How to Make Millions from Weapons of War

How to Make Money from Weapons of War

I want to talk about a subject that the media will never cover.

That’s because it involves information that politicians and other “important people” have used in the past to make millions.

And they’re still making millions using that same information. As a matter of fact, they’re making more than ever.

Right after the 2008 financial crisis, I said stocks would fly.

But I also said there would be a rise in conflicts between many nations, which would lead to financial/currency wars, political wars, and eventually war itself.

Knowing in advance what the majority of people fail to realize (or choose not to believe) is how we make the biggest profits. I wrote about this simple concept as well.

Believe me, a few years ago when I said stocks would break new record highs, they laughed at me. They also laughed at me when I said there would be an uprising amongst other nations against each other.

They’re not laughing anymore.

Over the past years, specific events propelled the values of many stocks. If you knew these events were coming, you too could have benefited from its information.

This is exactly how politicians, lawmakers, and those who are “in the know” make millions.

Benefit from War Profiteering 

You may not like the above subtitle, but its reality.

And since it’s not something people like to hear, the media rarely covers this story.

In my last Letter, I talked about how World War II revitalized the American economy.

I talked about why America is on the same path today.

The World’s Biggest Arms Dealer

Since the 2008 financial crisis, the United States has been the world’s biggest arms dealer, accounting for 29 percent of global arms exports.

Supplying arms to other nations gives the US policing power over hot spots such as the Middle East, while giving the US State and Defense departments incredible clout when negotiating with its buyers.

For example, the US can negotiate the addition of military bases in these countries to patrol certain interests in the area, such as oil and gas.

Below is an infographic from National Post of how the US has spread its might over the world:

Ironically, that makes supplying arms a potent form of diplomacy.

It’s no wonder why the US has sent billions of dollars worth of arms to countries in the Middle East, such as Egypt and Israel. These countries are surrounded by some of the world’s largest oil resources and coincidently, are also among the biggest recipients of US military aid.

It’s also no surprise that the US has dramatically increased its military presence around the South China Sea over the past years, and are conducting military exercises with “allies” in the area.

Via DNA:

“Thousands of Philippine and American soldiers began annual war games on Monday near disputed waters in the South China Sea, testing the readiness of the two oldest security allies in the southeast Asian region to respond to any emergency.

The Philippines has territorial disputes with China over the South China Sea, which is said to be rich in energy deposits and carries about $5 billion in ship-borne trade every year. The Spratly Islands in the South China Sea are also claimed by Brunei, Malaysia, Taiwan and Vietnam”

The US Geological Survey estimates that the area in the South China Sea may contain anywhere between 5 and 22 billion barrels of oil and between 70 and 290 trillion cubic feet of gas in as-yet undiscovered resources.

Is it a surprise then that earlier this year, the US signed a new security pact with the Phillipines that could lead to more weapons sales?

Via Reuters:

“A new 10-year security pact between the United States and the Philippines could lead to modest increases in U.S. weapons sales in coming years, especially for maritime surveillance equipment, analysts said on Sunday.”

Is it also a surprise that the US just eased its ban on weapons sales to Vietnam?

“The United States announced Thursday it was partially lifting its ban on sales of weaponry to Vietnam to help its maritime security in a sign of deepening ties between the former enemies.

The move is intended to support Vietnam’s ability to defend itself in the South China Sea, where it is among Asian nations facing an increasingly assertive China.”

You gotta love “diplomacy.”

War Creates Jobs

Weapons transfers do more than just provide “diplomacy”; it provides jobs.

Currently the United States has 1.3 million active duty military personnel as compared to 770,000 civilian personnel.

The cumulative employees involved in defense*, such as defense contractors, are well over either of those numbers.

*Yes, I am using American spelling.

The top five defense contractors alone, Lockheed Martin, Boeing, General Dynamics Corp., Raytheon, and Northrop Grumman Corp., combine to provide more than 600,000 jobs.

Now these jobs don’t just come from thin air, or just from taxpayers.

In order to create these jobs, you need conflict. But conflict alone isn’t enough because someone has to pay for these weapons.

So again, its no surprise that the countries with the biggest appetite for US weapons are oil-rich nations in the Middle East…with the money to pay for them.

