Investing In Infrastructure Companies

The U.S. has been lagging in infrastructure spending for decades. At present, America spends less than 2.4% of its GDP on infrastructure, compared to 5% in Europe and 9% in China. At the same time, the U.S. population is expected to grow 50% by 2050.

According to an estimate from the American Society of Civil Engineers, its suggested that the U.S. government will need to spend $1.6 trillion over the next five years just to bring existing infrastructure into solid working condition.

The flooding in the Midwest has pushed this issue even closer to center stage. Pictures like these are popping up in every paper:



Even though the housing and construction industry may be tanking, companies that deal in infrastructure development should do very well for the next several years.

According to one newsletter editor,

The next president, whoever it is, will feel a lot of heat next year -- the Highway Trust Fund runs out of money in 2009, for example -- and a big spending package on infrastructure seems likely.

The Cheapest In 25 Years

According to Steve Sjuggerud, Japanese stocks are cheaper than they've been at any time in the last quarter-century. I started buying Japanese small cap stocks via the ETF last year, but I was early to the party.

You have to go back to the beginning of 1983 to find price-to-earnings ratios and price-to-book values this low... and dividend yields this high.

If you were bold enough to buy Japanese stocks at the beginning of 1983, and hold them for seven years, you'd have made five times your money... The Nikkei – Japan's main stock index – started 1983 at 8,000 and closed 1989 near 39,000.

Just to give you an idea of what that means, consider the Dow Jones Average in the States... Today it's around 12,000. Can you imagine it rising to just under 60,000 in seven years? That's how much Japanese stocks moved starting in 1983, the last time they were this cheap.

Of course, Japan was undergoing an extraordinary transformation at the time. And it had to pay for that spectacular move higher... It's now nearly 20 years after the peak. And the market is still down more than 50%! The Nikkei bottomed most recently at around 12,000 in mid-March. Today it's closer to 14,000. So we might just be seeing the start of an uptrend here...



When you size it up under our True Wealth lens, Japan is:

1) The cheapest it's been in over a quarter-century.
2) Ignored, because it's performed so darn badly for so darn long.
3) Quite possibly in the beginning of an uptrend.

Bold speculators could step in today. A broad-market index fund for Japan (like EWJ) is the simplest way to go. Smaller stocks are even cheaper than the ones in the broad index. But speculators could get burned now...
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Look, if this is truly the beginning of a major bull market in Japan, like 1983 to 1989, then we don't have to be the first ones in. We're conservative. We'll give it just a little more time to develop... to prove itself. Right now, we have no particular catalyst... and no uptrend. So we're in no hurry.

It's not often you get to say something is the cheapest it's been in a quarter-century. But you can say that about Japanese stocks today.

Someday soon, we'll be buying Japanese stocks.

Good investing,

Steve.

Pork Prices Are Increasing

According to the Des Moines Register, it seems that Pork prices are next on the list of inflationary increases. Even though there's still no inflation, isn't it funny how everything is increasing in price!

For consumers feeling the pinch of higher food prices, the flooding of prime Midwest farmland will bring more bad news in supermarkets through next year.

By wiping out corn and soybean crops across Iowa, Illinois and other states, the flood is driving up prices that were already at historic highs and increasing the cost of feed for cattle, hogs and poultry.

"I have no choice: going broke or increase prices," said Heinz Kramer, who expects to have to charge more for the pork and beef that he processes at a family-owned company in La Porte City.

Pork prices could be up as much as 30 percent next year because of production cutbacks, said John Lawrence, an economist at Iowa State University. Prices of beef and poultry products are likely to be at least 10 percent higher by the end of this year, he said.

Even the Wall Street Journal has an article on soaring meat prices:

Livestock farmers and meat producers across the country have been dealing with soaring feed costs for nearly two years. Now, heavy flooding in Iowa is sending corn prices even higher. Thursday, the corn futures contract for July delivery closed at $7.27 a bushel on the Chicago Board of Trade, up about 13% from two weeks ago.

The floodwaters, grain prices, worried Wall Street debt raters and sticker-shocked consumers have combined in recent days to slice millions of dollars in value from shares of protein giants such as Smithfield Foods Inc., Tyson Foods Inc. and Pilgrim's Pride Corp.

Tyson shares perked up Thursday after BMO Capital, noting the recent slide, called the company "our favorite ag/protein idea." Tyson shares were up 5.8% at $14.47 in 4 p.m. New York Stock Exchange composite trading.

Although meat prices have been climbing of late, the meatpackers and the farmers who supply them haven't been able to offset the huge increase in grain expenses. That is being exacerbated by expected crop losses from flooding and harsh weather.

Time To Buy Airlines!

One of my favorite investors and long-time commodities bull, Jim Rogers, gave an interview to Bloomberg this week, and his story's largely unchanged... Jim is still short all investment banks through an ETF. He's specifically short Citibank and Fannie Mae.

Rogers also announced he purchased airlines. His reason... "Everybody's very bearish." He said flights are full, fares are increasing, and if you ordered a new plane today, you couldn't get it for several years due to problems at manufacturers. Also, 24 airlines have declared bankruptcy and "bankruptcies are signs of bottoms, not signs of tops."

There you have it - it's time to short Fannie Mae and buy airline stocks

US Exports Explode

According to the International Herald Tribune:

As U.S. exporters scramble to meet the increased demand for their products created by the weak dollar, they are running into an unexpected snag: Space on ships leaving American ports has suddenly become scarce.

So the country's farmers, chemical companies, machinery makers and other exporters are facing delays at the docks that erode the currency advantage they enjoy over their foreign rivals. Or they end up paying a premium for space that, until recently, shippers were almost giving away, producers and shippers say.

Timothy Powers, chief executive of Hubbell, an electronics maker based in Orange, Connecticut, told investors this week that in March, his company saw East Coast waiting times for cargo space jump from two days to three weeks.

I guess its time to look at shipping company stocks.