$787 Billion Later...
The Dynamic Wealth Report
February 19, 2010
by Corey Williams, Editor
One year ago this week, President Obama was signing the $787
billion American Recovery and Reinvestment Act (ARRA). He charged his
VP, Joe Biden, with the task of overseeing ARRA.
Earlier this week, Biden presented the President with a 27 page report
detailing the ARRA’s progress. The report’s a nice bit of light reading
if you’re a fan of government statistics and acronyms.
Oh, you don’t love to read that sort of stuff?
Well then, I’ll give the down and dirty details and an investment idea
to boot.
First off, there is a lot of misinformation surrounding the ARRA.
I don’t know if it comes from merely misinformed or misguided (or maybe
just plain evil) media types. I know it’s hard to believe someone would
sensationalize to boost their ratings.
Or it’s possible certain political opponents are twisting the truth,
possibly to further their own political career.
But most likely the confusion comes from the different bailout and
stimulus packages being passed into law around the same time. And who
expects your Average Joe to actually understand what money went to help
which people. (Can’t we all just watch American Idol and forgot this
boring stuff?)
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A recent CNN poll shows just how displeased and misinformed Americans
have become with the stimulus plan. 56% of Americans now oppose the
stimulus plan. That’s up from 44% when the ARRA was signed into law.
And get this. CNN’s polling director said, “The belief that the stimulus
bill helped bankers and CEOs is due to the public confusing the stimulus
bill with the various bailout bills.”
I think we need to clear the air and set the record straight.
ARRA is not TARP (Troubled Asset Relief Program) or Bernanke’s Fed or
Geithner’s Treasury Department. If you have a problem with bank
bailouts… that’s TARP. Oh, and by the way, TARP was signed into law
before Obama ever took office.
Now that we’re clear on what ARRA isn’t… what the heck is ARRA?
ARRA is $288 billion in tax relief.
Take a look at the difference in Federal Income Tax withholding on your
paycheck between February and March of ’09. 95% of working Americans
should see a reduction in withholdings. That’s a little bit of extra
money in your pocket every payday.
ARRA is $273 billion in direct relief payments to state governments and
individuals.
This money is helping offset state government budget shortfalls. It’s
allowing them to keep hundreds of thousands of teachers, firefighters,
and police officers on their payrolls. A worthy cause if you ask me…
It’s also providing extended unemployment benefits, health insurance,
and support for the people hardest hit by the recession.
ARRA is $226 billion in projects.
This includes the infrastructure portion to be spent on roads, bridges,
and airports. It’s also designed to jump start projects “to lay the
foundation for a stronger economy”. These are investments in new
technologies. (It’s also where there will be opportunities for investors
to profit.)
The Biden report goes into detail about how, when, where, and why the
money’s been spent and will be spent.
The short story is… $179 billion in spending has been paid and $119
billion in tax relief has been doled out. That’s just 37% of the total
to be spent. And most of the spending is direct relief payments. Not
exactly economically stimulating stuff… but it has cushioned the pain we
would have felt without it.
Going forward, the goal is to have 70%, or $551 billion, spent by the end
of September. That’s going to pump an additional $253 billion into our
economy over the next two quarters. And the amount of money being pumped
into projects benefiting businesses you and I can invest in is
accelerating rapidly.
Here’s the deal, the stimulus money is just beginning to flood the
market. It’s going to boost revenues and earnings further and faster
than most analysts and investors think.
The project that caught my attention is the expansion of the broadband
network. $7 billion will be awarded to companies who bring
broadband to communities with little or no access.
Regardless of who wins the contracts for the government projects, the
entire networking industry will benefit. Lucky for you, there’s an ETF to
make investing in this industry easy. It’s the S&P North American
Technology-Multimedia Networking Index Fund (IGN).
IGN holds 31 communications equipment companies. These companies are the
ones making the fiber optic cables, switches, decoders, and other
equipment needed to expand the network.
To add a little fuel to the fire, the technical setup indicates IGN is
headed for a breakout. IGN is in a five month consolidation pattern. It
recently pulled back to the 200-day moving average and has been
rocketing higher over the last two weeks.
A breakout above the previous high around $28 could send share into the
mid $30 level quickly.
Whether you’re a fan of government stimulus plans or not, consider
picking up some shares of IGN today!
***Editor’s Note*** The recent market pullback has created an
enormous opportunity in certain penny stocks. And to take advantage of it, my
friend and colleague, Robert Morris is releasing a blockbuster trade on
Tuesday. It’s a gaming stock selling for a mere 23 cents a share. Robert
thinks it could double in the next few months. Because of the small
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• Whole Foods (WFMI) was upgraded by JP Morgan this
week. They now have an overweight rating on the stock. The company
recently raised its sales outlook for 2010.
• Chemed (CHE) was downgraded to hold by RBC Capital
Markets. The company’s Q4 profit fell and missed analyst estimates by a
wide margin.
• BB&T Capital Markets started coverage on Bucyrus
(BUCY) this week with a buy rating. The mining equipment company is
moving higher ahead of their earnings announcement.
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