Lets talk about the Stimulus Plan.... 4

[shaunsnoll]

Hi everyone,

please excuse me if this is discussed somewhere else, but i thought this part of the forum would be appropriate

i'm just looking at this ~90B$ in US infra spending over the next 2-3 years from the Obama plan and wondering what you guys take is on how it will impact the US E&C Industry? I have found the members here to be of high quality and intelligence so will be interesting to get your feedback and thoughts.

thanks!

 

[TheTick]

I have two questions about the whole stimullistles plan:

1. Will the short term gains be oversdhadowed by the enormous debt burden we are incurring?

2. Are we ready for stimulus? We are still nursing a debt and risk hangover. We are not ready for spending. To me it seems like planting seed with snow still on the ground.

 

[Zapster]

How can anyone talk about this plan when no one read it?

 

[TheTick]

Half of Congress hasn't read it, either. That was a point of contention among the Democratic dissenters in the House. Pelosi got upset when her own people didn't want to ramrod it through.

It's easy enough to talk about the potential impact of $800 billion in deficit spending, regardless of what is or isn't in the bill.

 

[shaunsnoll]

my initial take is that it will be more of a 2010-2011 story, and that it probably won't offset the decline in US infra spending from the state and local governments due to their budget issues, since if we assume that we get 45B$ of spending in 09 and the other 45B$ in 2010, that will not even offset the 140B$ combined deficit the states are likely to have by 2010, which expands to 180B$ in 2011

so it would seem to be that even under best case scenario, the US E&C industry will still see negative revenue growth in 2010.

your thoughts?

 

[ctopher]

The easiest way is to have your girlfriend or wife have 8 babies, you'll do fine. Who needs a stimulus plan?



Chris
SolidWorks/PDMWorks 08 3.1
AutoCAD 08; CATIA V5
ctopher's home (updated Aug 5, 2008)
ctopher's blog
SolidWorks Legion

 

[shaunsnoll]

mostly i'm just trying to get my head around what the impact will be for US E&C firms, if the ISM goes to ~20 again, seems like there is no way this stimulus plan could possibly offset the US (and global) slowdown for the larger E&C companies (Aecom, URS corp, Jacobs, etc).

 

[shaunsnoll]

hahahha!! heck yeah! i'm having some octoplets!

 

[SnTMan]

Zapster, I can easily talk about it without reading it. I could go on at length, but I'll keep it short.

1) This money is "black hole" money, it will disappear largely without a trace.

2) The quoted figure "X million jobs saved or created" is fiction.

I have nothing to add and I doubt I would respond to any challenges to my statements

Regards,

Mike

 

[csd72]

SnTMan,

I cannot see how this is black hole money, more money needs to be spent on infrastructure in the US as it is deteriorating faster than it is being repaired.

Any money spent on this is better than nothing, surely.

 

[ewh]

I don't think it's all blackhole money. 1-2% will probably see the light of day.

"Good to know you got shoes to wear when you find the floor." - [small]Robert Hunter[/small]

 

[jmw]

I had to agree with Sarkosy (sp?) (France) when he laid into Brown (UK):
Investing borrowed money into infrastructure and projects means you get something for your money and that is what the French propose.
Just cutting taxes, as Brown proposes, and bailing out the debt ridden banks does actually acquire anything but debt.
That's not to say either is necessarily going to work but if either was to have less long term negatives I'd say at least have something to show for all the money you've spent, like a dam or two, a bunch of nuclear power stations, some new roads.
But one things for sure, I don't think we need $140million dollars worth of new climate computer models.


JMW

http://www.ViscoAnalyser.com

 

[TheTick]

The stimulus bill takes money out of the hands of those most capable of reviving the economy and puts it in the hands of the government.

 

[metengr]

We don't need anymore spending programs. All I want are my freakin taxes to go down. If Congress would have considered deep tax cuts across the board to put more money in consumers pockets to pay down their debt and continue some spending this would be a stimulus.

 

[SnTMan]

csd72, I said I wouldn't but....

I agree that more spending should be on infrastructure, but per the news, this figure is only about 6% of the total. Outrageous.

If we are going to spend public money, I want stuff we can put our hands on in 5 or 10 years time.

Regards,

Mike

 

[zdas04]

I've been through several booms in the Oil & Gas industry (always followed eventually by a bust), and the key characteristic of every one was everyone throwing money around like a drunken sailor, mostly on non-productive stuff. When manpower is short everyone raises their pay scale and lowers their standards, costs go up and value per dollar go way down.

