In listening to Sec. Gates speech, it appears that program cancellations were offset in many cases by program gains. Growth in the F-35 program is offset by canceling the F-22. New ship construction offset delays in others. Cancellation of TSAT is to be offset in part by additional AEHF satellite buys and new programs. Ultimately, the speech provides some answers to the unknown and will make it easier for analysts and investors to move forward. With defense stocks at technical and fundamental lows, these answers should provide a boost to the sector. Between the end of the speech and the end of the trading day, the SPADE Defense Index rose roughly 3.5%. Next up is what changes Congress will suggest to the Gates' proposal and details on the out-year budget -- expected when the President submits the full budget in late April, but likely, early May.
- For those wanting to read the transcript of his April 9 budget speech, I have posted a copy at http:///www.spadeindex.com/Sec-Gates.pdf
Scott Sacknoff, SPADE Defense Index manager