China to Lay off 300,000 Troops -- Bummer for Defense Stocks

It's a bad day for Neocons!  

That madman Obama seems to have put together enough radicals who want to try talking PEACE with Iran (and what did you expect with John Kerry in charge?) and now China says it will cut 300,000 troops and has only peaceful goals as a global citizen (troops pictured here marching off to the unemployment office).  Who are we going to attack with all our brand new F-35s?  

Thank goodness for ISIS, now THERE's a threat that justifies $1Tn in annual military spending (8x China, now $130Bn).  That's right, Mr. Trump, perhaps the real reason China is "kicking our asses" is because, unlike the United States, who spend 40% of all tax receipts on marching up and down the square, China would rather spend all their citizens' money propping up the stock market.  

OK, well perhaps all Government have their own idiocy but we are clearly the World's idiots with our RIDICULOUS military budget, which is "officially" $711Bn, but that doesn't count the portion of our debt that comes from our Military Adventures and the cost of the interest it takes to service that debt.  Nor does it count the Medicare/Medicaid and Veteran's Benefit spending that's attributed to the millions of troops who have been sent home damaged after one of our military excursions.  

As you can see from the chart, even the low estimate for US military spending equals what the ENTIRE REST OF THE PLANET spends in total.  And most of those people are our allies!  Could it, maybe, possibly, somehow be possible that our MASSIVE military budget is the only reason other countries spend even what comparatively little they do on their own armies?  

One way we could find out, is to bravely follow Chairman Xi's example and cut our own military back by 15%.  For one thing, that would cut $100Bn off our budget - who doesn't like that (or, in the case of Republicans, pretend to like that)?  $100Bn, as you can see from this chart, would be 15% of our discretionary, non-military budget.  Pick your favorite non-military program from this list and double it and we'd still have 10% left - enough to double two more or  we could just add 3% to five of them!  

Adding 3% to some of the other programs by just cutting 15% of our bloated military spending would add 50% to our Education Budget, 50% to the Housing Budget, 60%  to Health Spending, 100% to Science Research, 150% to Transportation, 300% to Food and Agriculture, 100% to Energy and Environment or 150% to the Labor Department.  

Why is it, you may wonder, that NONE of the Democratic candidates, not even Bernie Sanders, can draw up a simple chart like this and explain to Americans what terrible choices we are making when we value guns over butter?  Well, I have two simple charts that explains that too:

Lobbying, lobbying and more lobbying.  Only the Financial Sector pays more money ($320M vs. $240M) annually lobbying our 535 Congresspeople ($1M each between them) than the Defense Industry, who get a 758x return on their investment by making a combined $340 BILLION profit on the money we pay them.  Imagine how completely the Koch Brothers will be able to screw us over if they follow through on their promise to spend $889M buying the next election!  

If you were to use the low-ball budget number of $711Bn that we hand over to these bastards every year, 50% of that drops right to their bottom lines!  That is sick!  We are STUPID!  WAKE UP AMERICA!!!  These guys are BRIBING our Congressmen and Senators to perpetuate the very bloated, out-of-control Military/Industrial Complex that President Eisenhower warned us would destroy this country from within.  Even Ike was too scared to speak out against these bastards until he was on the way out of office.  

I am not, by the way, a "peacenick" or whatever the inevitable commenters will call me - I'm a numbers guy and if America is a Corporation, we are WASTING hundreds of Billions of Dollars just on the $711Bn we are spending, without even considering whether or not it should be spent in the first place.  Put me in office, and I'll start the next G8 conference by suggesting we ALL cut our military budgets by 10% a year for 5 years.  Do you really think anyone would object?  Other than the people who's cash-flow we threaten, of course.  

As Eisenhower said, only an "alert and knowledgeable citizenry" can reign in the monstrosity of the Military/Industrial Complex and, in his time, we used to spend more money on education than we did on the military.  Since then - well, not so much...

This country needs to get its priorities straight and we need to stop falling for the propaganda machine that is continuously trying to make mountains out of mole-hills in a desperate attempt to justify, for example, $500Bn spent by our Military, so that Lockheed Martin (LMT) could develop F35 fighters that they will then sell to us for $160M each at a 50% profit per plane for our beloved contractor.  

Isn't profit usually used to recoup R&D costs?  Why does the customer not get a break when they paid for the R&D?  When LMT sells F35s to other countries, do we get a commission at least?  Who negotiates this BS???  (answer, Bush II, of course).  

The Defense Sector ETF (ITA) took a hell of tumble last week to $85 from $115 abut now back to $113.  BA is 8.6% of the index and that makes them tough to short so I'm not advocating a short here but, back at $120 (the 200-day moving, I think they are flying too high and make a nice short.  ITA has no options, unfortunately, nor do PPA or XAR, which is kind of strange.

Meanwhile, the broad market is bouncing along today with Chinese markets closed until Monday but we'll be adding some hedges into the weekend - in case China goes back into post-parade free-fall.  After all, they have defense contractor in China too!