President Bush recently submitted a $3.1 trillion dollar budget to congress with the biggest proposed increases in defense spending, and homeland security. The Pentagon would get a $35 billion increase to $515 billion for core programs, about 7% with war costs additional (but how much is additional?) This further supports my investment posture for this year and next that the defense sector is the place to be as I posted earlier today and many times over the past few months -- the BIG BUYS.Some of our big defense contractors, all of which should benefit to some degree include: Boeing (NYSE: BA), General Dynamics (NYSE: GD), Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), Raytheon Company (NYSE: RTN), and United Technologies (NYSE: UTX). I am not suggesting that you jump into these stocks immediately, but you should add them to your watch list. Perhaps, for some investors dollar cost averaging into them over six months would make sense. Each has a varying degree of exposure to defense spending. For example, United Technologies is the parent of Sikorsky helicopters which makes the Black Hawk. Lockheed Martin and Boeing make fighter jets. Raytheon makes defense electronics and missile while General Dynamics and Northrop Grumman supply warships to the US Navy. Northrop also makes aerial vehicles that are being used in the Iraq War.
President Bush prides himself on his personal integrity. I wish he would demonstrate some integrity by being the first president to be honest with his budget, especially when it comes to defense. That would go a long way to setting us on the right path toward improving our current economic mess. Every short term Band-Aid, be it interest rate cuts, tax rebates, restructuring debt, extending unemployment benefits or anything else only allows the economic pressures to build and build and build until we have an explosion.
That economic explosion will create higher inflation, higher unemployment, and a loss of national equity until the money we spend on defense only defends assets owned by foreigners and rented back to us. That is what is happening now as growing economic powers in China and the middle east buy our real estate and our banks from us in the open market 'doing us a favor' to bail us out.
Sheldon Liber is the CEO of a small private investment company and the design and research principal for an architecture & planning firm. Disclosure: I own shares of GD.
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Reader Comments (Page 1 of 1)
2-08-2008 @ 6:02AM
Glenn said...
Which defense company is talking merger with another. Which stock in the defense sector should I buy right now?