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

This from The Sovereign Society:

Often it’s the fine print that makes all the difference in the world. If you need any more proof of that fact, just ask the millions of Americans trapped in a sub-prime, Adjustable Rate Mortgage.

With half a million jobs lost in November alone and no one predicting an end to this recession any time soon, Mr. Obama hinted (read “fine print”) that $500 billion in spending is not out of the question.

He would like to see a plan that creates 2.5 million jobs. His interview on Meet the Press this past Sunday indicated that he wasn’t afraid of big spending to stimulate the economy, but that mindless spending should be avoided…

“We are not going to simply write a bunch of checks and let them be spent without some very clear criteria as to how this money is going to benefit the overall economy and put people back to work”. The new administration’s plans will be based on what is “going to make the biggest difference in the economy and what will have some long-term benefits.”

Obama emphasized that the spending will be on “infrastructure” – projects to build roads, modernize schools, expand Internet access, improve buildings’ energy efficiency, put better technology in hospitals.

“We’ve got to make sure that the economic stimulus plan is large enough to get the economy moving,” Obama said in the interview. And even with a $1 trillion budget deficit, Obama said, “We can’t worry short-term, about the deficit.”

This perspective is clearly shaped by the experience of the pre-Roosevelt Depression years, when (as some economists believe) stinginess in monetary policy and a failure to effectively target government spending led to disastrous results.

Infrastructure spending has a further advantage, in that it will direct the fiscal expansion to state treasuries. Most states are required to run balanced or almost-balanced budgets. Many states, without help from the federal government, will have to cut spending or raise taxes next year. The federal fiscal stimulus needs to deliver enough help to the states to offset this.

State-directed infrastructure investments, which are “shovel ready”, are a fitting part of the mix. Last week, the nation’s governors presented $126 billion in highway, public transportation, airport and waterway ready-to-go projects to Obama.

So where should we look to profit from this huge amount of money that is going to “stimulate” the economy? Just look at the fine print…here that means all the highways, bridges, airports and waterways. These will be major construction projects that will use a lot of steel, concrete and equipment.

There are a number of good infrastructure ETFs out there, but most of them are global in scope. Reading “the fine print” you have to guess that President Obama will make sure that our public tax dollars will flow to U.S. companies. If you want an all-domestic infrastructure play, the closest you can get is the PowerShares Dynamic Building & Construction Portfolio ETF (NYSE:PKB).

The index bottomed twice last month at about $7.50 per share and has recently rallied above its 50-day moving average to about $11.50. If you were to decide to buy in, do not chase it…$10 looks to me like a price that could yield you some big returns and as always keep you stops pretty tight.

Source: Want to make Big Bucks off Obama’s Stimulus Plan? Just read the fine print…

And history shows that such periods can be the worst for investors to navigate – especially when they follow a record stock-market run, such as the all-time-highs that U.S. share prices reached last fall.

In the United States, for instance, Dow Jones Industrial Average hit 381 on Sept. 3, 1929, a record pinnacle achieved in advance of both the Great Crash and the Great Depression that followed – and a level that wouldn’t be eclipsed again until November 1954 – more than 25 years later.

From the Great Crash, fast-forward 60 years, to 1989 Japan. On Dec. 29 of that year, the Nikkei 225 Index topped out at 38,957.44, before closing at 38,915.87. By the following September, stock prices had nearly been halved – and there was still much more bloodletting to go. (Despite several subsequent rallies up over the 20,000 threshold, the Nikkei ultimately bottomed at 7,830 in April 2003. It closed yesterday – Thursday – at 12,887.95, still down 67% from its trading high 19 years ago).

The fallout from Japan’s slow motion, stock-and-real-estate-market meltdowns was incredible. By early 2004, Japanese houses were selling at 1/10th their peak value, and commercial real estate was selling for less than 1/100th of its record highs. All told, an estimated $20 trillion in stock and real estate wealth was vaporized (although one could easily argue that the peak values weren’t real to start with).

That’s scary stuff, especially because many experts fear the U.S. version of the Lost Decade that’s to follow could be much worse. After all, the U.S. financial crisis is much, much bigger, and the resultant malaise is arguably going to take much longer to work through.

Let’s look at some of the some of the profit plays that will allow investors to sidestep a long U.S. slumber – and profit just the same.

