If you think about how countries around the world spend money on defense, you will quickly notice that the US with an $800 billion dollar budget is far and away the highest. Then comes China and Russia. There is a reason for that. after WW II, the US government would not allow Germany and Japan and other countries in the Axis to spend more than 1% of GDP on defense so a repeat from WWI and WWII would not happen. The world had great peace for many years. The cold war developed and the US and Russia spent great amount on defense, this meant the rise of large defense contractors which exist in the US.

President Trump was elected and he wants to change things. One of the things he wants to change is the being policeman to the world and that can be good if he cuts the $800 billion defense budget to balance his own budget. However, the reality is US defense contractors have been the favored military companies around the world, will that change? Most of the money the US sent to Ukraine has come through defense contractors products.

In an article by Jim Tankersley, Jeanna Smialek and Melissa Eddy of the New York Times News Service, Europe is looking at spending hundreds of billions of dollars in their own backyard or on European miliary companies.

There is a growing consensus that new military spending is likely to offer some boost to European economies in the near term as military companies ramp up production.

French President Emmanuel Macron is pushing allies to buy French missile-defense systems instead of American ones. Portugal which previously bought American jets is looking at European jets.

The US recently unveiled a $234 billion loan meant to finance shared military development that will prioritize European made products. The loan says 65% of the products must come from member countries. European defense industries employ 600,000 workers which is less than the 3 million employed by automakers.

Defense officials caution this will not happen overnight and will take a few years to ramp up. There is an issue with standardization for example Ukraine has been sent 17 kinds of howitzers not all which use the same type of shell.

However, in WWII, we saw domestic production change to wartime production in reasonably quick timeframe. It will not take years, but a year or two and then sales from the US will fall.

Linking to dividend paying stocks, if you owned defense companies in your portfolio, it terms of making money they have been good for governments like to spend money on defense. Which companies can change and nothing in the defense industry ever seems to go down in price. Perhaps you want to begin to diversify your holdings to include European companies or at least as long as the US is no longer going to be the policeman of the world.

There are more questions than answers, till the next time – to raising questions.