[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]
Fw: WALL STREET GOES TO WAR
WALL STREET GOES TO WAR
From: jacdon@earthlink.net
To: Mid-Hudson Recipient List <jacdon@earthlink.net>
Subject: WALL SSTDREET GOES TO WAR
Date: 01 Mar 2002 09:54:35 -0500
The following article appears in the March 1, 2002,
issue of the email Mid-Hudson Activist Newsletter,
published every two weeks in New Paltz, NY.
WALL STREET GOES TO WAR
By Jack A. Smith
It's well known that war is good for business -- especially the kind of
wars the United States has gotten into in recent years against much
smaller, weaker nations. The Pentagon suffers hardly any losses but
must spend multi-billions to constantly replenish mass graves of used or
outdated equipment from bullets to missiles, hand grenades to
daisy-cutter blockbusters, submarines to aircraft carriers, jet
fighters to stealth bombers, uniforms to helmets and so on.
Given the importance of militarism as well as business in contemporary
American society, the wealthy investor can hardly be expected to remain
indifferent to Presidents Bushs plan to engage in a series of
business-benefiting wars against a variety of small nations to avenge
the Sept. 11 attacks in Washington and New York.
We should be thankful that, as opposed to the mass media and its
penchant for wrapping government press releases in an entertaining
package and calling it war news, the business press has been known from
time to time to resort to the undraped truth, at least in matters
pecuniary. It does so because its principle constituency doesnt have
to be convinced to support Americas wars; it just has to be honestly
informed how to profit from them.
So we shall forgo, for the nonce, our usual reliance on the daily
newspapers to convey the Bush administrations latest effusions about
the wars on terrorism, and acquaint the reader with the Inside Wall
Street column in the Feb. 19 issue of Business Week, headlined,
Striking Saddam: Some Stock Could Soar.
Yes, its that time on Wall Street, the article began, when analysts
start calculating which companies will win in which kind of war.
Already, some investment pros are girding for a U.S. attack on Iraq,
after President Bushs latest threats in his Axis-of-Evil State of the
Union manipulation of the public mind. While its inherently unsettling
to think about ways to profit from war, author Gene Marcial assured us
(not that we had an iota of doubt that the investor class was anything
but shaken by the prospect), Wall Street is always on the outlook for
an investment opportunity. And defense companies are the natural first
place it looks at such times.
Now we come to the hard stuff. A war against Iraq, Marcial quotes
Merrill Lynch analyst Byron Callan, should benefit companies that
produce military consumables, including ammunition and spare parts.
Callan figures that outfits facing material change in their earnings
include Alliant Techsystems, Raytheon, and possibly L-3 Communications
because such consumables constitute a high percentage of their sales.
Alliant (ammunition, rocket motors, detonation fuses) traded at 65 on
Sept. 10 and 89 now; Raytheon (laser-guided weapons, cruise missiles,
radar parts) was 24 on Sept. 10, 38 now; and L-3 (communications, fuses
and microwave components) was 60, now 109 -- and a war with Iraq would
push the numbers at least as high as the flagpole atop the stock
exchange. Other big players mentioned in the article include Moog
(aircraft and helicopter spare parts), Goodrich Corp. (also spare
parts), Lockheed Martin (missiles and aircraft parts), General Dynamics
(ammunition and other war equipment).
Ah, but theres a downside, Callen noted: An attack on Iraq could also
have a negative impact on commercial aerospace suppliers, since air
travel could again by curbed by the threat of terrorism.
But the upside shrinks the downside into the smallest of potatoes. The
article continued: The safest course for investors, Callan advises, is
to own stock that could have the highest potential of upward revisions
in their earnings estimates. Among the companies that should benefit
are those that make such products as air-to-surface missiles, Tomahawk
cruise missiles, and precision-guided weapons used in air and naval
strikes. Also in the same category are ammunition for heavy ground
forces and spare parts for aircraft and helicopters, such as electronic
warfare systems and engine components.
President Bush's requested 2003 militarist budget of $391 billion (our
calculation, which includes billions tucked away in the Energy and
Intelligence budgets), should just about be able to pay for the goods
needed to carry out next years wars and still provide a pittance of
profit for the patriotic investor.
Callan regards the Bush administrations intention to demand major
increases in the next several Pentagon budgets as having a broader
ramification for investors than the mere prospect of a war against
Iraq. To which the author Marcial puns in a concluding sentence, This
could be a case where defense is the best offense for investors.