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Will the 2015 Military Budget Hurt Defense Stocks?
From the Buzz & Banter: The programs of Lockheed, Boeing, Northrop, and Raytheon will continue to be funded while spending on personnel declines.
Tom Clancy    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO.

1. Since I mentioned it as a short-term trade on Friday on the Buzz & Banter [subscription required], I wanted to note that I have moved up my stops on NutriSystem (NASDAQ:NTRI) with the intention of exiting before earnings are released on Wednesday. The stock is already making the move above $16, which I expected after it had announced earnings, giving me a profitable exit without risking a downside surprise caused by the earnings release or guidance.

2. Never underestimate the potential for business model changes to alter industry dynamics. Bloomberg reported on the "Peak Car" era today, hinting that, while the auto industry will increase global manufacturing capacity to 120 million units by 2016, which is about 50% higher than last year's production, the auto industry also needs to prepare for more car sharing among urban populations. This means less car buying. There is no doubt that emerging market (and many US) consumers cannot afford the hefty price tags on many cars and trucks sold today, but I don't expect people to give up their cars. Rather, I have been expecting electric bikes, Segways, and other vehicles to disrupt the personal transportation industry from the low end. The article suggested, instead, that the purchasing model may change the industry, and it is not a factor to which I had given much thought. I have been reading more about an emerging partnership-home-purchasing model (as oppposed to a household-based model) as well, and these new models could be important in moving us to a more sustainable economy. We live in an era of peak banking and peak debt levels, when everything is purchased on credit, and the production of high-price, long-lived assets like autos and homes are important to the level of GDP. However, the ability to drive economic growth through debt extension and asset ownership has been exhausted. Smart people have begun to look at new purchase models that are more capital efficient and that could lead to more sustainable demand models, but with potentially different levels of equilibrium.

3. The Department of Defense (DoD) will preview what is expected to be a $500 billion 2015 budget today. There has been a lot of talk about the military emphasizing a smaller but more technologically advanced fighting force. The key here is that the "big iron" programs of Lockheed (NYSE:LMT), Boeing, (NYSE:BA), Northrop (NYSE:NOC), and Raytheon (NYSE:RTN) will continue to be funded while spending on personnel declines. Expect cuts to order numbers, though this has been signaled for some time. The Asian Pivot will require continued spending on the Navy and Air Force while Army and funding for ground forces continue to decline. As I have mentioned before, look for these cuts to US funding to be made up for by "sales" of technology to allies, especially Japan, which has been increasing its defense procurements.

Twitter: @Honest_T

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.)
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Position in NTRI

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Will the 2015 Military Budget Hurt Defense Stocks?
From the Buzz & Banter: The programs of Lockheed, Boeing, Northrop, and Raytheon will continue to be funded while spending on personnel declines.
Tom Clancy    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO.

1. Since I mentioned it as a short-term trade on Friday on the Buzz & Banter [subscription required], I wanted to note that I have moved up my stops on NutriSystem (NASDAQ:NTRI) with the intention of exiting before earnings are released on Wednesday. The stock is already making the move above $16, which I expected after it had announced earnings, giving me a profitable exit without risking a downside surprise caused by the earnings release or guidance.

2. Never underestimate the potential for business model changes to alter industry dynamics. Bloomberg reported on the "Peak Car" era today, hinting that, while the auto industry will increase global manufacturing capacity to 120 million units by 2016, which is about 50% higher than last year's production, the auto industry also needs to prepare for more car sharing among urban populations. This means less car buying. There is no doubt that emerging market (and many US) consumers cannot afford the hefty price tags on many cars and trucks sold today, but I don't expect people to give up their cars. Rather, I have been expecting electric bikes, Segways, and other vehicles to disrupt the personal transportation industry from the low end. The article suggested, instead, that the purchasing model may change the industry, and it is not a factor to which I had given much thought. I have been reading more about an emerging partnership-home-purchasing model (as oppposed to a household-based model) as well, and these new models could be important in moving us to a more sustainable economy. We live in an era of peak banking and peak debt levels, when everything is purchased on credit, and the production of high-price, long-lived assets like autos and homes are important to the level of GDP. However, the ability to drive economic growth through debt extension and asset ownership has been exhausted. Smart people have begun to look at new purchase models that are more capital efficient and that could lead to more sustainable demand models, but with potentially different levels of equilibrium.

