I think of it as “The Great Suppression.” The government keeps trying everything it can to suppress the unfolding economic bust. Whether the Great Suppression succeeds or not is beside the point. What concerns us is that its actions will have consequences in the marketplace. And as investors and speculators, we have to think about what those might be.

It’s sometimes uncanny how history repeats. Historian Frederick Lewis Allen writes about the New Deal of the 1930s in his book The Big Change: “It rewrote a good many of the rules of the economic game as played in America.” The steps the government took resemble what’s happening now an awful lot.

“The New Deal,” Allen continues, “continued to prop up ailing corporations through Hoover’s RFC; made arrangements to prevent near-bankrupt firms from going broke; aided farm owners and homeowners in meeting their mortgage payments; underwrote the financing of new housing enterprises; insured bank deposits…” And on and on.

It also went into the business of stimulating the economy directly by “building dams, bridges, parkways and playgrounds on a grand scale.”

If FDR walked the Earth again, Obama’s stimulus would look familiar…

Over the past few weeks, we’ve gotten more details of Obama’s stimulus plan, which comes with a price tag of at least $820 billion (and climbing). Some of the projects of interest to us include:

• Renovate 10,000 schools
• Build more than 3,000 miles of new or modernized transmission lines and install 40 million “smart meters” in homes
• Weatherize at least two million homes and 75% of office buildings
• Launch 1,300 wastewater projects, 380 drinking water projects and 1,000 rural water and sewer system projects
• Repair and modernize thousands of miles of roadways.

“Shovel ready” is the hot new phrase in Washington these days. It means a project is all set to go as soon as the money arrives. The list of projects for Obama’s plan are shovel ready — so they say. As soon as Congress approves the deal, the money goes right to work, like a needle sticking into a vein.

The water pipe business, in particular, ought to benefit from the slew of water projects in Obama’s stimulus plan. Whether the companies build, repair or install pipes, they’re in a great position to cash in on the growing list of projects coming out of Washington these days.

Sincerely,
Chris Mayer

February 3, 2009

Chris Mayer

Chris Mayer studied finance at the University of Maryland, graduating magna cum laude. He went on to earn his MBA while embarking on a decade-long career in corporate banking. Chris is the editor of Capital and Crisis and Mayer’s Special Situations, a monthly report that unearths unique and unconventional opportunities in smaller-cap stocks. In 2008, Chris authored Invest Like a Dealmaker: Secrets From a Former Banking Insider.

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