Welcome to the first “Best-Of” Weekend Edition of Investor’s Daily Edge. If you didn’t see the Unplugged Edition on Thursday, this is one of many changes we have made for the coming year. Other changes include a new video room on the website as well as answering your reader feedback in the editors’ blogs. The Weekend Edition will now be a best-of edition, where we will take highlights from the daily issues and compile them into one article. If you missed any of the week’s articles, you will be able to catch the highlights in one issue. If you want to read the entire article, simply click on the day of the week and it will take you to that day’s complete issue. Without further adieu, let’s get to it. Monday My message to Congress and to the President is this: Don’t screw up the chance you are being given. Start acting in our best interest and not your own. Stop looking at each other across the aisle like you are enemies. The country needs partisan politics to go away now more than ever. You did it when we were faced with the crisis of the attacks of September 11. Now we have a different crisis and we need our elected officials to act without regard for their own benefit, just as you did in 2001. If you screw it up this time, the American people will revolt and not only will our economy be changed forever, but our entire political system will be changed. But maybe that is what we need at this point. President-Elect Obama was definitely right about one thing, the longer we wait to act, the worse things are going to get. Click here to read the full article. Tuesday [regarding the wars in Iraq and Afghanistan] … The companies already providing their services over there are in a better position than anybody to know what‘s going on. And they also don't believe the talk of cutting back the private-sector presence. For example, William Ballhaus, the CEO of DynCorp (DCP), an infrastructure and security company with a large presence in Iraq , said that with existing commitments stretching military manpower, capacity, contractors add value by letting the military focus on security operations. Iraq's needs are gigantic. Usually, a country's needs grow organically as it modernizes and the economy expands. But Iraq is emerging from a devastating war followed by years of destructive civil violence. Rebuilding Iraq is going to take a great deal of effort, money, and heavy equipment. Think construction equipment... transportation and infrastructure services... and know-how. Iraq will be getting loads of new stuff, including tow trucks, communications vehicles, hauling vehicles, aerial platforms for construction, fire and garbage trucks, and heavy-load hauling vehicles. Click here to read the full article.
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Wednesday It isn’t that I don’t think an infusion of cash or any investment in infrastructure is a bad idea, I know we need it. There has just been something out of place or not quite right about it. I attributed it to my genetic rejection of anything that comes out of Washington as bad and probably exactly the wrong thing at the wrong time, or worse, just another political payoff with my money. Then it hit me. Putting cash into a broken banking system is like having a hole in a water bucket. We can’t possibly expect this money to have its maximum affect on the economy if the banks are still broken. How can he be missing this? Banks must be recapitalized and made healthy first, if any stimulus package is to have any chance of producing the desired affect of shocking the economy back to some degree of normal functioning. The ideal situation that would produce the best results is to have the stimulus money pass through many hands on its way through the system, which includes most importantly, the banks. The banks are where the money really starts to grow. This is basic economics. As things stand now, banks are literally hoarding as many assets as they can just to stay above water. They have been crushed by the collapse of the mortgage market. Click here to read the full article. Thursday There’s a lot to think about as we plan how to right the economy again. But one thing we should not waste time on is the notion that pseudo-Darwin arguments are either well informed or likely to help. There are better tests and better questions. Will spending on infrastructure as President-elect Obama wants help the jobs situation? In the short run, almost certainly yes—in a limited way. Not many unemployed accountants or brokers will get jobs building roads. In the long run… Well, unless the short run improves, the long run won’t look very good, either, since long-run economic health depends on a revival in consumer spending and optimism. Don’t like infrastructure spending? Then what other approach do you think will work better? All ideas are welcome, and there may indeed be better answers. I’m willing to listen to your ideas—but not to cockamamie pseudo-Darwinism. Will the national debt get too bad if Obama gets his plan through Congress? If you think so, I think you are probably right to worry. I will tell you that this truly frightens me. I already thought our repeated budget deficits of the last several years were dangerous. My opposition to the Bush administration’s overspending was exactly that it did not leave sufficient room for emergencies like the one we are facing now. Even so, we already made the mistake of overspending when we didn’t need to. Now what? Do we skip doing what we need here, now, at home, because we already spent daddy’s money on a flashy war in a distant land? That doesn’t seem to answer, does it? Click here to read the full article. Friday Thankfully, besides Ron Paul, there is at least one other politician in Washington asking the question, where is all this money going to come from. Speaking to the Washington Times, Michele Bachmann (R-Minn) said: “[…] someone has to pay for [the stimulus package] whether it's today's taxpayers or their children and grandchildren. There comes a time when government simply cannot provide enough government jobs to bolster the economy. There comes a time when the taxpayers' burden to pay for all of the projects is too heavy to carry. With the trillions in bailouts and stimulus packages that have already been passed and that are in the works, that time may be sooner than we think. “Government should not take on the role of creating the jobs and buying the goods. Government should be in the business of establishing an environment in which businesses can thrive and play those roles themselves. Americans need a stimulus proposal that actually stimulates the economy.” I heartily agree. But I am also realistic enough to understand that that is not what we are going to get. What we will get is a massive “stimulus” program with an emphasis on infrastructure, similar to the public-works projects of the Great Depression. If you’re looking for a way to capitalize on the government-sponsored bull market in infrastructure, I expect there will be some upside to the usual cast of companies that benefit from government construction and engineering projects. Companies like Fluor (FLR), Shaw Group (SGR) and Jacobs Engineering Group (JEC). But the real winners – in the long-term – will be those investments that benefit most from rising inflation… precious metals and precious metals mining stocks. Click here to read the full article.
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