3. The Department of Defense (DoD) will preview what is expected to be a $500 billion 2015 budget today. There has been a lot of talk about the military emphasizing a smaller but more technologically advanced fighting force. The key here is that the "big iron" programs of Lockheed (NYSE:LMT), Boeing, (NYSE:BA), Northrop (NYSE:NOC), and Raytheon (NYSE:RTN) will continue to be funded while spending on personnel declines. Expect cuts to order numbers, though this has been signaled for some time. The Asian Pivot will require continued spending on the Navy and Air Force while Army and funding for ground forces continue to decline. As I have mentioned before, look for these cuts to US funding to be made up for by "sales" of technology to allies, especially Japan, which has been increasing its defense procurements.

Twitter: @Honest_T

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.)
< Previous
  • 1
Next >
Position in NTRI

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Daily Recap
Will the 2015 Military Budget Hurt Defense Stocks?
From the Buzz & Banter: The programs of Lockheed, Boeing, Northrop, and Raytheon will continue to be funded while spending on personnel declines.
Tom Clancy    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO.

1. Since I mentioned it as a short-term trade on Friday on the Buzz & Banter [subscription required], I wanted to note that I have moved up my stops on NutriSystem (NASDAQ:NTRI) with the intention of exiting before earnings are released on Wednesday. The stock is already making the move above $16, which I expected after it had announced earnings, giving me a profitable exit without risking a downside surprise caused by the earnings release or guidance.

2. Never underestimate the potential for business model changes to alter industry dynamics. Bloomberg reported on the "Peak Car" era today, hinting that, while the auto industry will increase global manufacturing capacity to 120 million units by 2016, which is about 50% higher than last year's production, the auto industry also needs to prepare for more car sharing among urban populations. This means less car buying. There is no doubt that emerging market (and many US) consumers cannot afford the hefty price tags on many cars and trucks sold today, but I don't expect people to give up their cars. Rather, I have been expecting electric bikes, Segways, and other vehicles to disrupt the personal transportation industry from the low end. The article suggested, instead, that the purchasing model may change the industry, and it is not a factor to which I had given much thought. I have been reading more about an emerging partnership-home-purchasing model (as oppposed to a household-based model) as well, and these new models could be important in moving us to a more sustainable economy. We live in an era of peak banking and peak debt levels, when everything is purchased on credit, and the production of high-price, long-lived assets like autos and homes are important to the level of GDP. However, the ability to drive economic growth through debt extension and asset ownership has been exhausted. Smart people have begun to look at new purchase models that are more capital efficient and that could lead to more sustainable demand models, but with potentially different levels of equilibrium.

3. The Department of Defense (DoD) will preview what is expected to be a $500 billion 2015 budget today. There has been a lot of talk about the military emphasizing a smaller but more technologically advanced fighting force. The key here is that the "big iron" programs of Lockheed (NYSE:LMT), Boeing, (NYSE:BA), Northrop (NYSE:NOC), and Raytheon (NYSE:RTN) will continue to be funded while spending on personnel declines. Expect cuts to order numbers, though this has been signaled for some time. The Asian Pivot will require continued spending on the Navy and Air Force while Army and funding for ground forces continue to decline. As I have mentioned before, look for these cuts to US funding to be made up for by "sales" of technology to allies, especially Japan, which has been increasing its defense procurements.

Twitter: @Honest_T

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.)
< Previous
  • 1
Next >
Position in NTRI

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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