Saturday, September 04, 2010

August 4, 2010 Life is short and so am I


August 4, 2010 Life is short and so am I

Thank you, all of you who wrote to say thanks for the brevity of the blog yesterday. Well, it was short by accident. Let me explain. During the course of the day, anything I glean that might be of interest to the readers I slap into a draft of the blog which I leave open all day. At the end of the day, I copy everything to MS Word, clean it up, insert any graphics and cleaver captions, and eventually publish.

Yesterday, some of the content was lost when I was cutting and pasting. In looking back, the only noteworthy loss was a caution about Defense Contractors.

The best defense is an austerity castrated offense.

If you have been following the blog for the last 11 months, you know on occasion we have pimped quite a few defense contractors. Raytheon, Lockheed, Northrop, Boeing, General Dynamics and the like. In keeping an eye of the Eurozone activity, unlike the US which right or wrong has taken a stimulus approach to recovery, most of Europe has taken an austerity approach to mending their embarrassing balance sheets. As a result, they are cutting back on many programs including military spending. Sweden, Greece, Germany, Spain, the Netherlands and the UK are all cutting billions from their defense spending.

Many US defense contractors sell into Europe. Think about the linkage. Linkage can be positive or negative. Just like sometimes 2 plus 2 equals 5 or 6, occasionally 6 minus 2 does not always equal 4. My suggestion if you have defense contractors in your portfolio look up their last quarterly filing with the SEC, and I assure you they will break out their international exposure. If it is Euro rich, reconsider your positions. Most of the cuts will begin in 2011 and will not present themselves as earnings drop for these companies until Q1 or Q2 2011. Food for thought.

On a side note, Kiplinger had a paragraph about US military bases ripe for the closing. That lead me to do some homework and I ran across an interesting little blog/website hosted by a former US Marine. It is an interesting read and it suggests that Obama made some promises about base closings for good reasons and it may be an opportune time to execute those base closings. Congress and Sentate will probably not argue many of these as a group as they have no constituents to satiate. This of course would add to defense contractors strife. The website if you care is and I will admit it is not well vetted.

From "The Patries at the Whitehouse" Gallery:

The caption is: "Very nice to meet you Mr. President." 
The question is: Did Stevie say it to Tony or did Tony say it to Stevie?
Salve Lucrum


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