop at Uniqlo, in particular, since my family and I shop there each year when we’re home in Kyoto. Just to be unique, I often pick up something for my wife and kids from China’s Uniqlo stores. The service is top notch and I can’t help but chuckle over the fact that I can buy several shirts for less than I would ordinarily pay for just one in Europe, or here in the United States.

Locals – like my friends Hao Jun and Hairong Zhao – tell me the situation is much the same among China’s yuppies, or “Chuppies,” as they’re now known.

“We’re still buying what we like, if we can afford it,” Hairong says.

And judging from the latest figures, which said China’s domestic consumption advanced at a mind-boggling 28% in 2008, there’s lots to like.

Depending on which studies you believe, Chuppies account for slightly more than 7% of the population. That doesn’t sound like much, but that puts the number of Chuppies at more than 100 million – every one of them with a middle class income, appetite and purchasing power that can be expected to grow.

Granted, China’s overall consumption is slowing and 2009’s domestic growth could slow to the mid-teens, but that’s still more than double what we’re likely to experience here in the United States, or in Europe.

For some, this slowdown is the end game. But others understand that this is just the beginning. I’m in that latter camp, having spent considerable time in the region over the past two decades – more than enough to watch several boom-and-bust cycles in both Japan, and China, and to understand how they work and what to look for.

“While it’s clear that Chuppies can’t replace a drop in Western consumerism [all] on their own,” said my good friend and noted China expert, Robert Hsu, “they’re still spending in many sectors – like education, for example. And the government is still spending on the infrastructure that enables financial growth.”

That’s a mantra I’ve spent years encouraging investors to take to heart, if for no other reason than there will be growth “because” of Chinese policy that’s not just limited to the growth taking place “in” China. And that, in turn, leads to some appealing investment opportunities – particularly now that the markets have beaten the share prices of so many superb companies down so significantly.

Assuming this strategy is correct, history suggests there are two potential ways to profit. Clearly the results won’t be immediate, nor will they be straight up – like the returns we saw a few years ago, during China’s earlier period of frenetic growth.

Nevertheless, the payoffs to come could well be the best we see for a generation or more.

First, savvy investors in sync with Chinese buying patterns can target companies that sell to Chuppies, like New Oriental Education & Technology Group Inc. (NYSE:EDU), the Beijing-based provider of private-educational services, and YUM! Brands Inc. (NYSE:YUM), the well-run global operator of the KFC, Pizza Hut and Taco Bell fast-foot-restaurant chains. Both companies are enjoying superb year-over-year sales growth in China – even in the face of worsening global economic conditions. [For Money Morning's recent report on Yum Brands' successes in China, please click here. The report is free of charge.]
Second, investors who believe that infrastructure is the way to go can easily choose from dozens of companies engaged in China’s great economic build-out, including choices related to rail, air and construction.

Third, still another choice is to invest directly in the Chinese Yuan (Renminbi). Not only is China’s currency continuing to appreciate and gather strength; it’s likely to emerge as one of the world’s most powerful currencies, once both the dollar and euro are eviscerated.

Undoubtedly, a good number of people reading this will take issue with my assessment. And I don’t blame them. On the surface, it appears that China may be all washed up.

However, at a time when our own economy is sliding into a deep, dark hole, China’s relentless march forward suggests that this Asian country not only has a more promising future; it will emerge as an important economic and political force to be reckoned with.

Not to mention a powerful investment opportunity.

Source: China’s “Chuppies” Point the Way to Growth and Profits

What a beautiful day it is in Paris. It’s snowing. The streets are white. And the streetlights, shoplights, and automobile lights make everything glow. It would be a nice morning to sit in a café and drink a cup of coffee.

But we don’t have time for that. We’re back at our desk…there is another year to be reckoned with…and it promises to be a doozy. The trouble with this year so far is that it is missing the question marks. What lies ahead seems obvious…too obvious…

“World stocks rise on US rally, stimulus hopes,” comes the headline from CNN/Money.

The Dow flew up 258 points on Friday – stocks have been up in the last three trading sessions. Oil rose to $46. Gold fell to $879.

The expected rebound seems to be underway. Even dead cats bounce. And considering the height from which this one fell, it would not at all be surprising to see it bounce up 30% or even more…over the next three months.

Investors took a terrible beating in ‘08. It was the worst year in stock market history. They’ll figure that this year is bound to be better. And along will come many reasons to believe that things are looking up.

