http://seekingalpha.com/article/1124...

Dennis Gartman suggested this week a strategy to go long the infrastructure sector (specifically the steel industry) while shorting the overall stock market. See the video here. I like most of Dennis Gartman's ideas and this one is no exception. The logic is that with Obama's promise to spend up to a trillion dollars on roads, bridges, schools and general infrastructure building, together with a likely agreeable congress, it's as much of a sure thing as we will see next year.

More reasons to be bullish on the steel industry:

• According to the U.S. Green Building Council, raw material for newly formed steel is composed of up to 90% recycled scrap metal. Demand has plummeted for scrap metal in the last six months and a large supply is readily available.
• Scrap metal trades like a commodity and with such a large supply available, input costs for newly formed steel are incredibly cheap right now.
• Energy costs to run steel mills and to form it into usable shapes will be relatively low for some time.
• Transportation costs to bring raw materials to the steel mills and to ship it out to fabrication shops and construction sites will also be relatively low for some time.

A smart way to get in on this strategy would be to invest in SLX (steel industry ETF) while committing the same dollar amount to a position in SH (S&P 500 short ETF). Theoretically, if SLX goes up 20% based on Barack Obama's infrastructure plans, but the S&P 500 drops 10% over the same time period based on continued bad news for the overall economy, you could realize a 33% gain.

Three potential scenarios with a $10,000 investment ($5,000 in each):

1. SLX advances 20% while the S&P 500 drops 10%.

• SLX (around $27 today) goes to $32.40. $5,000 becomes $6,000.
• SH (around $75 today) goes to $82.50. $5,000 goes to $5,500. (Remember - it's an inverse ETF)
• $10,000 investment becomes $11,500.

2. SLX surges 50% while the S&P 500 advances only 10%.

• SLX (around $27 today) goes to $40.50. $5,000 becomes $7,500.
• SH (around $75 today) drops to $67.5. $5,000 goes to $4,500.
• $10,000 investment becomes $12,000.

3. The unthinkable happens and SLX drops 20% while the S&P 500 also drops 20%.

• SLX (around $27 today) goes to $21.6. $5,000 becomes $4,000.
• SH (around $75 today) goes to $90. $5,000 goes to $6,000.
• $10,000 investment is hedged perfectly and stays flat at $10,000.

If you're up for a more risk/reward strategy, go long Nucor (NUE) instead of SLX. Nucor is considered by many, Dennis Gartman included, as best-in-breed in the steel industry and likely to outperform it's competitors. Lastly, Nucor's dividend goes ex-div on December 29. You could pick up an extra $.35 per share if you put on a position by then.

Disclosure: Author holds a long position in SLX