Lockheed Martin CEO Marillyn Hewson should think about sending Kim Jong Un a gift basket.
The escalating tensions between President Donald Trump and the North’s impertinent boy king have, predictably, been a boon for the US military-industrial complex. In an interview with Reuters, Tom Cahill, the vice president of Lockheed Martin’s missile-defense business, said he has been receiving more inquiries about the company’s offerings over the past 12-18 months – a bump that coincides with the accelerating pace of North Korean missile tests and the increasingly heated rhetoric.
“Lockheed Martin Corp, the Pentagon's No. 1 weapons supplier, said on Tuesday its customers want to defend themselves against possible incoming missile attacks and are increasingly asking about missile defense systems. The greater interest comes amid a surge of North Korean long-range missile tests, unsettling its neighbors South Korea and Japan, as well as the United States.
"The level of dialogue around missile defense is now at the prime minister and minister of defense level," Tim Cahill, the vice president of Lockheed's Air and Missile Defense business, told Reuters in an interview.”
With South Korea, Japan and the US in North Korea’s crosshairs, it’s unsurprising that Lockheed’s international business would see a lift. And now that US officials have confirmed the worst-case scenario – that North Korea is already in possession of a nuclear warhead small enough to fit inside one of its ICBMs – inquiries will likely continue to climb.
While President Donald Trump and the North’s dear leader swapped threats of nuclear annihilation, Lockheed’s share price has risen. The company has handily beaten the S&P 500 so far this year (despite giving Trump that $600 million price break on the F-35). It raised its sales and earnings guidance last month after reporting second-quarter earnings.
“Some countries are putting missile defense at the top of their list of desired capabilities, Cahill said. Interest has increased over the last 12 to 18 months, as have threats, he said.
Shares of Lockheed are up nearly 8 percent, to $300.10, since North Korea's first long-range missile test on July 4. The stock is up 20 percent year-to-date.”
Of course, it will take years before any of this interest leads to an increase in sales because, as one might expect, the proliferation of heavy arms is a tightly regulated process in the US.
“The increased demand could turn into sales over the coming years. The U.S. government sanctions weapons sales in a process that can take years and often requires the approval of U.S. legislators.”
Lockheed outperformed the market on Tuesday, finishing 1% higher after Trump’s “fire and fury” comment triggered the algos and forced human traders to ponder the increasingly limited diplomatic avenues available to Trump and the North Koreans.
Debt (from the borrower’s perspective) owed to banks is profit and income from the bank’s perspective. In other words, banks are in the business of creating more debt … i.e. finding more people who want to borrow larger sums.
Debt is central to our banking system. Indeed, Federal Reserve chairman Greenspan was so worried that the U.S. would pay off it’s debt, that he suggested tax cuts for the wealthy to increase the debt.
What does this have to do with war?
War is the most efficient debt-creation machine. For starters, wars are very expensive.
For example, Nobel prize winning economist Joseph Stiglitz estimated in 2008 that the Iraq war could cost America up to $5 trillion dollars. A study by Brown University’s Watson Institute for International Studies says the Iraq war costs could exceed $6 trillion, when interest payments to the banks are taken into account.
This is nothing new … but has been going on for thousands of years. As a Cambridge University Press treatise on ancient Athens notes:
Financing wars is expensive business, and the scope for initiative was regularly extended by borrowing.
So wars have been a huge – and regular – way for banks to create debt for kings and presidents who want to try to expand their empires.
Major General Smedley Butler – the most decorated Marine in American history – was right when he said:
Let us not forget the bankers who financed the great war. If anyone had the cream of the profits it was the bankers.
War is also good for banks because a lot of material, equipment, buildings and infrastructure get destroyed in war. So countries go into massive debt to finance war, and then borrow a ton more to rebuild.