The Infrastructure & Energy Sectors: The 2 Best Places to Put Your Money
by David Fessler, Advisory Panelist, Investment U
Friday, September 5, 2008: Issue #850
As a degreed electrical engineer, I’ve always been fascinated with energy and infrastructure. Watching a huge bridge being built over a river, a tunnel being bored through a mountain, or an offshore oil rig drilling tens of thousands of feet down gets my heart pumping.
Projects like those truly are a testament to the ingenuity of man, and they’re necessities in any country with a growing economy. Right now, however, dwindling fossil fuels and crumbling infrastructure here - and the lack of it elsewhere - are huge problems in need of solutions.
Massive amounts of capital will be required to solve them - $53 trillion just on the infrastructure piece alone. And the opportunities for investment are nearly endless within the infrastrucuture and energy sectors.
Let’s take a look at the energy sector first…
T. Boone Pickens On The Oil Crisis
In his July 8 interview on CNBC, T. Boone Pickens said, “Oil is getting more expensive to produce, harder to find and there just isn’t enough of it to keep up with demand… and now it’s reached the point of crisis.”
December 31, 2005 passed into the annuals of history with little notice. On that day, half of all the crude oil ever found was consumed - over one trillion barrels were gone in the blink of an eye. In the last 10 years alone we’ve used 500 billion barrels.
But the energy picture could get much worse.
“Oil prices could be $500 a barrel within three to five years,” warned senior energy advisor Dr. Robert Hirsch. “The reason is we’re limited by geology… there just isn’t that much oil out there. We need to produce three to four million barrels of new oil each year just to stay even (to offset the decline in older fields).”
Think Hirsch’s $500/barrel oil is a pipedream? Then consider the political turmoil in Nigeria, Iran and Angola… all powder kegs that could explode at any moment, immediately cutting off millions of barrels of daily supply.
For 200 years, the world’s energy supply has primarily come from burning fossil fuels. But increasing global demand is outstripping the world’s ability to supply them. Emerging economies are clamoring for the good things in life we have. And it all requires more and more energy.
The 21st Century Energy Paradigm Shift
The good news is that record oil prices are the catalyst that’s ignited the “21st Century Energy Paradigm Shift,” as I like to call it. And this time, there’s no turning back.
The next 50 years will see major advances in alternative energy supplies, like solar, wind, geothermal and others. At the same time, we’ll start to see a gradual shift away from fossil fuels.
But dwindling natural resources aren’t the only problems facing us…
- Just over a year ago on August 1, 2007, the bridge carrying Interstate 35 over the Mississippi River in Minneapolis collapsed, killing 13 people and injuring over 100 more.
- According to the American Society of Civil Engineers, it’s one of an estimated 160,570 bridges that have been deemed structurally deficient or obsolete. That’s a whopping 27% of all of the bridges in the country.
- A recent a study by the Associated Press found that only 12% of the nation’s 1,020 worst structurally deficient bridges had been fixed.
Surprised? Don’t be.
Pete Rahn, the Transportation Commissioner of Missouri, had this to say, “At some point, relying on miracles is not going to be the best way to manage our system. I would pray we don’t have to have another disaster to bring about the right attention to this. I see very little political will there.” (Politicians, please take note.)
But it’s not just the nation’s bridges that are falling apart. Roadways, water and sewer lines, water and sewerage treatment plants, and the power grid are all in dire need of replacement or major upgrades.
Emerging economies around the world are spending big money - at twice the rate of developed economies - to upgrade their infrastructure. Why? A study by the World Bank estimates that adding 1% to a nation’s infrastructure “stock” results in a similar 1% gain in Gross Domestic Product (GDP).
The 2 Best Places for Your Money Right Now
Now some of this is unnerving and downright scary, but here’s the good news: The energy and infrastructure sectors represent perhaps the two best places to put your money for the foreseeable future…
Why? Energy and infrastructure have an incestuous relationship:
- You need energy to create infrastructure.
- And you need good infrastructure to move the energy to where it’s needed.
- One can’t exist without the other.
More importantly, the world needs cheap energy not just to function, but also to spur global economic growth. Emerging economies need good infrastructure for the same reasons. Look at all the countries in the world, and you’ll find the one’s with developed economies also are the ones with good infrastructure and cheap energy.
Roads, bridges, railways, ship ports, airports, electrical grids and pipelines are all examples of the types of infrastructure projects underway all over the world, but especially so in developing countries.
Think about this: China spent more on infrastructure in the last five years than in all of the 20th century. And it’s just getting started.
