$787 Billion Later…

| February 19, 2010 | 0 Comments

One year ago this week, President Obama was signing the $787 billion American Recovery and Reinvestment Act (ARRA).  He charged his VP, Joe Biden, with the task of overseeing ARRA.

Earlier this week, Biden presented the President with a 27 page report detailing the ARRA’s progress.  The report’s a nice bit of light reading if you’re a fan of government statistics and acronyms.

Oh, you don’t love to read that sort of stuff?

Well then, I’ll give the down and dirty details and an investment idea to boot.

First off, there is a lot of misinformation surrounding the ARRA.

I don’t know if it comes from merely misinformed or misguided (or maybe just plain evil) media types.  I know it’s hard to believe someone would sensationalize to boost their ratings.

Or it’s possible certain political opponents are twisting the truth, possibly to further their own political career.

But most likely the confusion comes from the different bailout and stimulus packages being passed into law around the same time.  And who expects your Average Joe to actually understand what money went to help which people.  (Can’t we all just watch American Idol and forgot this boring stuff?)

A recent CNN poll shows just how displeased and misinformed Americans have become with the stimulus plan.  56% of Americans now oppose the stimulus plan.  That’s up from 44% when the ARRA was signed into law.

And get this.  CNN’s polling director said, “The belief that the stimulus bill helped bankers and CEOs is due to the public confusing the stimulus bill with the various bailout bills.”

I think we need to clear the air and set the record straight.

ARRA is not TARP (Troubled Asset Relief Program) or Bernanke’s Fed or Geithner’s Treasury Department.  If you have a problem with bank bailouts… that’s TARP.  Oh, and by the way, TARP was signed into law before Obama ever took office.

Now that we’re clear on what ARRA isn’t… what the heck is ARRA?

ARRA is $288 billion in tax relief.

Take a look at the difference in Federal Income Tax withholding on your paycheck between February and March of ’09.  95% of working Americans should see a reduction in withholdings.  That’s a little bit of extra money in your pocket every payday.

ARRA is $273 billion in direct relief payments to state governments and individuals.

This money is helping offset state government budget shortfalls.  It’s allowing them to keep hundreds of thousands of teachers, firefighters, and police officers on their payrolls.  A worthy cause if you ask me…

It’s also providing extended unemployment benefits, health insurance, and support for the people hardest hit by the recession.

ARRA is $226 billion in projects.

This includes the infrastructure portion to be spent on roads, bridges, and airports.  It’s also designed to jump start projects “to lay the foundation for a stronger economy”.  These are investments in new technologies.  (It’s also where there will be opportunities for investors to profit.)

The Biden report goes into detail about how, when, where, and why the money’s been spent and will be spent.

The short story is… $179 billion in spending has been paid and $119 billion in tax relief has been doled out.  That’s just 37% of the total to be spent.  And most of the spending is direct relief payments.  Not exactly economically stimulating stuff… but it has cushioned the pain we would have felt without it.

Going forward, the goal is to have 70%, or $551 billion, spent by the end of September.  That’s going to pump an additional $253 billion into our economy over the next two quarters.  And the amount of money being pumped into projects benefiting businesses you and I can invest in is accelerating rapidly.

Here’s the deal, the stimulus money is just beginning to flood the market. It’s going to boost revenues and earnings further and faster than most analysts and investors think.

The project that caught my attention is the expansion of the broadband network.  $7 billion will be awarded to companies who bring broadband to communities with little or no access.

Regardless of who wins the contracts for the government projects, the entire networking industry will benefit.  Lucky for you, there’s an ETF to make investing in this industry easy.  It’s the S&P North American Technology-Multimedia Networking Index Fund (IGN).

IGN holds 31 communications equipment companies.  These companies are the ones making the fiber optic cables, switches, decoders, and other equipment needed to expand the network.

To add a little fuel to the fire, the technical setup indicates IGN is headed for a breakout.  IGN is in a five month consolidation pattern.  It recently pulled back to the 200-day moving average and has been rocketing higher over the last two weeks.

A breakout above the previous high around $28 could send share into the mid $30 level quickly.

Whether you’re a fan of government stimulus plans or not, consider picking up some shares of IGN today!


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Category: ETFs

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets on a daily basis. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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