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Shovel Ready?

Sigma Investment Counselors

November 11, 2016

Both presidential campaigns emphasized their support for increased infrastructure spending, suggesting that this should not be materially controversial now that the election is over.

However, before rushing out to make a big bet on construction industry investments, it might be appropriate to consider some of the obstacles to a rapid build up of infrastructure spending.

The proposed Keystone pipeline fell into a political chasm and now appears to be dead.  The Dakota Access pipeline is currently mired in controversy with an uncertain outcome.

A proposed $1.4 billion telescope, to be erected on Mauna Kea by an international consortium of astronomers, has been stalled by protests and legal challenges.  While Mauna Kea is the preferred choice of location, if that proves to be impractical, the group has announced that it would build the telescope in the Canary Islands.

These are just a few examples.  In addition to the prevalence of protests, any new project requires an environmental impact statement and faces other time consuming regulatory obstacles.

Another potential roadblock may be the availability of workers with the necessary skills.  According to data published by the U. S. Bureau of Census, total domestic construction spending rose steadily for more than 10 years to 2006, then dropped significantly to bottom in 2011, and has now recovered to almost the peak levels reached in 2006.  Any material effort to increase infrastructure spending may run into capacity issues.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®

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