Dear Reader,
Good morning!
Today I want to address why defense (and briefly, biotech) stocks have been selling off.
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Israel’s Brand-New Weapon
The U.S. has co-developed the most advanced weapon in the world – in a multibillion-dollar deal with Israel.
The New York Times calls it, “impossible to defend against.”
The US Army says they’re going to “build a lot of them very quickly.”
CNBC says that it will “open up a massive market for the defense industry.”
And one small defense contractor won the contract to build these weapons.
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I want to talk about an excellent opinion piece Mike Gallagher wrote for The Wall Street Journal.
If you don’t know Mike Gallagher, he is a former congressman from Wisconsin and the current head of defense for Palantir Technologies.
The article is titled, Pentagon has two years to prevent World War III.
Now, that sounds a bit hyperbolic, but what he’s saying is that China is going to make a move, which we’ve talked about, by 2027 – that’s what China has come out and said publicly – that’s their own timeline.
So the Pentagon has two years to really get ready for this.
And the reason defense stocks have been selling off is…
When you look at Trump’s pick to run the Pentagon, Pete Hegseth, the question a lot of us in finance and on Wall Street have is, “is this person really capable of bridging the gap between where the Pentagon is today, and where we want it to be in two years … five years … twenty years?”
We’re talking about a trillion-dollar bureaucracy here.
You think about Trump’s first defense secretary, Jim Mattis, a personal favorite of mine. Or Bob Gates, the defense secretary George Bush chose after Don Rumsfeld.
You think of these guys who knew how to move a trillion-dollar-a-year bureaucracy.
This is like flying a BIG airplane.
It’s not driving a Jeep Cherokee.
This is moving an institution.
A lot of folks have come out and said, “Is Pete Hegseth really the right guy to move an institution?”
“Is he the guy to actually bridge the gap between where we are today and where we want to be?”
Think about that.
Right now, we know where we are.
We have our fighting force the way it is.
But to actually come up with a plan that takes us from tanks as the key armored formations on our battlefields, to integrating AI into all of our battle systems?
There have been a lot of questions about that.
That’s why the defense sector has really sold off in the past few days.
And frankly. Trump’s pick for health and human services, Robert F. Kennedy Jr., has impacted the biotech sector as well.
Pharmaceutical stocks have sold off big time.
No one knows where RFK Jr. is going to take a hammer and just start whacking things.
But that’s a side-note – I want to keep the focus here on defense.
The defense sector has sold off because Wall Street is saying…
“Is this the guy who’s going to be able to really drive change to get the Pentagon and our military, at this critical inflection point in our nation’s history …
“who can move this trillion-dollar-a-year bureaucracy and make it dance and fly and pivot in a way that’ll bring our Pentagon where we think it needs to be to prevent World War III in two or five or ten years?”
Because we have a couple years to really put together the kind of military that Teddy Roosevelt talked about when he said, “speak softly and carry a big stick.”
Those of you who pay attention to this stuff like I do will have seen that in the past week, China showed out its new armaments.
They have their own military show and their knockoff of our F-35 was there, their J Stealth thing.
They are releasing serious weapons.
What we need to do now is steer the Pentagon, to steer those billions of dollars away from tanks and those areas that won’t be that important in the future and toward AI, drones, autonomous warfare, weapons.
And the selloff in defense stocks is Wall Street saying, “We don’t think this guy can do it.”
Now, the good news is, you guys know I do a ton of research on AI/tech and warfare, and the private sector has some incredible things coming online.
This year we’ve closed something like eight triple-digit wins on these kinds of defense stocks.
There are three I’ve just added to our portfolios that are companies that can really help dominate future warfare.
I’ve added them to this newly updated report for you.
I recommend reading it even if you don’t invest, just to see what’s going on with China and “war games.”
“The Buck Stops Here,”
P.S. The U.S. has co-developed the most advanced weapon in the world – in a multibillion-dollar deal with Israel.
The New York Times calls it, “impossible to defend against.”
The US Army says they’re going to “build a lot of them very quickly.”
CNBC says that it will “open up a massive market for the defense industry.”
And one small defense contractor won the contract to build these weapons.