Now these were multi-million dollar booms. The "stimulus plan" is nearly a trillion dollars--four to six orders of magnitude bigger than the booms that one industry was absolutely unable to manage. This fiasco has the potential of making Oil-For-Food look like a church social. Many BMW's will be purchased/leased by bottom feeders who have never produced anything in their lives.

I agree that if the package was 90% infrastructure it could possibly do some amount of good (except where to you find the workers to do that magnitude of skilled effort?). With 6% of the total going to things that you can touch and feel I'm thinking that little of the money will ever leave the beltway.

David

 

[JAE]

The key to all this isn't some stupid "stimulus" effort by the government to throw money into the economy - that's been tried before and never really worked.

What really needs to happen is the US Gov't needs to suspend their mark-to-market accounting rules on banks. What this generally means is this. Currently, under mark to market rules, a bank must value all its assets per the CURRENT market, not a historical market value.

For example....Suppose you own a $600,000 house near a forest and have some other money assets. You go to borrow money from someone, full of knowledge that your house has a historical value of about $600,000.

A forest fire suddently looms up and approaches your house.
When you go to a bank for the loan, the bank sees the fire and doesn't accept your use of your house as collateral as they are "marking" your house to the current "market" as worth nothing....i.e. its going to burn down.

Historically its worth $600,000 but the bank, in its response to a potential fire on the house says its worth $0.

Suddenly the fire turns and your house is spared. But you couldn't get the loan as the bank only looked at the current, fluctuating value of the house and not its historical value.

In the banking industry, the government forces banks to have a level of reserve on hand and banks can only loan out so much money based on their "marked" assets. In this down market, those assets are VERY undervalued when compared to historical levels. So money is tightened since the banks are limited in what they can finance. The economy then further sinks, further reducing the assets the bank holds, further reducing available money, and the snowball down the hill occurs.

By suspending these mark to market rules, the money in the US would be freed up and certainly help the economy...much more than a ridiculous stimulus package that is really, truly a further attempt to strengthen government, not the economy.

 

[vc66]

I'm sorry, but unless we plan on selling those bridges and dams, after building them, then all those jobs are not real. Don't get me wrong, they're putting hard working (hopefully) people to work, but only until those infrastructure projects are finished--then the jobs are finished as well.

To me, the main problem (with regards to jobs) is that the U.S. has no hold on a specific technology. Meaning, there is nothing that can be designed and built here, that can't be someplace else in the world for 4 times as cheap. Unless they start using some of this money to create jobs that will last, indefinitely, they're all just phantom jobs. (Not saying I know how to do it, but I'm not an all-knowing politician.)

V

 

[ctopher]

The word lately is that Bo*ing is making a deal with India. India will buy their jets if Bo*ing outsources and trains their people. A nice swap for India.
Lots of IT employees were laid off recently to make way for this deal.
The stimulas plan is a good idea, but US companies need to keep the work force here to make a difference.

Chris
SolidWorks/PDMWorks 08 3.1
AutoCAD 08; CATIA V5
ctopher's home (updated Aug 5, 2008)
ctopher's blog
SolidWorks Legion

 

[shaunsnoll]

wow, i didn't mean to start such a heated argument/discussion but i guess i should have known better than to bring up politics! haha my main purpose of bringing this up though was to get your ideas on how this will impact the US business of the large E&C firms like Aecom, URS corp, Jacobs, etc.

where do you guys get that 6% number? i get 90B$ on a package of ~800B$, or 11.25% of the stimulus bill aimed directly at US infra

if you read the bill it has ~90B$ explicitly meant to be spent on US infra, and 50B$ of it is very focused and targeted even down to the state level of who is supposed to get the money.

FYI, suspending mark to market could ruin the international financial system. the banks already don't believe each other as to whats on the books, you get rid of the only accounting we have you'll see LIBOR go to 10% and more banks fail. the bank issues are not accounting, the problem is the levered up and bought illiquid assets at the top of a bubble. anyone who had done that with tech stocks in 2000 would be equally insolvent regardless of what accounting methods are used.

and they are cutting taxs AND spending money, but the basic gist of gov spending over taxes is that people save some of their income and don't spend it all so the multiplier effect is less. this is very well documented.