The prevailing Wall Street wisdom – and I use that term loosely – thinks there’s a better chance that some other “boom” is going to get under way. And over $8 trillion is parked on the sidelines waiting for it.

I guess the thought is that this economic resurrection will come seemingly out of nowhere. And that will lead us out of the deepening morass we’re mired in. Right…

But we’re not the closed-minded type around here. We don’t judge, and we don’t turn down a chance for above average profits.

So in the interest of fairness, let’s look at the probability of “booms” in other sectors, in the hopes they could fuel a global economic recovery.

4 “Boom” Possibilities

• A Housing/Building Boom?

Sure, maybe in my kid’s lifetime, but not in yours or mine. Let’s face it – we’re still in the process of busting. Just look at this sobering statistic:

In “normal” real estate markets, the inventory of bank-owned foreclosed properties is usually around 160,000 or so. Last November, completed foreclosures hit 900,000. Another 72,694 were added in January. February tacked on another 121,756.

But it gets even worse. According to RealtyTrac, nearly 75% of the property in foreclosures have yet to be listed for sale. That means another 300,000 or so homes already in the foreclosure process will be added to the total.

And there’s more coming behind them… lots more. Foreclosure filings for February alone hit 207,703, up 24% from January. Sales of foreclosed homes rose 4.4% in 2008, but availability of homes for sale doubled.

All this has the effect of keeping home supply much greater than demand. Bottom-line: You can forget a housing/building boom anytime soon.

• A Consumer Spending Boom?

Spending with what? Most consumers who used their home’s equity as an ATM are finding it out of cash. And now they’re strapped with big payments they can’t afford.

With home values cut in half in some parts of the country, most couldn’t squeeze more out even if they wanted to. Some will lose their jobs and will have to give up their homes (adding to the foreclosure situation).

Another nail on the consumer spending boom coffin is that Americans are saving more than they have in over 14 years. After years of dismal savings, consumers have started to get the message of “saving for a rainy day.” Unfortunately, only because it’s raining.

• An Export Boom?

The last time this country had a trade surplus was in 1991. As Warren Buffett likes to quip, “Right now, the world owns $3 trillion more of us than we own of them.”

And that’s not going to get better anytime soon.

While imports are certainly down (see consumer spending boom), many of the industries that contribute to exports are being decimated, too. Take the recyclables industry for example: It exported $22 billion worth of recyclables in 2007, mostly to China. 2008’s numbers, while not finalized, are expected to be down 50% to 75%.

And that’s just one example. We aren’t even touching on the fact that the world’s economies are in worse shape than ours is. So you can forget about an export boom.

• A Manufacturing Boom?

Every day, we read about another company laying off workers, in response to a drop in its business. It’s not too surprising, given the slowdown in consumer spending, the virtual shutdown of automobile sales, and the lack of consumers and businesses buying “stuff.”

We can expect that to continue.

It’s very likely that unemployment percentages will reach double digits later this year nationally. In some regions it’s there already. And it’s not hard to see why. (See the last three boom reasons above.)

So where does that leave us? Well, we could talk about a health care boom, or a biotech boom or some other mini boom that might have an uplifting effect on some small area of the country or the population.

But none of them will have the desired effect. They can’t cast a wide net over the entire economy to pull the country up from the depths of the deep recession we’re stuck in. None of them are the economic panacea, if you will, that we need.

Except two…

Energy and Infrastructure – 2 More Boom Possibilities

History has repeatedly shown that cheap energy and modern, efficient infrastructure are the key building blocks of sustainable economic growth. The World Bank estimates that for every 1% increase in a country’s infrastructure equates to a 1% increase in its GDP.

And I can think of no other initiative that can match the wide-ranging boost that energy and infrastructure projects will give to an ailing economy:

• Employment: Hundreds of thousands, perhaps millions, of jobs would be created both in the United States and around the world. When people have jobs, they have income, and they’ll spend it on things like houses, cars and trucks, consumables and “toys.”

• Construction: nothing jumpstarts an economy better than huge, labor-intensive energy and infrastructure projects. Jobs, heavy and light equipment purchases, and material purchases will boost companies in those sectors, many of whom are hurting right now.

