Financial Markets' View of Defense Industry Should Concern the Country

By Skibbie, Larry | National Defense, May 2000 | Go to article overview

Financial Markets' View of Defense Industry Should Concern the Country


Skibbie, Larry, National Defense


The ups and downs of the stock market notwithstanding, there are many reasons for the dot-com firms to be optimistic about the future. Unfortunately that is not the case for the defense industry

Recently I heard someone compare the dot-toms to defense companies. Specifically, he compared the combined market capitalization of the five top companies in defense industry to the five biggest dot-toms. That comparison showed that the dot-toms had a market capitalization almost five times greater than the defense industry. Interestingly, the combined earnings of the same dot-toms was a net loss, while the combined earnings of the five top defense producers was more than $4 billion.

We could view this as an interesting bit of trivia, but it clearly is more than that. The financial markets are making a statement about the dot-toms. And they also are sending clear signals about their perception of the defense industry.

In recent months, Wall Street has sent defense stocks plunging to a 12-month low. What the markets are saying, therefore, is that, regardless of this year's increase in defense procurement budgets, the future is not bright for defense, even if many companies' balance sheets are showing profits.

Perhaps it would be of interest to look at the defense industry with the eyes of an investor. For instance, would a prudent investor be interested in putting money into a sector that has been shrinking in size for the last 10 years? Would that investor be interested in a sector that has, essentially, only one customer-and that customer has been known to act indecisively, to change its mind frequently, to take too long to pay its bills, and to periodically resort to Law suits where criminal-like penalties result from only civil-level evidence (under the False Claims Act)?

Further, markets and investors don't like uncertainty. Unfortunately, the defense sector has plenty of that.

Next year's Quadrennial Defense Review (QDR) could change spending priorities; a national panel is about to render yet another report on ways to keep defense industry healthy; the Army is attempting to transform itself into a more mobile force; and changes seem imminent to the Joint Strike Fighter acquisition strategy. This set of possibilities is yet another reason for the markets to shy away from defense.

Short-term market vagaries aside, there are other significant reasons why investors will be inclined to shun defense stocks. These reasons have to do with the makeup of the workforce. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Financial Markets' View of Defense Industry Should Concern the Country
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.