Sand Spring Advisors LLC
No Mad Rush in Defense
March 2, 2003
by, Barclay T. Leib
Remember the mad rush in the aftermath of 9-11 to buy defense stocks? And now as we "inevitably are headed to war" in the estimation of most people, there has recently been another mad rush to buy oil. The steepness of the recent oil price ascent is nothing short of amazing.
And yet, if one bothers to ponder whatever happened to those defense stocks that were so hot not so long ago, perhaps it might surprise some that all of the five largest U.S. defense manufacturers (Lockheed Martin, General Dynamics, Boeing, Raytheon, and Northrop Grumman) are significantly lower today than they were last June, and only Lockheed Martin is any distance above its 9-11 levels.
Indeed, we still see Northrop Grumman falling with time from currrent levels near $86 toward a downside Fibonacci target some distance away -- down at $33.70. A tapped out government with poorer tax receipts and a spiralling budget deficit is likely to be the culprit here.
In terms of the current oil situation, our only message is that while it is obviously hazardous to try picking a top, this market could easily be back at $29.34 in a flash. If it were to do so promptly, perhaps we will finally get our long awaited equity market bounce into March 17-18th.
Therafter, we'll be more aggressively back on the trail of new equity short-sale candidates -- mostly in the high-end consumer sensitive and finance lending sectors.
Non-subscribers are invited to access our February 2nd article, "Gentle Early Spring, but Rough Summer: Focus on Asia for Now," together with other past articles, by signing up for a quarterly Sandspring.com subscription below.
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