• Manufacturing: Many things will have to be made and entirely new industries will spring up to support solar, wind, geothermal and infrastructure initiatives.

I believe that this administration – similar to that of FDR’s – likes the idea. Bank balance sheets are well on their way to being stabilized enough to lend and extend credit to both individuals and businesses. Government-induced catalysts in the form of monetary stimulus and tax incentives are slowly being put into place.

They need to happen quickly though – and be large enough – to kickoff the energy and infrastructure build-out… the “EIBO Boom” as I like to call it.

It’s an acronym I’ve coined to describe what I believe will be the single best place to focus your investment dollars for the next 20 years.

I’ll be writing about those opportunities here, and speaking about them at the Investment U Conference in St. Petersburg, Florida in just a few weeks. I hope to see you there.

Source: Energy & Infrastructure: The Cure For Our Economy

Mingchun Sun, chief China economist for Nomura International PLC, said the Chinese government could formally announce the bigger spending plan in March or April.

Since the original stimulus proposal was announced, state and local governments unleashed a long list of projects previously held back because of initial concerns of keeping growth from getting out of control, Sun said. And with a surge in bank lending in January, China is better suited to finance more infrastructure investments.

“Looked at from the perspective of demand and financing capacity, I don’t think it will be a big problem to get to 7-8 trillion yuan,” Sun said in estimating the size of the eventual stimulus, Reuters reported. “It could be even higher.”

So far, several Chinese leaders have hinted that an increase in spending is on the way.

On Monday, the Communist Party’s council said that it would bolster investment to support growth, Reuters reported. A day later, President Hu Jintao said that China would take additional steps to boost domestic demand.

More spending could set off an investment boom similar to that of the early 1990s.

“This may be a harbinger of another investment boom. The only similar big encouragement made by the central government was by the late leader Deng Xiaoping and thanks to that the economic situation took a big turn for the better,” Sun said.

Deng’s decision to push growth also caused inflation to peak at 24.1% in 1994, Bloomberg reported.

Two years ago, Sun forecast that China’s gross domestic product (GDP) growth would slow to 8% in 2009.

Source: Economist: China Stimulus Could Double in Three Years

The study, released last week, says that many of the countries that balanced their budgets over the past 10 years did so by skimping on the construction costs for new public assets and the maintenance of existing buildings and roads, CBC reported.

“The global economy is running a major infrastructure deficit as the cost of decades of under-investment is now surfacing,” said Benjamin Tal, the analyst who authored the study.

Canada, for example, has eliminated an enormous budget deficit left over from the 1980s, but built up an infrastructure deficit of $120 billion in the process.

Governments have come to realize that they are better off spending a modest amount each year on infrastructure upkeep, rather than spending substantially more in one lump sum to replace outdated projects, Tal said.

According to the CIBC forecasts:

• North America will spend $180 billion on infrastructure each year.
• Europe will spend $205 billion.
• Asia will spend $400 billion.
• And $10 billion will be invested in Africa annually.

Stimulus plans will figure heavily into the global infrastructure boom…

Asia Leans on Infrastructure

China, Japan, Malaysia, and Singapore have all unveiled stimulus packages that focus on shifting their respective economies away from dependence on foreign exports and creating jobs at home, mainly through public works projects.

In total, Asian economies have pledged more than $680 billion to economic stimulus since the onset of the financial crisis.

Singapore recently spawned $13.8 billion (S$20.5 billion) stimulus package to offset rising unemployment and prevent a political backlash against its ruling People’s Action Party government.

Singapore’s economy, like others throughout Asia, is overly reliant on exports, which have all but evaporated with the onset of the global economic crisis. Analysts estimate that the city-state’s unemployment rate – currently at a level of 2.2% — could double, or even triple, by 2010.

Approximately $13 billion (S$20 billion) of Singapore’s stimulus will go towards financing public works projects, with the remainder being used to provide tax rebates.

Malaysia, meanwhile, recently unveiled its second stimulus package in three months.
Bothered by the financial crisis, the country offered up a $1.9 billion plan in November primarily focused on public works and infrastructure.