And where there’s money, there’s big corporate profits.

Big Profits

Major defense contractors have been reaping the rewards of global conflicts.

Thanks to the conflicts that have surged since 2008, overseas demand for weaponry such as fighter jets has never been hotter.

For example, over the ten-year span between 1995 and 2005, sales of weapons to overseas buyers averaged only $13 billion per year.

But in 2010, the Department of Defense announced plans to sell up to $103 billion in weapons to overseas buyers.

This increase in arms sales didn’t just happen overnight.

Coincidence? Hmm…

Shortly before the announcement by the Department of Defense, Boeing began to lose profits on some of their older military production lines, including Boeing’s F-15 tactical fighters, which were being replaced by more advanced rivals.

Shutting down production would have meant the loss of hundreds of jobs during a time when the economy was already struggling.

But all of a sudden, rumours began to surface about a massive deal that was about to take place from a foreign buyer, just as conflict in the Middle East was beginning to get worse.

It turns out this buyer was none other than Saudi Arabia, who was negotiating a $30-60 billion arms package with the US which included, “84 F-15 Strike Eagles to replace the Kingdom’s Tornado strike aircraft and/or F-15A-D fighters, upgrades for another 70 planes, about 132 UH-60 Black Hawk utility and AH-64 attack helicopters, and armaments to equip them.”

It was then confirmed just a few months later in October 2010, that the Department of Defense notified congress of a $60 billion weapon sale to Saudi Arabia.

As fate would have it, a few months after the announcement of the weapons sale, tensions in Saudi Arabia grew increasingly worse.

By December of 2010, a revolutionary wave of demonstrations and protests, riots, and civil wars in the Arab world, known as the Arab Spring, had begun.

Coincidence?

Boeing wasn’t the only company benefiting from the growing conflicts.

Many other companies began to set their sights on international growth, and they too have been reaping the rewards.

I won’t post pictures of the charts today, but I can tell you that the shares of many defense contractors have been rapidly climbing in value over the past five years.

I talk more in details about some of these companies in my premium service, InvestmentDiary.com.

Why Have International Arms Sales Exploded?

It’s obvious that you can blame growing global conflicts for the dramatic increase in weapons sales to foreign nations.

But weapons sales to foreign nations don’t just happen. There’s a lot of regulation and it’s not as easy as one might think.

That is, until Obama came along.

While the media has portrayed Obama as a stickman-like peacemaker, who is calling for defense budget cuts, he has actually been more ruthless than he makes himself out to be.

Under his administration, sales of weapons to other countries have never been greater.

While many Presidents have attempted to change the rules that govern foreign arm sales, most of them failed to make much headway.

But in less than a few years, Obama has implemented a sweeping series of changes that has revolutionized the way the US imports its weapons.

Selling Weapons is Easy

Previously, before arms makers could sell weapons abroad, they had to obtain permission from the State Department, which must then clear the weapons for export.

But a year after the 2008 financial crisis, in August 2009, Obama launched the Export Control Reform Initiative (ECR)

The ECR would affect how the US currently oversees US firms who supply the global arms market.

For example, one of the biggest changes would be to turn over responsibility for reviewing the export of military equipment and aviation components from the State Department, to the Commerce Department.

The State Department’s goal is to make sure that US-made weapons don’t wind up in the hands of repressive governments, terrorists, and other hate groups.

The Commerce Department’s goal is to promote the creation of new markets for US manufacturers.

In other words, the transfer of power from the State Department to the Commerce Department regarding weapons sales, makes it easier for companies such as Lockheed Martin and Boeing to sell their weapons to other countries.

And you can bet big corporations such as Boeing and Lockheed Martin have been riding this massive wave of arms export deregulation.

The Obama administration has paved the way for massive weapons deals, such as the Saudi Arabia deal, and it continues to loosen the rules that govern arms exports.

We’ve already been seeing the affects of Obama’s actions.

Aside from massive corporate profits, US weapons are now being used all over the Middle East, with many of them by terrorists groups such as ISIS. 

Obama’s deregulation of arms sales has not only caused US weapons to fall in the hands of terrorists and repressive government regimes, but it seems the solution to this problem is to fight fire with fire by arming more rebels.

