Chris B

'Wars and Rumors of Wars' - Time to Look at Defense Stocks

I can see the author's point about how economic frustration has historically led people to support radical governments and blame outsiders, causing wars. However, each and every one of the headlines he mentioned could have been in the news 5 or 10 years ago so I don't see an imminent war on the horizon.

The Israeli/Palestinian proxy war has been going on for decades.
Pakistan has been unstable for decades.
Russia has been making threats and extorting neighbors for decades.
Riots in Greece and Iceland (pop. 300k) are too insignificant to note.
Iran and the US have been threatening each other for decades.

More likely, the US military will need to buy new vehicles and weapons to replace those trashed or given to other governments in the two wars going on right now. These domestically manufactured items will fit nicely with the Obama administration's spend-to-stimulate-eco... platform, but don't expect them to be talked about much.

The Iraq / Afghanistan wars will eventually be lost in that the democratically-elected governments we propped up in those countries will be overthrown by theocratic Islamists as soon as we leave. The public in those places just don't believe in democracy. We might even see a Hamas-like party win an election in one of these countries during the next election while we are still deployed there. Won't that be unsettling?

This experience, plus the national debt / inflation / entitlement problem will probably result in the diversion of funds away from defense in the long term and towards things like Medicare.

So short-term I see an earnings boost for defence, followed by a long gradual decline.