The majority of the money was put toward:

• Building of low and medium-cost houses.
• Upgrading and repairing police stations and army camps.
• Constructing roads, bridges, schools, and hospitals.
• And rural and agricultural development.

However, at just 1% of gross domestic product (GDP), the stimulus was criticized as being too small. Now the government is reportedly taking steps to expand it.

The second stimulus package will be about $2.7 billion, according to the Malaysian National News Agency.

Of course, none of these packages hold a candle to China’s enormous $586 billion stimulus plan. If Malaysia’s first stimulus plan was an example of an insufficient, or moderate, attempt to bolster the economy, China’s is just the opposite.

At a staggering 20% of China’s gross domestic product, China’s stimulus package is the model of an aggressive and substantial stimulus package. It boasts a vast infrastructure spending program that would cover 10 areas, including the construction of new railways, as well as projects aimed at environmental protection and technological innovation.

About $54 billion (370 billion yuan), or 11%, of the $586 billion spending package has been allocated towards rural infrastructure projects to create jobs.

Plans for China’s road system alone are unprecedented with 12 major routes under construction across the country from north to south and east to west, The Wall Street Journal reported. The system will stretch 53,000 miles by 2020, topping the 47,000 miles of roadways in the United States.

In addition to all of that spending, China is already looking to expand its stimulus package to help stem the rising tide of unemployment.

China currently spends about 9% of its GDP on infrastructure, versus 5% in Europe and 2.4% in the United States. Over the next 10 years, China will spend $200 billion on infrastructure development alone, according to the CIBC.

U.S. and Europe Look to Improve Infrastructure Marks

Of course the United States and Europe will be ramping up their infrastructure spending over the next decade as well.

In 2005 America’s civil engineers gave the nation’s infrastructure a “D” grade, and they estimated that it would take $1.6 trillion over five years for proper upgrades.

It’s taken a full-blown financial crisis and 8% unemployment, but the government is finally beginning to open the spigot to infrastructure spending.

“We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together,” President Obama said in his inaugural address.

About one-third of President Barack Obama’s $825 billion stimulus package will go to infrastructure with $30 billion allocated for roads and $10 billion for mass transit and railways.

President Obama has also proposed spending $150 billion “over the next 10 years to catalyze private efforts to build a clean energy future.” The new administration also proposes to increase the amount of electricity that comes from renewable resources from 10% in 2012 to 25% by 2025, according to Wall Street 24/7.

On top of that, upgrading the nation’s aging power grid could cost in excess of $880 billion, according to a November 2008 report from the Brattle Group.

Infrastructure development won’t come cheap in Europe, either. The International Energy Agency estimates that it would cost the European Union (EU) at least $650 billion to upgrade Europe’s power grid.

And in addition to more reliable grids, the EU is seeking greater energy independence. The continent relies on Russia for a quarter of its gas supply. And as last month’s dustup with the Ukraine demonstrated Russia is a less than reliable supplier.

The European Commission yesterday (Tuesday) unveiled a $4.5 billion (€3.5 billion) plan to invest in its gas and electricity interconnections, offshore wind technology, and carbon capture and storage to enhance its energy security, PennEnergy reported.

“Energy infrastructure will play a crucial role, reducing dependence and increasing competitiveness,” said the commission.

Similarly, the European Parliament has set out a blueprint for future EU energy policy that includes mandatory emergency action plans in case of gas supply shortages, more grid interconnections among EU member states, a specific roadmap for investments in nuclear energy, and new climate targets to be achieved by 2050.

Citing the recent gas supply crisis between Ukraine and Russia, the report calls on the European Commission to propose revision of a gas supply directive before the end of this year, which should include” mandatory and effective national and EU emergency action plans.”

It also challenges EU policymakers to improve energy efficiency by 35% and convert 60% of the region’s total energy consumption to renewable sources.

No budget outlines were offered by the report.

The United States will spend $150 billion annually over the next 10 years and Europe will look to invest about $300 billion a year, according the CIBC report.