If history is any guide, mankind will continue to improve himself and the environment around him, and the transformation will offer opportunities for investors taking note… I’ll be writing more about the infrastructure and energy sectors in the coming weeks and months. We’ll delve into both sectors in detail and take a look at some of the exciting investments each has to offer.
We’ll be keeping watch on these equipment, crane and drilling companies powering our future…
Good investing,
David
Today’s Investment U Crib Sheet
- After a bruising day in the market like the one we experienced yesterday, it’s natural for investors to get defensive and look to sell. But it’s the great investors that see these down days as buying opportunities. After all, Warren Buffett does. Take a look at yesterday’s issue to see how the “Oracle of Omaha” finds his most profitable winners in Investment U Issue #849, Warren Buffett’s Investment Strategy: Time to Buy the Ultimate No-Brainer.
- Last week, Floyd Brown showed us how to find bargains in deep value investments. Many of these shares are selling at a discount not because of poor performance, but simply because of negative investor psychology. Here’s a strategy for finding these bargains, and for distinguishing them from companies on their deathbed.
- And if you’re having trouble finding your next big investing idea, David Fessler shows us how to find winning stocks on your own in Investment U Issue #847, Stock Market Research: How To Find Winning Stock Ideas On Your Own.
- To save yourself a ton of time and money, you can also join The Oxford Club. That’s where we distill all of our stock research and present specific investment ideas each month.
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17 Responses to “The Infrastructure & Energy Sectors: The 2 Best Places to Put Your Money”
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October 9th, 2008 at 9:38 am
[...] from fossil fuels that’s driving billions of investment dollars in Investment U Issue #850, The Infrastructure & Energy Sectors: The 2 Best Places to Put Your Money for the Next 20 [...]
October 9th, 2008 at 9:54 am
[...] Dave showed us the two best places for your money for the next 20 years in Investment U Issue #850, The Infrastructure & Energy Sectors. And the best part is that some of the best investments on Wall Street right now are also the most [...]
October 9th, 2008 at 10:53 am
[...] And as our resident energy and infrastructure expert, Dave keeps his eye on the sectors and companies that are able to take advantage of the market’s movement best. Which is why he recently gave us the two best places for our money right now - the infrastructure and energy sectors. [...]
October 9th, 2008 at 11:26 am
[...] in the United States, our infrastructure is [...]
October 9th, 2008 at 12:50 pm
[...] -The Infrastructure & Energy Sectors: The 2 Best Places to Put Your Money Over the Next 20 Years: Issue [...]
October 29th, 2008 at 9:49 am
[...] to grow its business for the foreseeable future, and it represents a great way to add a healthy infrastructure service business to your recession-resistant [...]
November 5th, 2008 at 1:32 pm
[...] many of you who’ve been regular Investment U readers know, I’m a big fan of& the infrastrucutre and energy sectors. As we wait for the broader markets to recover, the infrastructure service sector looks like it [...]
November 10th, 2008 at 5:19 pm
[...] While the slowdown we are experiencing is nowhere near as severe as the Great Depression, the solution will be the creation of similar New Deal programs in two specific areas: the infrastructure and energy sectors. [...]
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[...] AHCHF) is China’s largest cement producer - hence, it’s certain to benefit from a major infrastructure program of this kind. Be careful, however: It’s quoted only on the “Pink Sheets,” and is [...]
November 21st, 2008 at 6:26 pm
[...] As Obama’s New Energy for America plan comes up to speed, investors could see a huge slug of cash - perhaps as much as $1 trillion - being thrown at the energy and infrastructure sectors. [...]
November 24th, 2008 at 9:23 am
[...] As Obama’s New Energy for America plan comes up to speed, investors could see a huge slug of cash - perhaps as much as $1 trillion - being thrown at the energy and infrastructure sectors. [...]
March 13th, 2009 at 10:43 am
[...] I can think of no other initiative that can match the wide-ranging boost that energy and infrastructure projects will give to an ailing [...]
April 9th, 2009 at 8:46 am
[...] future. Fresh water is clearly the new oil. And now’s a great time to make it part of your infrastructure and energy [...]
May 7th, 2009 at 9:06 am
[...] to grow its business for the foreseeable future, and it represents a great way to add a healthy infrastructure service business to your recession-resistant [...]
May 7th, 2009 at 10:09 am
[...] Dave showed us the two best places for your money for the next 20 years in Investment U Issue #850, The Infrastructure & Energy Sectors. And the best part is that some of the best investments on Wall Street right now are also the most [...]
May 7th, 2009 at 10:27 am
[...] in the United States, our infrastructure is [...]
June 5th, 2009 at 11:19 am
[...] I can think of no other initiative that can match the wide-ranging boost that energy and infrastructure projects will give to an ailing [...]