Wall Street firm epically fulfills their duty to clients in all-time great research note about Trump's wall
In a note to clients out Friday, analysts at Bernstein broke down what it would cost to construct the 40-foot-high wall between the US and Mexico that has been promised by US presidential candidate Donald Trump.
Bernstein calculates that it would cost at least $15 billion to build the wall; Trump thinks it will cost $10 billion. Lots of other people have weighed in on how much it will cost; estimates vary.
Trump also said he's going to get Mexico to pay for it, which is probably not going to happen.
On the one hand, this matters: The wall is a core promise from one of the two remaining major party US presidential candidates. On the other hand, it doesn't: The wall would take years to get approved, more years to build, and the unfulfilled promises of presidential candidates are many.
In this case, I think the chances this wall gets built as Trump proposes are much lower than whatever you think the current chances are.
But estimating the likelihood that said wall is built is not Bernstein's job.
As a research firm, Bernstein is paid to give clients views on what will or will not happen to companies they cover in various economic and political scenarios.
One of those current scenarios, as ludicrous as it might seem, is a 40-foot-high (and seven-foot-deep, and 10-inch-thick, and 1,000-mile long!) concrete wall being built along the US-Mexico border.
And if one takes Trump's proclamations at face value, and then extend these claims into action, there is a clear outcome for companies that make the materials (cement, steel, etc.) that would go into the wall: this would be good.
"As ludicrous as The Trump Wall project sounds (to us at least), it represents a huge opportunity for those companies involved in its construction," Bernstein writes.
Bernstein estimates the wall would require about $700 million worth of concrete and $240 million worth of cement. Depending on height - which, according to Trumps' past comments, could get higher! - these costs could balloon to about $1 billion and $330 million, respectively.
Building the wall would add more than 1% to cement demand in 2018 and 2019.
Bernstein adds, "What is less clear at this stage is whether US- or Mexico-based suppliers will benefit. In fact, despite arguments concerning which government will pay for construction, the large quantities of materials required may necessitate procurement from both sides of the border.
"Cemex appears best positioned regardless, with cement, RMX and aggregates facilities throughout the border region. Other companies who we would expect to benefit the most include CalPortland, GCC, Martin Marietta and Vulcan."
The tough terrain also makes cost overruns more likely.
Bernstein adds, "Allowances must be made for flooding, since the border crosses numerous floodplains. The construction of a more substantial wall than exists at present would also likely require roads to be built for access: not a simple undertaking in desert and mountainous areas. These difficulties were illustrated during the construction of the existing fence which was beset by delays, surging costs and disputes with private land owners."
But again, the real story here is not what the wall will or will not cost.
The story is that Bernstein, fulfilling its obligation to clients to discuss issues that are of potential concern to them no matter how absurd they might seem, does a job and does it well.
Wall Street analysts are often ridiculed for getting calls wrong, for always being bullish, or for being too clubby with management. These are often fair criticisms.
And I am sure there are some who believe even addressing the Trump wall is an unserious exercise by analysts who have now obviously shirked responsibilities in other areas. Reject this view.
Bernstein's team has done an admirable job taking seriously something that is, at heart, unserious. They have told clients what to expect in the case of something unexpected coming to pass. And that's the reason clients pay for this work.