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Pentagon Watch: Where Did Your Tax Dollars Go This Week?

The U.S. military has a reputation as a somewhat secretive organization. But in one respect at least, the Pentagon ranks among our most transparent government agencies. Every day of the week, rain or shine, the Department of Defense tells U.S. taxpayers what contracts it's issued, to whom, and for how much -- all right out in the open on its website.

DoD is budgeted to spend about $6.2 billion a week on military hardware, infrastructure projects, and supplies in fiscal 2013. (A further $5.6 billion a week goes to pay the salaries and benefits of U.S. servicemen and servicewomen). But as you may recall, the Pentagon went a wee bit over budget last week -- and spent a whopping $9.8 billion.

Like any other consumer shocked to see the balance on a credit card statement, the Pentagon sharply curtailed its spending. From Monday through Friday, DoD spent only $3.5 billion. Even accounting for a short break from shopping to enjoy the fireworks Thursday, that works out to a spending rate of just $875 million per day, or 70% of what you'd ordinarily expect.

So ... what did $0.70 on the budgeted defense-spending dollar buy us this week?

Ahh ... ahh ... achoo!
For one thing, it bought a whole lot of flu drugs to treat flu bugs. On Monday, the DoD awarded twin contracts for flu vaccines to a pair of foreign Big Pharma producers. France's Sanofi (NYSE: SNY  ) was awarded a $14 million contract for flu vaccines. Switzerland's Novartis (NYSE: NVS  ) got a similar $14 million order.

Chief of Naval Operations Adm. Jonathan Greenert receives his annual flu vaccine at the Pentagon. Source: Wikimedia Commons.

Imports and exports
Helping to balance out the U.S. balance of payments, though, was Boeing (NYSE: BA  ) , which inked contracts to export far more dollars' worth of military hardware than we're importing from Europe. In a trio of contract wins, Boeing won orders to "sustain" Apache attack helicopters operated by the Netherlands, to sell Apaches to the Saudi military, and in the largest of its contract wins, to "support" the Royal Saudi Land Force Aviation Command, which operates a fleet of -- you guessed it -- AH-64E Apache attack helicopters. In total, these three contracts should be worth upwards of $132 million to Boeing.

AH-64 Apache. Source: Wikimedia Commons.

$132 million? Chicken feed!
If that sounds like a lot of money -- it's not. At least not relative to the wins that Boeing archrival Lockheed Martin (NYSE: LMT  ) booked last week. On Monday, Lockheed scored a $295 million DoD contract to continue work on upgrading the Aegis air defense system to a configuration capable of shooting down ballistic missiles.

One day later, Lockheed won four more contracts in quick succession, headlined by a big $308 million award to supply an unspecified number of "tactical missiles" to the government of Kuwait. DoD kept mum on the specific sort of missiles being sold to the Kuwaitis. But further digging reveals that the contract being modified to increase Kuwait's purchase was actually a sale of Patriot Advanced Capability-3, or PAC-3, anti-aircraft missiles that we originally reported on back in January. DoD confirms that the cumulative value of this contract now exceeds $1.06 billion in revenues for Lockheed.

Opportunities on the horizon
So far, we've talked mainly about defense contracting news that's already been reported on our site. But what about opportunities for investors that are not yet widely known?

Actually, for investors in Raytheon (NYSE: RTN  ) stock, there may be a couple of those, too. If you think back to January's PAC-3 contract announcement, for example, Lockheed's big Patriot win was followed in quick succession by a series of three Patriot contract wins for Raytheon. All three were classified as "foreign military sales," and while the destination of the sales was not stated in any of them, I think we can take a wild guess that sand and sun were involved.

Combined, those three sales added up to $117.5 million in new revenues for owners of Raytheon stock. Don't be surprised if there are more contract wins in store for Raytheon this time, too.

A second bit of good news for owners of Raytheon stock could soon arrive from Down Under. In a little-noticed news item, we learned last week that the U.S. Defense Security Cooperation Agency has notified Congress of a request by Australia to buy 100 MK 54 torpedoes, with which to arm its new force of MH-60R Sikorsky Seahawk helicopters, and Boeing Poseidon P-8A subhunting airplanes. No contract has yet been signed, and it hasn't been officially announced yet. No one knows about it -- except that now, you do.

Boeing operates as a major player in a multitrillion-dollar defense market in which the opportunities and responsibilities are absolutely massive. However, emerging competitors and the company's execution problems have investors wondering whether Boeing will live up to its shareholder responsibilities. The Fool's premium research report on the company provides investors with the must-know issues surrounding Boeing. They'll be updating the report as key news hits, so don't miss out -- simply click here now to claim your copy today.


Read/Post Comments (4) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 07, 2013, at 12:36 PM, triliberty516 wrote:

    The definition for Racketeering: a racket is a service that is fraudulently offered to solve a problem, such as for a problem that does not actually exist, will not be affected, or would not otherwise exist. Conducting a racket is racketeering. Particularly, the potential problem may be caused by the same party that offers to solve it, although that fact may be concealed, with the specific intent to engender continual patronage for this party. A prototype is the protection racket, wherein a person or group indicates that they could protect a store from potential damage, damage that the same person or group would otherwise inflict, while the correlation of threat and protection may be more or less deniably veiled, distinguishing it from the more direct act of extortion.

  • Report this Comment On July 07, 2013, at 2:40 PM, sdchanman wrote:

    Unemployment Rate Unchanged In June, Long-Term Joblessness Still Terrible

  • Report this Comment On July 07, 2013, at 2:43 PM, Dq1Ai2013 wrote:

    as Horseshack says---Oh oh oh oh..I know.

    The Pentagon + the arms(USA,RUSSIA, CHINA, FRANCE, GREAT BRITAIN)= The Pentagram.

    I didn't even need a team of degreed analysts and a PhD from the war or financial college to know that.

    I saved time and money.

  • Report this Comment On July 07, 2013, at 3:27 PM, 2smartforlibs wrote:

    I missed the 7 million the overlord gave away and how much did john Kerry ( how served in Vietnam) give away. Not counting Dingy Harry giving away for a high speed railroad no one outside California and Nv want

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