President Obama has already put forth a $500 million plan to arm Syrian rebels in the fight against Islamic State militants, which has been approved by the House, and is still awaiting approval from the Senate.

Of course, left wingers will say Obama is doing the right thing by increasing economic activity through arms sales, while acting as a peacemaker by cutting the defense budget.

Right wingers, on the other hand, will say Obama is strengthening foreign nations by supplying them with arms, while he is making the US weaker by getting rid of weapons at home.

What do you think?

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Russia vs. the US. Here We Go Again…

I have already told you in past letters, such as Water Wars, The Real Reason for War in Ukraine, The Real Reason for War in Israel, and The Real Reason for War in Syria, that the role of Western intervention in conflict hot spots are shrouded by increasing profits led by big corporations.

I have also talked many times about the major battles between the East and the West, including Russia’s battle with the US for European gas sales, as well as how it affects surrounding nations.

The sales of arms are no different; both Russia and the US are battling each other for the world’s top spot when it comes to weapons sales.

Russia is the second largest exporter of weapons to the world.

Over the last five years, Russia has been responsible for 27% of global arms exports, just 2% behind the US.

But that’s not all.

Over the past five years, Russia has been the biggest supplier of weapons to the world’s current largest single buyer: India.

Via Aljazeera:

“India increased its arms imports by 111 percent in the past five years compared with 2004-08, and it now accounts for 14 percent of the world’s arms imports.”

If you recall in 1998, the US banned India from purchasing American weapons after India held a series of nuclear tests. In 2001, President Bush lifted the ban, but sales to India remained slow.

That is, until just after 2008.

The US is already fighting a major oil and gas battle against Russia, and many say Russia is leading the fight.

Because of that, you can bet that the US will do whatever it takes to protect its interest as the top weapons exporter, and not let Russia dethrone its might.

The US knows that India is the world’s largest buyer, and it knows that over the past five years, India has purchased more than 75% of its weapons from Russia.

You can bet the US won’t allow this to continue.

That’s why Obama has repeatedly visited India to ensure that the US takes a bigger piece of India’s pie.

And it’s been working.

Last year, the US toppled Russia as the leading weapons exporter to India:

Via FT:

“The US, which remained the largest exporter of military equipment, displaced Russia as India’s biggest arms supplier.”

The talks of more weapons are just beginning.

Just last week, India’s new Prime Minister Narendra Modi, met with Obama at the White House to talk about weapons.

A Dark but Foreseeable Future

I could go on for a long time talking about all of the major weapons deals and how the US and other countries often lobby and coerce other nations into buying weapons.

For us average citizens, the only thing we can do is take that information and use it for our own benefit.

I know that sounds dark, but its going to happen regardless.

It’s what lawmakers, the ultra-elite, and politicians have done for many years.

Via Huffington Post:

“Members of Congress have as much as $196 million collectively invested in companies doing business with the Defense Department, earning millions since the onset of the Iraq war, according to a study by a nonpartisan research group.”
That was from a 2006 study.Here’s a five-year chart comparing the top defense contractors, via Yahoo Finance:Screen Shot 2014-09-28 at 12.48.20 PM

Imagine how much money these members of congress have made since then.

Clearly, someone must’ve known that global conflicts were about to get worse…

Clearly, someone must’ve been prepared for 2008…

We know the global arms race is getting bigger and we know global conflicts are growing increasingly more dangerous. That means more weapons sales, which means higher share prices for major defense contractors.

Remember, Franklin D. Roosevelt sold weapons to Europe leading up to World War II and lifted the US economy out of the great depression.

In the 1980’s, Reagan deregulated Jimmy Carter’s arms embargo and helped lift America out of stagflation by promoting record arm sales to American allies.

And in case you forgot, Carter denounced the U.S. role as the world’s leading arms merchant, asserting in his June 1976 campaign speech that:

“We cannot be both the world’s leading champion of peace and the world’s leading supplier of the weapons of war.”

Two years later the Carter administration announced a major arms deal with countries in the Middle East.

Until next time,

Ivan Lo

The Equedia Letter

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