President-elect Obama is talking about relief on a Rooseveltian scale. He wants to spread unemployment and Medicare benefits around more freely, for example. But he knows he can’t just toss out a few dimes to bums on the street corners; he needs a stimulus plan that knocks peoples’ socks off.

“Economists from all across the political spectrum agree that if you don’t act swiftly and boldly we could see a deepening economic downturn,” he said recently.

We must be somewhere on the political spectrum. But he didn’t ask us. If he had, we would have explained that every penny spent on a bailout has to be taken out of the spending of the person who earned it. We’d add that there is no economic problem at all. The markets are doing what they’re supposed to do…clearing away the mistakes of the Bubble Epoch.

It’s a political problem, not an economic one. People don’t like to have to pay for their mistakes. So, they whine to politicians. And then the politicians make things worse…by trying to prevent the correction from taking place.

But, our “Head of State Hotline” has been silent, here at The Daily Reckoning headquarters. So we have to assume it was Barack Obama who was not calling – along with every other government leader on planet earth.

Mr. Obama figures he needs to do something spectacular…something that will give the impression of really turning things around. He calls his project the ‘American Recovery and Reinvestment Plan.’

Ahh…here are some question marks: What is it meant to recover? We don’t know…maybe the glory days of the Bubble Epoch. What is being reinvested? We can’t figure that out either. Typically, you reinvest a profit. But you have to have a profit to reinvest it. As near as we can tell, 2008 was a year of losses. You can’t reinvest losses.

Nevertheless, we know what American Recovery and Reinvestment Plan is…political claptrap. And now it’s expected to cost as much as $1 trillion. At least, that is what state governors are calling for. Congressional leaders say they want to stay below the “politically charged” one trillion dollar level. But they also say the bill won’t be ready for Obama’s signature until February. Congress needs time to pry open the pork barrel and spread it around – no question about that, either. By the time they’re finished, there’s almost sure to be $1 trillion work of grease in the package.

“US Debt Expected to Soar,” says the Washington Post, stating the obvious.

All this extra debt will do no good for the economy, but investors will probably feel like the good old days are back. And for a while, they will be…

*** This time of year you’ll find a lot of looking back at the year that just passed…and with good reason. Strategic Short Report’s Dan Amoss offers his views on 2008…and what lies ahead for us in 2009:

“When asked by family and friends over the holidays what I think about the 2008 stock market and economy, my response has been, ‘I expected a nasty bear market in 2008, but the carnage since September took me by surprise. The economy will remain weak, but I think the worst of the widespread market carnage is behind us. Future damage should be concentrated in sectors with horrible fundamentals. Thankfully, 2009 should be a year when fundamental analysis should start to matter once more.’

“This will be a welcome development, because 2008 was a year when the following strategy worked best:

1) Sell short any stock or ETF, without bothering to do any fundamental research
2) Invest the proceeds in Treasury bonds, preferably with as much margin as possible
3) Repeat Steps 1 and 2, over and over.

“Clearly, this ‘deflation trade’ strategy is not sustainable over longer time frames — not in an era of worldwide paper money standards. In fact, I’d expect that such a shotgun-based investment strategy of short S&P 500/long Treasuries could lead to big losses in 2009.

“Overall, I’m happy with Strategic Short Report’s performance. Obviously, I could have done even better, had I been more bearish since September. But it certainly felt unwise to sell short into an already panicked market. Let’s learn as much as we can from our experiences and move on; it never helps your trading discipline to dwell on past mistakes and missed opportunities.”

You can check out Dan’s full track record, and learn more about his trading strategy here.

*** It all seems so simple. After the crash comes the bounce. And the bailouts. The bailouts cost money we don’t have. So, we get more debt…and more printing press money. What’s to wonder about?

In the last two months of last year, MZM – a measure of the money supply – grew at 11% per year. Gold rose. With the Obama bailout…and the Fed’s bailouts…it seems a cinch that the price of gold will go up.

At $879 an ounce, gold is today no higher than it was 29 years ago. In January 1980, it briefly hit $875. If it were just to reach the same level now, adjusted for inflation, it would have to go to $2,400.

What bothers us about this is that it is so obvious. Looking at the facts, a sensible person would conclude: the price of gold is going up. Most likely, it will go to three times its current price.

