As I was reviewing the stocks / sectors we mentioned Monday as outperformers [Dec 14, 2009: There is Always a Bull Market Somewhere] the one name I could not wrap my mind around was Lowes (LOW).  While some retail stocks are flying in anticipation of (a) Christmas or (b) the consumer is back as he defaults left and right on previous debt obligations, hence freeing up cash flow for new spending - home improvement is not exactly a big Christmas item, and many housing related stocks have hit a wall now that housing seasonality has gone away.

Then it hit me... we now live not in a 3D investing landscape, but we have the 4th dimension - government.  Government interference, backstopping, bailouts, stimuli - you name it; you have to not only try to figure out economics and business fundamentals but you have to now triangulate on where the government is stomping at all times.  [Jun 5, 2009: 1 in 6 Dollars of Income Now Via Government; Highest Since 1929] [Jul 30, 2009: Cash for Clunkers a Bit Hit, Government Asks What Can we Buy You Next?]  Not until I read this quote in the following Bloomberg article did it hit me like a stack of bricks.  Home Depot (HD) and Lowes (LOW) are set to receive a direct transfer of monies from my pocket into theirs. Let us see if this leads to multiple earnings beats in year 2010....

Bloomberg: Obama Says Energy Efficiency Upgrades will Boost Jobs

  • President Barack Obama said giving homeowners and small businesses incentives to make buildings more energy efficient would meet dual goals of creating jobs and cutting emissions.  Insulating and sealing buildings “is one of the fastest, easiest and cheapest things we can do to put Americans back to work,” Obama said at a Home Depot Inc. store in the Washington suburb of Alexandria, Virginia.
  • The president’s plan, which includes tax breaks to encourage retrofitting buildings with insulation, may benefit Atlanta-based Home Depot; its main rival Lowe’s Cos., based in Mooresville, North Carolina; Owens Corning Inc., the largest U.S. maker of insulation, based in Toledo, Ohio; and Midland, Michigan-based Dow Chemical Co., which manufactures insulation and sealants.
  • Obama is promoting the energy efficiency program, dubbed “cash for caulkers,” as part of both his jobs program and his energy policy, and he’s seeking support from business executives to help push the proposal through Congress. He hasn’t put a price tag on the proposal.

Here is the light bulb moment:

  • Home Depot Chief Executive Officer Frank Blake and Owens Corning CEO Michael Thaman were among the people who met with Obama today at the Home Depot store.  “We are going to generate so much business for you Frank,” Obama said to Blake during his remarks at the store. “Over the course of the next several years, people will see this as an extraordinary opportunity.”

Of course the new stimulus jobs plan is on top of the previous $787 billion, of which we were sold would be mostly about job creation / savings - especially of the green [and government] kind (3.5-4M) & infrastructure.  If you suceed at passing mostly pork at first, try try (and keep spending) again.

  • About $8 billion of the $787 billion in the stimulus program, enacted in February is earmarked for homeowner energy- efficiency programs.

$8 billion there... $25? $30 billion here?  Soon you are talking real money.  The stocks of Home Depot and Lowes seem to be reflecting the coming largesse.  Unless caulk is this year's must have stocking stuffer for dad.

p.s. looks like another $5 billion is headed out the door today (can't keep up with the daily onslaught)....this one will create 'tens of thousands' of jobs.  If just $5 billion can create tens of thousands of jobs (20k? 30k? 40k?) then shouldn't say $787 billion put half of unemployed American back to work? (we've lost 7 million jobs since the recession began)

The math? If $5 billion can create tens of thousands ...when I divide $787 billion into $5 billion I get 157.  157 stimuli x 'tens of thousands of jobs' (say 25,000) = 4 million jobs.  Aha, that number sounds very familiar (wink wink).  

Even better - to finish off this entire recession, throw another oh... $600 billion on top of that, and that should create another 3 million jobs - and every American who has lost a job should be back in full employment.  Easy as that ....when I use guberment math.

  • In another effort to create green jobs, the White House will announce plans Wednesday to provide $5 billion more in tax credits for makers of wind, solar, electric-vehicle and other renewable-energy products, hoping to leverage at least $15 billion in private investment and create tens of thousands of jobs, administration officials say.

No position