Still Waiting for Stimulus Stimulation

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

If trickle-down economics is a tired old model plagued by frequent clogs in the plumbing, then ongoing efforts to promote domestic growth through debt-based stimulus packages has yet to even build the pipes.

Some 14 months have passed since I reported that industrial behemoths like Caterpillar (NYSE: CAT  ) and U.S. Steel (NYSE: X  ) noted only scant allocation to infrastructure and related industrial catalysts within a $787 billion stimulus package that indeed helped to ease some of the panic on Wall Street. When I spoke to Nucor (NYSE: NUE  ) CEO Dan DiMicco last November, he called the measure "a welfare package that did nothing to create jobs". As recently as December 2009, Commercial Metals (NYSE: CMC  ) observed "no discernable stimulus effect," but offered hope that some impact "may finally be evidenced by spring."

Now that spring is in the air, I suspect you will hear plenty of anecdotal evidence to the effect that stimulus spending is finally bearing fruit and paving the way for a sustainable U.S. recovery. With 730 allegations of waste or fraud surfacing thus far, combined with the recent $75 billion upward revision of the cost of the stimulus, the pressure is on Washington to show some tangible results.

Let's forget for a moment that China has just completely schooled us on how effective a stimulus package can be when it adequately targets the productive sectors of an economy rather than perpetuating a broken, debt-dependent, consumption-driven economic structure. While road crews have been out in force across this nation laying down enough asphalt to pave the moon, China quietly set about purchasing as many strategic natural resources as it could get its hands on while keeping its steel mills running full tilt. By October 2009, South Korea's POSCO (NYSE: PKX  ) was back to 92% capacity utilization while our domestic mills scraped their way back to 55%.

Meanwhile, even as Commercial Metals makes difficult choices like the recently announced closure of its deck and joist business, it appears that some iota of a stimulative effect is finally poised to be felt by the steelmakers. For its part, Nucor was careful to differentiate between encouraging strength in less construction-sensitive product segments like steel sheet and plate, while noting persistent weakness in "long" products like bars and rods.

Adding another layer of insight, Commercial Metals this week further subdivided the commercial construction-driven segment between the private sector and public sector components. Noting persistent weakness from the private sector, the company expects: "the public sector of the nonresidential markets to improve further in the second half of calendar 2010 as projects funded by stimulus dollars are awarded." I don't know if that's enough to fuel recent speculation that Commercial Metals may be targeted for acquisition by the likes of Gerdau Ameristeel (NYSE: GNA  ) , but it's a start.

While reporting a sizeable net loss of $173.3 million for its fiscal second quarter that included a $38.1 million writedown for the deck and joist business, Commercial Metals' list of persistent woes impacting its fabrication unit sums up the economic context within which these stimulative impacts are anxiously awaited. This industrial bellwether still observes: "no effective stimulus for construction, lack of customer liquidity, high unemployment and building vacancy rates, and state budget woes." I remind Fools to avoid the convenient presumption that the long-awaited stimulative impacts that may be forthcoming constitute some kind of assurance of a sustainable economic recovery.

Which domestic steelmaker will you choose as your steely wager for eventual recovery in the U.S. industrial sector? Please nominate your favorite in the comments section below, and cast your official vote by joining Motley Fool CAPS and adding your pick to your CAPS portfolio.

Fool contributor Christopher Barker is the Nat King of Coal and the wild boar of iron ore. He can be found blogging actively and acting Foolishly in the Motley Fool CAPS community under the user name TMFSinchiruna. He tweets. He owns no shares in the companies mentioned. POSCO is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a stainless disclosure policy.

Read/Post Comments (0) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1138346, ~/Articles/ArticleHandler.aspx, 10/26/2016 5:47:21 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 4:02 PM
CMC $16.45 Up +0.17 +1.04%
Commercial Metals… CAPS Rating: ***
CAT $84.13 Down -0.35 -0.41%
Caterpillar CAPS Rating: ***
GNA.DL $10.99 Down +0.00 +0.00%
Gerdau Ameristeel… CAPS Rating: *****
NUE $47.34 Up +0.34 +0.72%
Nucor CAPS Rating: *****
PKX $53.67 Down -1.03 -1.88%
POSCO (ADR) CAPS Rating: ****
X $20.09 Up +0.62 +3.18%
United States Stee… CAPS Rating: **