And so, sensible people seem to be doing the sensible thing; the World Gold Council says demand for gold is increasing fast. The price of gold rose more than $100 – while every other asset, save U.S. Treasury paper – fell. Gold coins have become difficult to buy; the premium on a bullion coin has risen to about 10% over the gold price.

Still, the price of an ounce of gold is under $900…not over $2,000. Does the big money…the inside money…see something we don’t? Or do we see something it doesn’t? We don’t know…but it worries us.

Will there be no run-up in gold? Or will it come on sooner and more violently than even we ever imagined?

There’s bound to be a surprise waiting for us somewhere…but, just to be on the safe side, we’ll hang onto the gold we have. And we urge our dear readers to do the same. No gold? There’s still time to pad your portfolio with our favorite yellow metal. See here.

*** It also troubles us that so many people expect a bounce…followed by a further collapse. How can Mr. Market work his mischief if so many people see what he is up to? Where’s the surprise? Will the bounce not come at all? Or, will it come much more emphatically than people expect?

Perhaps markets will rally strongly all over the world. Chinese manufacturing will show signs of recovery. Housing in the United States will appear to have stabilized. Commodities will edge up. Investors may begin to believe they have another bull market on their hands – or at least a tradable rally. They won’t want to miss the opportunity to ‘get even.’ And then, as stock prices rise, investors will slip back into their old habits. They will turn to risky investments in order to boost their profits. Among other things, they are likely to invest in emerging markets, which will probably rise more than the U.S. market itself. Currencies such as the Brazilian real and the ruble will go up against the dollar.

As the rally recovers 40%…50%…maybe even 60% of last year’s losses, investors will be suckered into seeing it not as a bear market rally, but as a genuine new boom. They will think it is real…and durable. And they will forget to sell.

Mr. Market will have pulled another fast one.

*** “In a severe crisis, orthodoxy can prove a very bad strategy,” said Ben Bernanke last week.

We are as puzzled by this as by Obama’s American Recovery and Reinvestment Plan. Economics is not improv theatre. You can’t just make it up as you go along. You make a change in banking regulations or fiscal policies, for example, and it will take months or years before you know if it has worked. That’s why you need theories to guide you…you can’t wait to see how an economy reacts. In the absence of a theory about the way things work, you are just committing random acts of kinkiness.

Today’s news from Bloomberg also tells us that the “Fed has abandoned monetary policy.” We’re puzzled by that too. With rates at zero, what monetary policy did the Fed have left? Not much.

*** Poor Ireland. The Celtic Tiger has been de-clawed and spayed. House prices have fallen as much as 50%. Bank shares are down 90%. Unemployment – which had all but disappeared in the boom years – is headed back to 10%.

Source: An American Recovery: How High Will this Dead Cat Bounce?

This from Taipan Daily:

Japan’s absurd 0.2% rate cut is offering American “Dollar Shorts” a second chance at doubling their money.

Welcome to the World Banking Limbo competition, wherein central bankers around the world try to calculate that fine line between a stimulated economy and a destroyed currency.

Last Tuesday, U.S. Fed Chairman “Helicopter Ben” Bernanke re-earned that moniker when he announced that the U.S. central bank would move rates below 1% for the first time in history. What’s more, he promised that if that didn’t work, he would just have to imagineer trillions of new dollars to buy up U.S. Treasury notes.

Currency traders reacted almost instantly, ditching dollars for euros and yen as fast as the market would allow. Suddenly, the dollar was trading at a 13-year low to the yen and damn near par with the euro’s launch price back in 2002.

Gold bugs were also driven into a frenzy, and over the next day or so, futures for the stuff popped up some 5.42%.

The Race for the Bottom

Problem is, this whole “recession thing” is an international phenomenon. So when the dollar drops, stuff overseas gets a good bit more expensive for American consumers.

Now, let’s say you work in the corner office at Toyota’s headquarters. It’s been hard enough selling into the US market, what with American consumers all down in the dumps. Last thing in the world you want to hear is that your uphill climb selling into our market just got a good bit steeper.

Think Japanese sports cars are fast? The hand that dialed the phone between Toyota and the Bank of Japan was a heck of a lot faster.

By Friday, the BOJ announced that it, too, would cut rates. So there, Mister fancy pants Fed Chairman!

The Government wants to steal up to 65% of your retirement savings!

Whether you know it or not, you’re being hit with a secret “Retirement Tax” that’s taking huge chunks of your retirement portfolio away each year. Learn how you can avoid ever paying a single cent more with this FREE report, available now. This is 100% legal and could be the key to saving your retirement dreams. Learn the details now!

