The Internet is buzzing this morning over the surprising news that Lockheed Martin's
It's no surprise. It's not news. And when you get right down to it, $1 trillion really isn't a lot of money.
Begin at the beginning
First things first: This is not news. The Wall Street Journal may have deemed this story important enough to devote a whole page to it (with pictures!), but the fact is that we've been telling you for years that buying and flying 2,500 F-35s would cost $1 trillion and up. Factor in the 1,000 to 2,000 F-35s Lockheed hopes to sell to U.S. allies, and the number gets even bigger. Anyone who's "surprised" by today's WSJ story simply hasn't been paying attention.
Now, I get that the splashy headline in today's WSJ is going to shift the debate. Some folks will respond to it by saying we absolutely must fund General Electric's
All of which are valid arguments. But taking any of these actions in a WSJ-headline-induced panic is exactly the wrong move to make, because …
A trillion here, a trillion there … still ain't that much money
Here in the 21st century, "trillion" may be the new "billion" -- but it's still not a lot of money. Not when you consider what we get for it. For one thing, a "trillion dollars" spent over the anticipated 50-year lifetime of the Lockheed F-35 only works out to about $20 billion a year. Add in the flyaway cost of the plane itself, and the tally rises to $27.7 billion -- or less than $100 a year per U.S. citizen.
When you consider that:
- the F-35 isn't "just another airplane," but the single fighter jet designed to replace multiple fighters already in our air forces …
- according to Joint Chiefs Chairman Admiral Mike Mullen, this is the last manned fighter jet we'll ever buy …
- and that the $1.385 trillion figure covers the cost of the planes, their fuel, maintenance, training -- plus the cost of hangars, spare parts, and inflation even …
… I submit to you that we're really "not paying a lot for this muffler." The F-35's annual cost will make up all of 4.1% of our 2012 defense budget -- and that's not a lot of money to buy an air force.
A trillion bucks: It's all relative
In short, this "trillion-dollar price tag" really isn't as big a deal as the Journal makes it out to be -- at least not for taxpayers. In contrast, a trillion dollars is pretty significant to the companies that will be building and maintaining the plane -- subcontractors like GE, UTC, Honeywell
Make no mistake: The F-35 is crucial to the U.S. military's long-term planning. It will make up an important, and growing, portion of the revenue streams of Lockheed's partners. But as I think I've mentioned before, the F-35 is absolutely central to the investment case for Lockheed itself. Revenues from U.S. F-35s alone could secure an average of 60% of Lockheed's annual revenue stream for the past 12 months -- for the next half-century. Factor foreign F-35 sales into the mix, and Lockheed could put perhaps 75% of its revenue stream in the bag from this one product alone.
The F-35 is the single most important reason that last year, I nominated Lockheed to the Fool's list of 10 core stocks for your portfolio. Today's trillion-dollar brouhaha notwithstanding, I remain convinced it deserves a place there still.