INFRASTRUCTURE

One of the things that the President mentioned last night during his address was the fact of building up our infrastructure; while that is good news as investors we need to be careful in the way that we may invest in order to capitalize on it. Infrastructure alone is no precursor to economic growth. The late British economist Peter Bauer pointed out in his extensive research that infrastructure alone is insufficient to assure growth. According to Bauer, infrastructure develops in the course of economic development, not ahead of it. In other words, economic development and infrastructure develop in tandem, with growth powering infrastructure spending. To build, and then to expect “they” will come, is folly. Build a magnificent urban infrastructure in Antarctica and that's all that will exist. Infrastructure arises as needed; infrastructure follows, it doesn't lead. This is no matter of small importance: To be a successful investor you must understand the economic consequences of your investments. If you don't, you invest at the whim of speculators.

The problem with many infrastructural investments is that they adhere to a one-and-done paradigm. Sustained value is difficult to gauge. Once a bridge is built or a road paved, that's it. Contractors must scramble to ensure another bridge to build or road to pave is in the waiting. Concurrently, they must maintain the expensive fixed capital to ensure they can build or pave if a bridge or road is in the waiting.

The safer course is to invest in infrastructure that creates value, and then does it repetitively on the initial investment. After all, it's riskier to continually find new projects than to continually tap established projects for revenue, earnings, and cash flow. In other words, the infrastructure company itself must have a stable infrastructure. In looking at that we believe that we have found such a company this week for our members that meet those criteria. The company itself has a stable infrastructure, it has a 27% upside potential over the next 12 to 18 months and at present it boasting a 6.61% dividend yield with the potential of increase, and its paying .87 a share.

Remember you can’t make income if you don’t get in the game and play.

Disclaimer:  Suburban Trader is a publisher of financial news and opinions and NOT a securities broker/dealer or an investment adviser.  You are responsible for your own investment decisions.  All information contained in our newsletters or on our web site(s) should be independently verified with the companies mentioned, and readers should always conduct their own research and due diligence.

Suburban Trader