Source: Global Infrastructure Spending to Reach $35 Trillion Over the Next 20 Years

This from Penny Sleuth:

Two days before Christmas, a 66-inch water main burst on River Road, not far from where I live, during morning rush hour. Water spewed out at a rate of 150,000 gallons per minute, turning River Road into an actual river for a time. People at the scene described the burst as a bomb going off. The road itself took significant damage.

The force of the water – going at 12-15 miles per hour – pushed cars around like so much debris. Firefighters had to rescue people from their cars as freezing cold water swirled around them. They had to use a helicopter to pull some out of the more sticky situations.

This was a big deal where I live. My kids came home early as the county closed schools over concerns about water supply. It hit home, too, because I’ve been writing about the dangers of this exact thing for at least two years. So I have cause to revisit one of my favorite investment themes – water. When water pipes get old, they break.

The pipe that broke was 44 years old. The Washington Suburban Sanitary Commission, the local water utility, has nearly 5,500 miles of pipeline. Of these, 1,380 miles of water mains are more than 50 years old.

Another 2,000 miles are between 30-50 years old. Many of these pipes are near the end of their engineered life spans. The WSSC replaces 27 miles of pipe per year. At that pace, the WSSC will replace a pipe, on average, no sooner than once every 200 years.

It’s a simple matter of math to see that’s untenable. This was the third major water main break in the last six months. In June, one break led to the widest disruption of service in more than 20 years. Restaurants closed and residents were under a boil-water advisory. From Jan. 1 through November of 2008, the WSSC repaired 1,357 breaks and leaks – or about four per day.

The previous general manager at the WSSC, a former Navy engineer, raised the alarms in February 2008. “In my view, the public will no longer be able to trust the system that delivers water to residents,” he said. Unfortunately, this is a problem that is widespread in our country. Water pipes are aging and need replacement.

The Great Water Build Out

Globally, too, the demand for new water infrastructure is also strong. There is, for example, a huge urbanization movement happening on this planet of ours. Think about this: The average population of the world’s top 100 cities in 1900 was 700,000. Today, the average city has 6 million people living in it. In just the last 30 years, the world’s urban population went from 1.6 billion to 3.3 billion. This puts huge stresses on water systems.

Industrialization also eats up a lot of water. It takes large amounts of water to make food – some 630 gallons of water to make a hamburger. Even basic consumer goods take a lot of water to make – it takes 2,900 gallons of water to make a pair of jeans.

Semiconductor plants are huge consumers of water. Power generators also use water for cooling. Manufacturers use it for cutting, cleaning and more.

We ask a lot of water. The water services industry alone is a $385 billion business – and growing. “There is a boom in the construction of new assets,” says Antoine Frerot, CEO of Veolia Water. “The assets are also more complex and more technical than before.” Water-related equipment is another $64 billion industry. That too is a growing field.

Energy and water are also linked in ways people don’t appreciate. It takes a lot of water to make energy.

As the easy oil is gone and we go deeper into the earth, our water needs rise. “Enhanced oil recovery,” reports the FT , “is particularly water intensive.” Alternative energy is no better off. Biofuels, obviously, consume water, but so do solar and wind power. It’s just not as obvious. (There are enormous amounts of water used in making the equipment.)

But this is only half of the greater water crisis. The other half is an issue of supply. I don’t have space to get into that aspect of it again here. But suffice it to say that in the American West, China, India and many other parts of the world, getting water where people live is an ongoing problem. According to the U.N., there are over 1 billion people without access to clean water. This has appalling health effects.

“Water has never been more under threat in modern history,” reports the FT without exaggeration. A new special report in the salmon-colored pages of the Financial Times is entirely about water. I give the paper credit for reporting on this topic more than any other mainstream outlet I follow.

Thinking thematically, energy, infrastructure and agriculture all look attractive to me as long-term investment themes. And water issues touch each of these in numerous ways.

Over the holidays, I swapped e-mails with my friend Tom Rooney. He is a former CEO of a water pipe company and a highly sought-after consultant on water issues, especially now. “Water and water infrastructure are getting hotter by the day,” he reports.

“It’s not going away.” I agree, it’s not going away – whether we have a global depression or not. For investors, water is, indeed, blue gold.

Source: Investing in Water: Mining for Blue Gold