I Broke The Law… And Paid The Price...
I still remember that guilty feeling in the pit of my stomach… the day I knowingly broke the law.
It was my first year working at a hedge fund and I was still just learning the ropes.
With a tight schedule (and a limited family budget — none of my bonuses had kicked in yet), I was driving my beat-up Honda Civic to a lunch meeting.
Accelerating onto Georgia Highway 400, I suddenly remembered I was on a toll road.
I also remembered that I had scrounged around to find the last coins lodged in my seats to buy coffee that morning. There was no way I could pay the toll that day. And if I stopped, I would have been late to an important meeting.
That’s when I panicked — and gunned it through the toll booth without paying.
Paying Out the Nose for a Violation — And It’s Going to Happen Again!
I’m not proud of breaking the law that day. But I can certainly say that I’ve paid my debt to society. Because not one week later, I got a bill in my mailbox from the Georgia Department of Transportation.
The bill was a triple-digit fine for failing to pay the toll.
And the icing on the cake — the part that actually made me laugh out loud (before the term LOL was even a thing) was that the bill included an extra 50-cent line item for the original toll. They weren’t going to let me get away with anything!
So why bring up this unscrupulous decision from my early adulthood?
Because it ties directly to a class of investment opportunities we’re covering today.
The tollbooth that I ran through is no longer in operation. It was originally set up to pay for a new highway in Atlanta — a highway that was direly needed, but not eligible for Federal assistance due to some political issues at the time.
So the state of Georgia took on debt to pay for the highway construction. And then it collected tolls to reimburse the state over the next 10 years.
The plan worked perfectly! Each year, the toll booths collected an average of $21 million. And by 2013, the debt was repaid by drivers like me.1 Today, the state has a superhighway helping to connect more than 130,000 commuters to their jobs.
Over the next 10 years, state and local projects like Georgia Highway 400 are going to be springing up all over the country. And these projects will largely be paid for by tolls, new municipal bond offerings or through new state & local taxes.
The vast majority of the funding will come from the local communities that actually need these new infrastructure projects.
But the catalyst behind these projects will be Trump’s new infrastructure spending bill…
A “Free Market” Plan to Drive More Spending
This week, President Trump officially introduced his new infrastructure spending plan.
The bill has been widely anticipated, largely because there is such an acute need for repairs and expansion to our nation’s network of roads, bridges, pipelines and other infrastructure systems. According to CNN, more than 55,000 of the nation’s 612,000 bridges need to be repaired or replaced. And that’s just one area that the spending plan will address.
As expected, the plan calls on state and local governments to foot the majority of the funding for this package, which makes a lot of economic sense when you think about it.
For too many Federal projects, there is a big temptation for waste and abuse. After all, if the Fed is making funds available, local governments will do everything they can to tap into the funding source and collect the dollars available.
But Trump’s plan helps to bypass this “moral hazard” situation.
For every dollar the Fed spends on projects, state and/or local governments will be required to spend $10. In other words, the Fed will simply be acting to give state and local governments an incentive to spend money on important infrastructure projects.
This way, projects that actually need to be done will more likely be funded. And “pet projects” that have little or no economic value will be more likely to be sidelined.
According to the plan, the Federal government will spend up to $200 billion over the next 10 years, igniting well north of $1 trillion in overall spending (depending on the exact ratio between Fed and local spending).
While skeptics will wince at the $200 billion in spending this adds to the budget, keep in mind the new projects will add more jobs… stimulate more business… and ultimately result in higher tax revenue on both a state and federal level. So much of the costs behind this spending will eventually be offset.
Piggybacking on Trillions in New Projects
While the plan’s structure discourages states from tacking on unnecessary and wasteful projects, that doesn’t mean you can’t personally profit from this new infrastructure plan.
We know that massive spending on infrastructure projects will result in strong demand for construction equipment. So in the years ahead, we can expect big equipment makers like Caterpillar (CAT) to grow their business and increase profits.
Now, up until the past two weeks, I didn’t feel great about recommending investing in CAT. That’s because the stock had moved sharply higher and you had to pay a premium price to own it.
But that’s changed with the recent market action and with the revised prospects for Caterpillar’s future earnings.
Over the past few months, investors have been increasing their expectations for CAT’s 2018 earnings. Remember, earnings are the ultimate factor that drive long-term stock prices higher or lower. So higher expectations for CAT’s earnings should be pushing CAT’s stock price higher.
But instead, the market’s volatility has caused shares of CAT to temporarily move lower. And that creates a great buying opportunity for this iconic infrastructure stock.
With a discounted price, a bright future, and a solid dividend yield, CAT is one of several infrastructure stocks you should be watching in today’s market.
Here’s to growing and protecting your wealth!
P.S. The recent market pullback has opened up a great window of opportunity to collect some big cash payments from specific stocks. And I want to make sure you know how to take advantage of the situation!
That’s why next week, I’ll be holding an emergency webinar to share some important wealth-building information with you.
I’ll have more details on this special webinar later this week. So please stay tuned to The Daily Edge for more information once we finalize the plans for next week’s live event.
More information coming soon!