Private Money Might Yet Save Trump’s Infrastructure Plans:

Financial Times | May 26th 2017:

The Blackstone-Saudi deal can help the president deliver his campaign promise.

When the White House caravan headed to the Arabian Desert last weekend, Donald Trump’s team were keen to score big “wins”. Stephen Schwarzman, head of the president’s business advisory council, duly obliged: on Saturday Blackstone — which Mr Schwarzman just happens to run — announced plans to create a $40bn infrastructure fund, using $20bn from Saudi Arabia’s biggest sovereign wealth fund. This will be dedicated towards upgrading US infrastructure, and is far bigger than anything ever seen before.

What should investors make of this? One obvious lesson is that dancing around Mr Trump’s caravan is already paying handsomely for some business leaders: Blackstone’s share price has subsequently surged. A second point is that financiers and non-American governments alike have noticed that one way to Mr Trump’s heart is to play the infrastructure game. After all, the president has repeatedly pledged to deliver a trillion-dollar infrastructure plan. His team has a strong incentive to keep banging this drum, since infrastructure has bipartisan appeal, and other elements of his policy plans, such as healthcare reform, have stalled.

However, a third point that the Blackstone deal inadvertently highlights is how much uncertainty is wrapped around infrastructure plans. When Mr Trump first made his pledge last year, most observers assumed it would be largely funded by taxpayers’ funds and government debt. This is how the lion’s share of US infrastructure is currently funded, and Mr Trump is not a man scared of leverage.

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