Monday, May 27, 2013

How one accident equals $2.2 trillion

I somehow became the target of a twitter rant from a well respected analyst/hedge fund mgr over the weekend when I dared to question the stories that seemed to flow to quickly following the failure of the I-5 bridge in Washington.  This guy is one of my favorites so it was a really weird exchange.

Yes, this was a scary accident and it would have been terrifying to have been on that span when it down.  However, it was essentially a 2 car accident.  Yet somehow every major network led with it as their top story for the next two nights.  They all had infrastructure experts lined up for miles to comment on how terrible US infrastructure is and how we need to institute a national spending spree of about $2.2 trillion to fix this problem.

However, after a couple of days the facts started to interfere with this story.  It appears that a truck carrying drilling equipment travelling at highway speed struck the bridge and took out several key supports leading to its collapse.  A leading transportation inspector said something to the effect of "well, if this truck had hit a new bridge at that speed, the result would have been the same."  Again, this doesn't fit with the "spend, baby, spend" mantra so we have to ignore the facts.

Look, I'm not opposed to upgrading our infrastructure when the payback is real and the budgets are clear.  The two things we can't do well as a nation is see our toes or build large projects.  In NYC we've finally capped the new WTC 12 yrs after 9/11 (and we're still 2-3 yrs from being finished).  In the interim China has built 10-15 CITIES.  As far as budgeting, note that Boston's Big Dig was estimated to cost $2.6 billion but when the final tab arrived it was almost $15 billion.  Locally, consider the $106 million investment in a new Ft. Drum connector route covering 8.4 miles (is it paved in gold?).

Is it embarrassing to fly back into JFK from just about any major airport in the world?  Sure.  Would I like Rt 95 through Connecticut to be more like a highway and less like a minefield?  Sure.  I just want to have an honest conversation about our infrastructure not a panic induced spending spree.

1) Our bridges aren't falling apart.  Many of them are hit (like the I-5 bridge) every day and the vast majority do not collapse.  In the UK it is estimated that 7 bridges are struck every day.  In a country, the size of the US I'd expect that we have 5-10 times that number every day.  Rarely do people end up in the drink.

2) A $ spent here does not return the same amount as a $ spent in India or China because our costs are so much higher and the incremental change isn't as great.  If you add 1,000 miles of 6 lane highway in India you are replacing 1 pothole filled road where the average speed was 20 mph.   If you add 1,000 miles of 6 lane highway in the US you are probably just replacing a 4 lane highway where the average speed was 68mph.

3) Let's invest with an eye to 2100 - Fiber, wireless, etc.  Roads, bridges, rail?  Nice but it feels a bit like building the Rideau Canal when the railroads were coming.

So, I took it on the chin this weekend from an angry hedge fund manager(who is probably long Caterpillar) with 40,000 twitter followers because I dared to question the "America is falling apart:" theme.  Point taken - next time I'll ask about your positions first :)

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