By Jack A. Smith

Itís well known that war is good for business -- especially the kind of wars the United States has gotten into in recent years against much smaller, weaker nations.  The Pentagon suffers hardly any losses but must spend multi-billions to constantly replenish mass graves of used or outdated equipment from bullets to missiles, hand grenades to daisy-cutter blockbusters,  submarines to aircraft carriers, jet fighters to stealth bombers, uniforms to helmets and so on.

Given the importance of militarism as well as business in contemporary American society, the wealthy investor can hardly be expected to remain indifferent to Presidentís Bushís plan to engage in a series of business-benefiting wars against a variety of small nations to avenge the Sept. 11 attacks in Washington and New York.

We should be thankful that, as opposed to the mass media and its penchant for wrapping government press releases in an entertaining package and calling it war news, the business press has been known from time to time to resort to the undraped truth, at least in matters pecuniary.  It does so because its principle constituency doesnít have to be convinced to support Americaís wars; it just has to be honestly informed how to profit from them.

So we shall forgo, for the nonce, our usual reliance on the daily newspapers to convey the Bush administrationís latest effusions about the wars on terrorism, and acquaint the reader with the Inside Wall Street column in the Feb. 19 issue of Business Week, headlined, "Striking Saddam: Some Stock Could Soar."

"Yes, itís that time on Wall Street," the article began, "when analysts start calculating which companies will win in which kind of war. Already, some investment pros are girding for a U.S. attack on Iraq," after President Bushís latest threats in his Axis-of-Evil State of the Union manipulation of the public mind. "While itís inherently unsettling to think about ways to profit from war," author Gene Marcial assured us (not that we had an iota of doubt that the investor class was anything but shaken by the prospect), "Wall Street is always on the outlook for an investment opportunity.  And defense companies are the natural first place it looks at such times."

Now we come to the hard stuff.  A war against Iraq, Marcial quotes Merrill Lynch analyst Byron Callan, "should benefit companies that produce military consumables," including ammunition and spare parts. Callan figures that "outfits facing material change in their earnings include Alliant Techsystems, Raytheon, and possibly L-3 Communications" because "such consumables" constitute a high percentage of their sales. Alliant (ammunition, rocket motors, detonation fuses) traded at 65 on Sept. 10 and 89 now;  Raytheon (laser-guided weapons, cruise missiles, radar parts) was 24 on Sept. 10, 38 now; and  L-3 (communications, fuses and microwave components) was 60, now 109 -- and a war with Iraq would push the numbers at least as high as the flagpole atop the stock exchange.    Other big players mentioned in the article include Moog (aircraft and helicopter spare parts), Goodrich Corp. (also spare parts), Lockheed Martin (missiles and aircraft parts), General Dynamics (ammunition and other war equipment).

Ah, but thereís a downside, Callen noted: "An attack on Iraq could also have a negative impact on commercial aerospace suppliers, since air travel could again by curbed by the threat of terrorism."

But the upside shrinks the downside into the smallest of potatoes.  The article continued:  "The safest course for investors, Callan advises, is to own stock that could have the highest potential of upward revisions in their earnings estimates.  Among the companies that should benefit are those that make such products as air-to-surface missiles, Tomahawk cruise missiles, and precision-guided weapons used in air and naval strikes.  Also in the same category are ammunition for heavy ground forces and spare parts for aircraft and helicopters, such as electronic warfare systems and engine components."

President Bushís requested 2003 militarist budget of $391 billion (our calculation, which includes billions tucked away in the Energy and Intelligence budgets), should just about be able to pay for the goods needed to carry out next yearís wars and still provide a pittance of profit for the patriotic investor.

Callan regards the Bush administrationís intention to demand major increases in the next several Pentagon budgets as having a "broader ramification" for investors than the mere prospect of a war against Iraq.  To which the author Marcial puns in a concluding sentence, "This could be a case where defense is the best offense for investors."