1. Miss the Market Meltdown: The Dow closed at an all-time record high of 14,164.53 on Oct. 9 of last year. With yesterday’s 207-point rally, the Dow closed at 11,446.66 – leaving the 30-stock blue-chip index down 19% from the October record, leaving it right on the doorstep of a bear market.

But what if things were to get much worse? For the Dow to match the Nikkei’s wrenching decline of 67%, it would have to drop all the way down to 4,574.29 – an area it hasn’t seen since the first half of the 1990s.

Will the Dow drop that much? Probably not.

But it doesn’t hurt to hedge. That brings me to a key point: There’s a big difference between “diversification,” which most individual investors equate with “protection,” and actual “hedging,” which is part of an investment-protection package that professional traders employ. If we believe a market poised for a real fall, we want to hedge and find an investment that’s going to go up in value while everything else is going down.

For us, that investment is the Rydex Inverse S&P 500 Strategy Fund (RYURX). RYDEX URSA is a so-called “inverse fund” that’s designed to profit as the Standard & Poor’s 500 Index declines in value. In that way, it complements our other holdings by providing some portfolio stability.

As Money Morning Investment Director Keith Fitz-Gerald says, hedging is such a compelling strategy because financial studies demonstrate that “even though broad sections of the markets may decline over time and our portfolios with it, we need only have a small section permanently hedged at any given time. The reason is that, by having a small portion of our assets (5%-10% or less) earning above-average returns, our overall returns are far higher over time.”

2. Gold Isn’t Just for Hedging Anymore: Mention the word “stagflation” to anyone who worked and invested during the 1970s, and I’ll bet you’ll actually see that person physically shudder at the memory. Stagflation – the double-whammy combination of stagnant economic growth and high inflation – was thought to be an impossibility, until it showed up during that decade, leaving ruin in its wake.

But for our purposes, no matter whether we’re looking at stagflation or inflation, one thing is clear – we’re looking at higher prices. And when prices are on the upswing, gold is the one investment you certainly want to own.

Then there’s also the whole “Lost Decade” outlook for the U.S. economy. In a misguided attempt to slowly deflate the asset bubbles it created with a years of overly expansive monetary policies, the U.S. Federal Reserve is now keeping interest rates at artificially low levels – gambling it will still be able to launch a successful counterattack on inflation later on. What’s more, the central bank also has made the ill-fated decision to diversify into the “bailout business” with its intervention in the Bear Stearns Cos. (BSC) and Fannie Mae (FNM) and Freddie Mac (FRE) debacles.

The artificially low interest rates will continue to punish the U.S. greenback, sending it lower and causing inflation to accelerate. And the trillions in debt the U.S. government’s balance sheet will take on from the Fannie and Freddie bailouts certainly won’t help.

In addition to the bleak-sounding inflation-case for gold, there’s also what I like to call the “wealth case” for the “yellow metal.” As the consumer classes in China, India, Latin America and Emerging Europe grow in both breadth and depth, their ability to buy luxury goods will finally intersect with their desire. And gold will be a major beneficiary.

But how best to play it? There are mining companies, bullion, coins and even jewelry. Everybody has his or her preferences for gold investments, including us. We prefer the SPDR Gold Trust Exchange Traded Fund (GLD). There’s no delivery risk, it’s liquid, and you can buy and sell easily through any online brokerage.

This fund is full of the world’s largest construction and engineering firms, heavy-equipment makers, and building-material producers. Fluor, which we featured last week, is a large weighting. Also included is Valmont (utility poles and irrigation equipment), Tetra Tech (water), and Terex (excavators and cranes).

The PKB soared from mid-2006 to mid-2007. Infrastructure investors gained 50% in just 12 months. The soaring turned to sinking last year as the credit crisis hammered shares related to global growth. The PKB is now holding steady around $18. So… has infrastructure put in its low?

Our guess is yes. U.S. infrastructure has earned a widely publicized “F” grade. The blossoming BRIC nations require bridges, roads, refineries, pipelines, and ports to continue growing. The Middle East is bathing in cash and needs to upgrade its ability to pump and process crude oil. This industry has an unimaginable amount of money headed toward it… think $41 trillion. We’re placing this trend in the “no brainer” category.

Source: The Infrastructure Correction Is Over