Country's Falling Apart -- Who's Going to Fix It?

Sometimes I think it just makes sense to abandon the charts and statistics and go out and take a look around. Those who compile the numbers, both on Wall Street and in D.C., are often insulated from reality -- hence those numbers rarely reflect reality.

The first observation that I thought was important came on the train ride up to the city. I often drive to Manhattan but I since I was planning a Sunday return, I decided to take the train. Getting caught in returning vacation and beach traffic on the Turnpike has turned my three-hour drive into an eight-hour excursion, so I let Amtrak do the driving this trip.

Apparently I am not the only one who has discovered the ease of train travel -- the trains were packed both ways. We quickly discovered that the quiet car where no phones or loud conversation is allowed is the way to go. Most people cannot stand to be away from the phone these days that long, so these cars are relatively empty.

Traveling by train is a great way to get a glance at the nation's infrastructure. Of course you get a bird's eye view of the conditions of the train tracks. It is clear that much of the rail in the country needs to be replaced. There has been talk for years of installing rail in the Northeast corridor to allow for high-speed train travel. After bumping and clacking three hours each way, I am in favor.

You also pass under many road and highway bridges along the way. You can easily see that we are going to need to spend an enormous amount of money in this area. They need to be repaired or replaced sooner rather than later. It is not just the bridges either -- anyone who has ever driven I-95 is well aware that the highway itself needs a great deal of work.

The Surface Transportation Act now winding its way through Congress proposes spending $50 billion for high-speed rail and $340 billion for highway and bridge spending. As worthy as this may sound there is a major problem with the bill. It seems no one has any idea how to fund these projects.

I am confident that the bill will pass and they will find a way to fund it. I doubt anyone will like the way they choose to fund it as it is going to include new taxes and fees of some sort but it will get done.

The $49 billion allotted to the Department of Transportation under the stimulus package has been slow to make its way into the system as well. According to executives at LB Foster only about 3% of that money has been spent so far. The balance should come in the back half of this year and first half of 2010. The Congressional Transportation and Infrastructure Committee has a great Web site to help track where the money is being spent and it is worth checking for investors with an interest in infrastructure investor.

The infrastructure theme is one of the most important. When the economy recovers, the money is going to be directed in these areas. The need was reaffirmed this morning. I flipped on local radio to catch up on sports news I missed over the weekend and was informed by the traffic reporter that yet another water main break was disrupting downtown Baltimore. The nation's water, electric and transportation systems have to be repaired. The only other choice is a drastic reduction in quality of life.

I have done well with these stocks in the past. I have owned or still own stocks like LB Foster, Granite Construction and Pike Electric that have done very well. I keep a spreadsheet with the tangible book values, all-time low EV/EBITDA ratios and current prices of companies in the group. When they trade there, I will buy them. I refuse to pay up for anything, but I'd think that over the next decade this group has the potential to be the next bubble.

The next observation has to do with shopping in the city. As I was traveling with the girlfriend, we had to hit 5th Avenue. We made our way though Saks, Tiffany's and all the other assorted stores. In Saks she pointed out that although there were a lot of shoppers, there were no shopping bags. Lots of looking, not much buying.

The only store where she purchased anything was Banana Republic, which is owned by The Gap. They were having a huge sale and the store was crowded. However, entire banks of registers were closed and on the second floor -- only one was open. It was more than enough as we checked out with no line in spite of the crowds.

I still do not buy the consumer recovery. It is not happening.