Invest in reality

Jan. 13, 2009
Paul Studebaker, CMRP, editor in chief, says recent financial shenanigans are encouraging folks to focus on tangibles.

Now that Bernard Madoff has taken hundreds of the world’s smartest financial wizards for billion-dollar rides, it’s easier for me to admit it: I was once taken for thousands by a pyramid scheme. Though on a smaller scale (a few hundred million), it had all the features of Madoff’s fund: clean professional audits, tacit SEC approval, big investments by rich people who should have known better, and, my favorite, exclusivity — you had to know somebody and make a very hefty minimum deposit. (That helped me imagine that the 20% returns were possible, thinking, “So this is the secret of how rich people get richer!”)

I’ll spare us the grisly details (you can Google “pinnfund” if you want) and skip to the lessons:

  1. Never invest in something you don’t completely understand.
  2. If it seems too good to be true, it probably is.
  3. Greed blinds good, wise and sensible people to lessons 1 and 2.

These days I prefer to put my money into stuff I can see and companies whose profit-making methodologies I thoroughly understand.

It looks like other people are thinking the same way. Media mogul Ted Turner has invested in solar power and now spends time promoting clean energy as an essential priority regardless of financial conditions or the prices of fossil fuels. “The United States needs a massive new investment package to get our economy out of the ditch. And where better to invest than in our future?” he said in a recent op-ed piece for the Chicago Tribune. “If we’re going to help out Detroit, let’s make sure the automakers commit to invest in manufacturing the plug-in hybrid vehicles that will get American cars off oil. If we’re going to help out the construction industry, let’s put it to work retrofitting America’s energy-wasting homes and businesses.”

Sure, Turner has interests that are almost certainly coloring his priorities but, the point is, he’s not talking about “American Idol,” designer water or hedge funds. Instead, he’s backing initiatives that require high-tech manufacturing and the beautiful facilities, machines and skills required to do it well. Your facilities. Your machines. Your skills.

He’s not alone. A study released Jan. 8 by Building America’s Future ( surveyed Americans about infrastructure, priorities and willingness to pay for it. It shows widespread and bipartisan support for smart infrastructure investment with accountability measures. Key findings included:

  • 94% of Americans are concerned about America’s infrastructure.
  • 81% of Americans are prepared to pay 1% more in taxes to rebuild infrastructure.
  • Accountability is their single-highest priority (61%) in rebuilding America’s infrastructure.

The survey says energy facilities are the highest priority, with roads and highways second and clean water third.

“Americans don’t want their children educated in portable classrooms, and they don’t want to waste millions of gallons of water from leaky old pipes,” says California Gov. Arnold Schwarzenegger in the survey report. “Now is the perfect time to put money into public works projects because it will help create jobs while pumping up our economy. It's like hitting two home runs with one swing.”

(Actually, three home runs, Governator, if you count the value of the new infrastructure.)

Investors are sitting on a lot of cash right now, and I think a little momentum behind the concept of rebuilding the economy by building a better world will deliver a faster recovery than most people imagine. Referring to the amount of money stashed in conservative but low-yielding assets such as money market funds, Eric Thorne, an investment advisor at Bryn Mawr Trust, told the Associated Press, “We're very confident that the $9 trillion that is in cash right now will look to find a home in better-performing assets."

So it should be no surprise that President-Elect Obama’s economic stimulus plan puts strong emphasis on buying infrastructure improvements and investing in energy conservation. The plan would result in a huge federal budget deficit and heap debt on the next generation of Americans, but at least they’ll have some safe roads and bridges they can use, a power transmission infrastructure they can rely on, and the possibility of low-cost, secure, climate-friendly energy supplies.

E-mail Paul Studebaker, editor in chief, at [email protected].

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