Saturday, August 16, 2008

Cold War II, Continued.

How US can win cold war? The same way we won last one: force Russia to spend on arms more than it can squeeze from population. I don't say "can afford" because USSR really could not afford level of arms production if it were normal country. Nor current Russia can afford current military/intelligence spending (it's ironic, we call what KGB is doing "intelligence", but it's not intelligent in any sense). Anyway, the biggest armament gap in the last 30 years was in electronic warfare. Most "experts" would say "In aviation", but it's wrong. Soviet/Russian aircraft are at least as good as US ones, and flying qualities of SU-27 and it' successors (SU-30, SU-35) make it the very best aero acrobatic jet in the world. F-15, the king of air for the last 30 years, is an excellent flier. Not as good as SU-27 though. But F-15 is the best weapon system in the world. Maybe F-22 will overshadow it sometimes. But it's outrageously expensive and wasn't combat tested yet. The difference between F-15 and SU-27? Electronic systems, radar first of all. Also missiles and their guidance systems. And who is making this stuff? Mostly Raytheon (RTN). There is also even more advanced weaponry, called "Electronic Warfare", or EW. But most of it so secret, we don't even know who makes it. My bet is that Raytheon is involved here big time as well.

Another case for Raytheon: I think that soon Baltic countries (Estonia, Latvia, Lithuania) are going to think of buying US fighter planes. If only they can afford it. F-16 most probably. And there is Ratheon stuff worth millions in every plane, and Raytheon missiles are coming with them too. Decision to deploy anti-missile missiles in Poland also means money for Raytheon.

General Dynamics is another very good military production company with great history, but it's not that high-tech oriented. Sure, I won't call current generations of nuclear submarines or M1 tank low-tech, but it's not the area where qualitative weapons race can destroy your opponent.

So I'm choosing Raytheon. Yes, military expense is evil. But the necessary evil. Let's make money on it instead of hand wrangling. I'm waiting for RTN to get down a little bit, then it's a buy. Usual caveats apply, life changes and my views and picks change as well. My job is in programming, and we use term "agile development" for particular style of code production. Let's do agile investment.

Full disclosure: at the time of publication author had no positions in any stocks mentioned. Positions can change any time.

Disclaimer: This article is not intended as an investment advice. Every person should make her/his own investment decisions based on all available information and advice from her/his own financial advisor.

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