How Low Can They Go?

“Wait a minute,” you might very well ask. “Haven’t BOJ interbank rates already been sub 1% for ages now?” You betcha! In fact, before the BOJ acted, they were already down to 0.3%.

So how low can they go now? The new BOJ rate is a whopping 0.1%. That’s right: one tenth of one percent. Oh, and Governor Masaaki Shirakawa and his board cohorts also claim that they, too, will create new yen with which they can buy up corporate and financial sector debt.

Some of the folks who watch these gyrations for a living have described the new mood in Tokyo as “aggressive.” Others have described it as “desperate.”

One thing I can tell you: They will hit dead zero before we do. I don’t know if that’s anything to be proud of… In the short run (we are talking a day or two), this has driven the dollar back up off its knees.

The Yen Will “Win” in the End

I have to figure that Japan will lose this limbo contest in the end. There are simply too many Japanese housewives banking yen every chance they get… whereas our government has told us outright that we simply must begin shopping again as soon as possible, and it is quite willing to put all of “its” (and by that I mean “your”) dollars behind that notion.

To my mind, this is a buying opportunity for the various short dollar/long gold positions I have mentioned recently, including shares of PowerShares DB US Dollar Index Bearish (NYSE:UDN) and SPDR Gold Shares (NYSE:GLD).

Either position stands to gain some 20%-30% over the next few months. Traders who are looking for additional leverage (or a shorter time span) should consider at-the-money mid-term call options. Properly done, these options could easily triple your gains on these ETFs.

Source: How Low Can They Bend Before Their Backbones Break?

Three of China’s largest wireless carriers are making a mad dash to bring the country’s wireless infrastructure into the 21st century with a widespread upgrade to so-called 3G networks.

3G networks enable high-speed, multimedia services packed with hefty margins for the carriers. Get in now on the program and you’re likely to see healthy returns as the networks come on line.

3G achieved legendary status in the U.S. and Europe when Apple announced a revised iPhone that was 3G compatible.

For example, when AT&T (NYSE:ATT) announced Q2 results on July 23, 2008, its revenues jumped as the exclusive provider of the iPhone 3G. The new phones entered the market on July 11.

In its Q2 earnings, AT&T reported that during the first 12 days, sales of the iPhone 3G nearly doubled levels achieved in AT&T’s 2007 iPhone launch. Subscriber growth surged to 1.3 million, with a larger percentage opting for higher-end smart phones like the iPhone 3G.

Bottom line: a 52% increase in wireless data service revenue, and an increase in average revenue per user (ARPU) of 3.5%.

Now the question remains: Does AT&Ts’ 3G growth serve as a model for China’s wireless carriers?

While China’s wireless providers may not see such startling increases, it is safe to assume that revenues will certainly rise.

The Chinese telecommunications market is the biggest on the planet. With the mobile sector still expanding at over 18% going into 2008, the 3G will surely give the market yet another boost, according to research from Paul Budde Communication.

Paul Buddle also reports…

“The robust growth was due to an expanding rural market and the increasing number of people who have acquired more than one mobile phone. Both China Mobile and China Unicom have invested considerably in network improvements, especially in rural China, where approximately 750 million of China’s population resides and teledensity is just 12%. For many of China’s tech-savvy citizens, the mobile phone is becoming the preferred means of using the Internet. The number of people who access the Internet through their mobile phone surged to 50 million in 2007 from 17 million at the end of 2006, about a quarter of China’s Internet users.”

Of the three Chinese carriers going 3G, China Mobile stands to be the biggest winner. It’s China’s largest wireless service provider.

China Mobile trades in the U.S. under the symbol CHL on the NYSE. Currently trading in the $50 range, its down off a 52-week high of $91.78.

Sure, China’s economy is in a slump. But advanced wireless services such as 3G are the staple of current and future economic growth. In China, 3G is inevitability.

In the current economic climate it may take longer for 3G to spread in China than everyone would like. Still, this is a sure thing. You just have to be a little more patient.

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.”

This program – which I call the “13F Disbursement Plan” – allows you to legally skim money from the cutthroat Wall Street firms who’ve gotten obscenely rich at the expense of ordinary folks like you and me.

By following the detailed instructions outlined in this letter, you’ll learn how to add $4,570 to $11,450 to your bank account every month, courtesy of the U.S. Government.

Read on for more information…

“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