The Economic Stimulus Boost

Written By Nick Hodge

Posted January 16, 2009

It’s the Obama-bump in full effect.

I’ve been telling you it was coming.

After nearly five days of spiraling, the market took off today in a big way as the exact picture of what an Obama infrastructure stimulus would look like came more clearly into focus.

In the first twenty minutes of trading this morning, Suntech (NYSE: STP) was up over 7%, so were American Superconductor (NASDAQ: AMSC) and Shaw Group (NYSE: SGR).

All this on a day when Bank of America (NYSE: BAC) posted a 4Q loss, needing another $20 billion in Monopoly money from the Fed, and Citi (NYSE: C) reported a $8.29 billion loss, forcing them to split up.

Oil was down to $35. Sony (NYSE: SNE) posted a loss. Johnson Controls (NYSE: JCI) posted a loss.

But renewable energy and infrastructure stocks? They were climbing higher.

New Economic Stimulus to Boost Alternative Energy, Infrastructure

How long it will last is anyone’s guess, especially with all the grim economic indicators constantly coming out.

But still, if just talking about an infrastructure stimulus is enough bolster stocks, imagine what will happen when the thing is passed and implemented.

Stocks were in a frenzy today on the unveiling of an $825 billion (no way it remains that cheap) economic stimulus package by the House that contains billions of dollars in tax breaks for renewable energy, energy efficiency, and infrastructure improvements like smart grid technologies and increased transmission.

For starters, the production tax credit, which was extended for one year last year after much partisan bickering, will receive a $20 billion boost and a multi-year extension for wind, geothermal, hydro, and bioenergy.

Power grid upgrades to support increased use of renewables will get $32 billion.

Building retrofits to improve energy efficiency will get $16 billion.

Carbon capture technologies will get $2.4 billion.

Weatherizing middle-income homes will get $6 billion.

How much will you be getting?

Four Years of Profits

Last night we saw George Bush bow out as Commander-in-Chief amid his lowest approval ratings ever. In his brief farewell, he tried his best to spin his legacy, honing in on 9/11, and touting his security record since.

Whether you agree with it or not, you have to say he’s right. After the trillions spent on defense, we have not been attacked again. Simultaneously, defense stocks have had a legendary run.

That’s what happens when the government decides to support a certain sector. Call it whatever you want. I call it easy money.

And the same thing is about to happen. Only this time it won’t be defense stocks going on a years-long run, it’ll be renewable energy stocks and associated infrastructure, because that’s what the next president is focusing on.

It’s as simple as that.

Look at this chart of a handful of defense and infrastructure stocks since November, when the election was held.

Obama Infrastructure Stimulus Stocks

Defense stocks like Raytheon, Northrup, General Dynamics, and Lockheed have traded largely sideways. Energy and water infrastructure stocks, on the other hand, like Shaw Group and Insituform have been surging, up nearly 70% in some cases.

Don’t fight it. This is happening, and it will continue to happen.

The President-elect has repeatedly touted his vision of a ‘green economy.’

He’s pledged $150 billion over 10 years to develop alternative energy and create 5 million jobs.

He’s called for doubling our domestic renewable energy capacity in the next three years.

And he’s said he’ll reduce carbon emissions via either a cap-and-trade scheme or a carbon tax.

From an investors perspective, the only difference between the War on Terror and the new War on Fossil Fuels, is the companies that will profit.

We’re looking at a term-long bull run here.

Renewable Energy Investments: What to Expect

Even with the good industry news of late, the broader economy still faces serious challenges. The government’s $20 billion cash-injection to Bank of America today is clear evidence of that.

And so, even with Obama’s backing, clean energy stocks will still be susceptible to swings and sell-offs like those witnessed earlier this week.

That’s where a service like the Alternative Energy Speculator (AES) comes in. This week, while solar stocks were tanking, we closed a position in GT Solar (NASDAQ: SOLR) for a 42% gain, and initiated an energy efficiency play that is already up several percentage points.

In this market, you have to be nimble enough to take short-term gains when they present themselves, and be smart enough to enter good long-term plays as well. That’s exactly what we’re doing at AES.

And there’s plenty more to come.

The stimulus that’s being planned is only a kick-off party for renewable energy.

In the next few years, we can also expect a national Renewable Portfolio Standard (RPS), new Renewable Fuel Standards (RFS), and an intense focus on electric vehicle infrastructure and grid-scale energy storage.

All of that will present a multi-billion, if not trillion, dollar investment opportunity in alternative energy and supporting companies.

Getting in now, and making smart decisions with a little guidance, will ensure investment success for years to come.

To get you started, I’ve written a new report that explains everything that’s going on. From the government’s intentions on alternative energy to what companies will succeed, this report, coupled with guidance from AES, is all you need to earn profits in this market.

Click here to read it today! It could mean the difference between participating in one of the biggest market events in years and simply watching from the sidelines.

Call it like you see it,

nick hodge


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