Who'll Benefit From the Stimulus?
The average worker will get about $13 more a week in their paycheck.
— -- As bailout money flows into the banking system, you, the taxpayer, can expect to get effusive thank-you cards from your bank, as well as free ATM use and free checking.
Ahahahah! Just kidding. Nevertheless, the government's massive cash infusion into the economy is bound to have some effects, and you may be able to actually profit from it — but probably not through your bank.
Finding a good stimulus play is tough: You might be better off looking for beaten-down sectors that will rebound if and when the economy revives.
The government's $787 billion stimulus bill is now law, and that money will soon be flowing through the economy. About $280 billion of the package will go directly to taxpayers, in the form of lower tax withholding.
Normally, that would benefit companies that benefit from discretionary spending — in other words, companies that do well when consumers feel flush. Department stores and restaurants are good examples of companies in the consumer discretionary sector.
But there are a couple of drawbacks to that strategy. The first is that most of the tax cut will be doled out throughout the year by reducing the amount the government withholds from your pay. The average worker will get about $13 more a week. Most people aren't going to go on a shopping spree at Nordstrom's with $13 a week.
The other drawback: People are likely to pay down debt with any money they get. Paying down debt is a smart thing to do, and will benefit the economy in the long run, but it probably won't help the restaurant business.
Caterpillar, which sports a 6.4% dividend yield and sells for just 2.4 times its estimated 2010 earnings, does, indeed, look cheap. (A company's price-to-earnings ratio — price divided by estimated 12 months' earnings — is a standard measure of how expensive a stock is, relative to earnings. Lower is cheaper.)
