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For the ‘Seventy Twelfth’ Time… But This Sector…

by | Nov 10, 2022 | Market Outlook

My first job out of college was on Capitol Hill.

I’ll admit that interning for a Congressional representative in D.C. is boring.

When I wasn’t looking at my fantasy football lineup, I responded to handwritten letters from constituents. Some of the letters were crazy… I remember one demanding all evidence that the moon landing was real.

Others were just unusual. A letter asked the congressman if they could get a VIP tour of the U.S. Embassy… in Turkmenistan.

At the time, the congressman for whom I worked was a key member of the U.S. Select Intelligence Committee. This leadership team goes into a steel bunker, hands over their phone and receives information on covert U.S. operations around the globe — and the military and terrorist threats that should keep people up at night.

Back in 2005, when the job ended, I had an opportunity to speak with the congressman about my future. Interns typically ask a few dozen questions if they get that opportunity…

I only asked two.

First: What should I study in graduate school?

Second: Could I receive a law school recommendation letter?

I skipped law school — and never followed up on the recommendation.

On the first question, the congressman went into deep detail on why I should study cybersecurity — something I ultimately did as a consultant and graduate student.

Cybersecurity remains the thing that kept this congressman up at night for a long time.

But not long ago, I joined him for dinner in Baltimore. It appears something else had supplanted that place in his mind.

And this threat is not going away any time soon.

The Hypersonic Threat

While I joined the congressman for dinner at the Prime Rib in Baltimore, I asked him the same question I do every time I see him.

“What are you worried about?”

Those who care about their constituents are most concerned about the headline issue impacting Americans. Right now, it would be commodity inflation, housing costs and social security.

The people who pretend to care about their constituents are more concerned about their careers and climbing the social ladder in that town… Read the book “This Town: Two Parties and a Funeral — Plus, Plenty of Valet Parking! — in America’s Gilded Capital,” by Mark Leibovich to understand my point.

I assure you, this congressman cares deeply… which is why he’s hyper-worried about hypersonic missiles.

During that dinner, he asked me what I knew about them.

I went into pretty deep detail, explaining this to my father, who joined us, about them, having relied on my military security courses.

This is advanced military technology, missiles that can travel about one mile per second — or five times the speed of sound at more than 3,800 miles per hour. On the other hand, the Tomahawk cruise missile — a standard U.S. weapon — travels at just 550 mph.

These missiles reach a target thanks to a jet engine, and can effectively bypass any missile defense system that is supposed to intercept incoming warheads. These missiles can also fly at very low trajectories, making them nearly impossible to detect on radar systems.

To put into perspective what I’m talking about, consider this elementary lesson I learned that evening… Traditional missile defense systems, which are designed to intercept an incoming attack, require about eight seconds — EIGHT SECONDS! — to react to an attack.

A missile will have traveled eight miles in those eight seconds — EIGHT SECONDS!

And there are reports that the Russian Zircon missile could travel 12 miles in that time.

But things are about to get even more concerning…

The Hypersonic Race

On Thursday, CBS reported that Iran… yes… Iran… has claimed the development of a hypersonic missile. Iran says this missile can penetrate all weapon defenses — including the Iron Dome of Israel.

“This hypersonic ballistic missile was developed to counter air defense shields,” Iran’s leadership told its local news agency. “It will be able to breach all the systems of anti-missile defense.”

With nations like China, Russia and Iran now accelerating this technology… I have to be worried.

The real issue is the threat of these missiles to U.S. aircraft carriers.

For example, if an American ship detected that a Russian Zircon missile was inbound from 100 miles away, this ship would only have about 60 seconds to react. That’s not enough time to maneuver a ship, meaning the military would need to intercept it with a similar, high-speed missile.

The United States was already dealing with China in the Pacific Ocean.

And now Iran threatens our military and allies in the Middle East.

This serves as a reminder that the defense sector — with annual spending approaching $1 trillion per year in the decade ahead — is a very safe place to park capital, in my opinion. My favorite defense stock remains Lockheed Martin Corp. (NYSE: LMT), which has surged on the back of the Russia-Ukraine crisis.

But you can also find comfort in Boeing Co. (NYSE: BA) and Raytheon Technologies Corp. (NYSE: RTX).*

This threat isn’t going away, and the U.S. government will continue to throw money at this problem until one winner cracks the code and delivers America a great leap forward in hypersonic missile technology.

Enjoy your weekend,

Garrett

WRITTEN BY<br>Garrett Baldwin

WRITTEN BY
Garrett Baldwin

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