By Keith Fitz-Gerald
While many investors are focused on the roles that Google Inc. (GOOG) and Twitter played during Egypt's recent turmoil, I immediately zeroed in on all the American-made military hardware that exists in that region - and began to analyze the risk that investors face if the U.S. defense industry quite literally bet on the wrong horse.
Between 2006 and 2009, we sold more than $50 billion worth of weapons systems and related hardware to Middle East nations, according to the Congressional Research Service. The value of annual military contracts in the region has quadrupled since 2000, according to CNN.com.
And it doesn't look like things are slowing down - at least, not yet.
Impact of the "Obama Arms Bazaar"
Since U.S. President Barack Obama took office, there's been a major acceleration in the sales of frontline fighter jets, tanks and other U.S.-made hardware and weapons systems being sold overseas. According to the Defense Security Cooperation Agency (DSCA), worldwide sales zoomed from $18 billion in 2006 to $30.7 billion in 2009.
In 2009 and 2010, the U.S. Department of Defense notified Congress that weapons sales to foreign buyers could reach as much as $100 billion - almost an eightfold increase from the $13 billion that was the yearly norm from 1995 to 2005, Deutsche Bank AG (DB) analyst Myles Walton told CNNMoney.com.
As a rule of thumb, those congressional notifications are more likely to translate into $50 billion to $70 billion in actual sales. About half of those deals are done with customer countries in the Middle East.
"There is an Obama arms bazaar going on," Arms Control Association Deputy Director Jeff Abramson told CNNMoney.
While the biggest buyers are countries such as the United Arab Emirates (UAE) and Saudi Arabia, Egypt accounted for about $2 billion worth of deals all by
