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Baby Boomer Infrastructure


I believe the recent shutdown of the BP [BP Plc (Quote: BP)] Pipeline on the North Slope of Alaska’s Prudhoe Bay Oil Field [BP Prudhoe Bay Royalty Trust (Quote: BPT)] is just the first of many infrastructure problems to disrupt not just our oil supply but the nation’s operation. The fact is we don’t bother fixing most things until they are broken, and the lifespan of many of the infrastructure that our nation is built on, whether they be pipelines, building foundations, electrical lines, or even airplanes, are due to break down in the near future. The majority of the big infrastructure built after WWII (i.e. the Baby Boom Infrastructure) won’t last much longer.Us engineers design things to last only a certain number of years under certain conditions. Yes, monster beastly gimongous levies could have been built to keep New Orleans dry, but it could have cost too much for anyone to be willing to pay for it. Likewise, BP’s Prudhoe Bay pipelines could have been made 2 or 3 times as thick so they would take 60 or 90 years to corrode instead of 30 years. Sure, scheduled maintenance are done and problems are patched up, but band-aides can only hold a body together for so long.

Eventually we will have to replace most if not all of all the infrastructure, and that will be a gigantic undertaking. Furthermore, if we wait until disaster strikes to tell us when to replace these infrastructure, it’ll take much longer, cost much more, and cause much more problems than following the initial design recommendations of when replacements should be done. It is true that some renovations are being done on civil infrastructure.

For instance, almost all of the Golden Gate Bridge in San Francisco is new material now, although no one would have known. They work around the clock to replace the Golden Gate Bridge piece by piece. The dilemma here is it costs more to keep something in place and keep it working while renovating it than to replace it. Yet, our communites depend so much on these structures day to day that we can’t shut them down. More over, governments, communities, and politicians would rather spend money dealing with other problems immediately in front of them rather than look behind them to see what needs fixing.

So, look for more of these problems to come. Oil disruptions (a lot is already occuring with the oil refinery fires and such, and don’t you blame the high oil costs on big oil companies and the government. The people have more power and thus carry more of the responsibility than you care to admit and realize.) Airplane disasters and mishaps. Power outages, structural collapses.

From a stock investing standpoint, this is why I am long and overweight on infrastructure companies such as Halliburton Company (Quote: HAL) and ABB Ltd. (Quote: ABB). The industry will get a double boom. The demand to build and repair stuff will be several times higher than before and last longer because of the BRIC (Brazil, Russia, India, China) and because a majority of the big infrastructure built after WWII (i.e. the Baby Boom Infrastructure) won’t last much longer.

Other Infrastructure Plays:
Foster Wheeler Ltd. (FWLT)
URS Corporation (URS)
Jacobs Engineering Group Inc. (JEC)
Technip ADR (TKP) – I know employees of this company.
Ingersoll-Rand Company Limited (IR) – I own this stock.
United Technologies Corporation (UTX) – I own this stock.
The Boeing Company (BA) – I own this stock.

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