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Thoughts for 2009

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By TMFEldrehad
January 28, 2009

Posts selected for this feature rarely stand alone. They are usually a part of an ongoing thread, and are out of context when presented here. The material should be read in that light. How are these posts selected? Click here to find out and nominate a post yourself!

As I often do this time of year, I spent some time thinking about what happened over the past year and, perhaps more importantly, thinking about what I expect to happen over the coming year and how it might impact my life both personally and as an investor.  After all, this coming year marks a new start in a lot of ways.  President-elect Obama's inauguration is but weeks away, and whether or not you agree with his political viewpoints, I think it's safe to say that his presidency will be substantially different, in a number of ways, than was President Bush's.

I, like a number of people I imagine, have spent a little time thinking about how an Obama presidency might impact the economy.  Perhaps the most interesting to me is his proposed public works construction program which he pledged about a month ago would be the biggest since the inception of the interstate highway system.  While he still has to haggle out the specifics with congress, price tags in the $400 to $600 billion range (or more) have been bandied about.  Proposed elements include not only classical infrastructure projects like repairing roads and bridges, but also technology and 'green' projects that will hopefully reduce energy needs and global warming.

Putting aside, for a moment, the issue of whether or not our government should be going on an even bigger spending spree than it's been on lately, assuming that Obama largely gets his way, what kinds of investment opportunities might exist as a result of this kind of stimulus package?  If I were looking, as an investor, to capitalize on this government spending, what kinds of things would I be looking for?

Well, I know what I wouldn't be looking for -- a company or business that actually needs�the money.

It's no secret to anyone who's followed my CAPS record that I've long been a bear on alternative energy in general, and fuel cells and ethanol in particular.  While some might argue that Obama's proposal might be just what the proverbial doctor ordered, I don't think so.  These companies simply aren't really economically viable today.  The infrastructure challenges related to fuel cells are simply too staggering and the net energy gain from ethanol is simply too small.  Nothing an Obama administration could do can materially change these basic, fundamental facts.  Sure, new research might lead to a technological breakthrough that changes the underlying economics of these industries, but unless and until it does, I will continue to be bearish.

So... what will I be keeping my eye out for?

For starters, it'd be a successful business that is capable of not only surviving, but thriving on its own without significant government intervention -- one which might get a little boost from a large infrastructure spending bill, but that doesn't actually depend on it.  It's one thing, in my mind, to look at political trends and attempt to find solid companies that are well-positioned to capitalize on any potential upside these trends might bring, and quite another to actually count on them.  The former, in my opinion, can make for some smart investments -- the latter seems, to me, to be nothing more than pure speculation.

Regards,

Russell (a.k.a. TMFEldrehad)