Infrastructure bubble coming?
Why wait for the bubble to inflate before predicting it will pop? Perhaps I’m a victim of my Caterpillar tunnel vision, but the relentless flogging of infrastructure stocks these days has me wondering. After all, a huge uptick in infrastructure spending will cause a vast boom that lasts until the spigot of borrowed government money runs out. Then the boom turns to a bust.
I have to wonder if Cat isn’t a bit bubbly already: A half-decade of consecutive annual increases in sales and profitability — one record quarter after another for years on end — strikes me as an unsustainable uptrend that is bound to be corrected (little voice in my ear says “what part of down from 80 to 40 in the past six months have you failed to detect?”)
Generally I will try to avoid empty speculation of this ilk, but I thought it would be fun to deflate a bubble that doesn’t even have any air in it yet.
As long as I’m on the subject, you might enjoy this two-part Seeking Alpha profile of infrastructure-related ETFs. Also: Investopedia profiles Cat and its competitors.