America Can't Stay Behind in a New Kind of Arms Race
Doc's note: For decades, America was the greatest military power in the world. But America's dominant role has been in question in recent years.
Marc Chaikin – founder of our corporate affiliate Chaikin Analytics – explains why America is losing the arms race and how the country is trying to catch up...
On an otherwise quiet night last November, fireballs fell from the sky over the Ukrainian city of Dnipro...
They plunged to the ground in groups of six. And the fireballs repeatedly hit a military factory at a massive speed.
Over the next few hours, experts struggled to identify this high-speed weapon.
Then, Russian President Vladimir Putin made a surprise appearance on national TV. He said that Russia had tested an experimental missile on Dnipro...
Our missilemen called it "Oreshnik." The tests were successful. The launch goal was achieved.
Putin explained how the Oreshnik travels "like a meteorite" at "2.5 to 3 kilometers per second." That's roughly 6,000 miles per hour. And it's much faster than standard missiles.
Russian forces launched the Oreshnik along with eight "normal" missiles. Ukraine's air force shot down six of them. But the Oreshnik made it through.
Putin gave this chilling clarification...
The existing air defense systems around the world, including those being developed by the U.S. in Europe, are unable to intercept such missiles.
Putin had a clear message. He wanted governments around the world to see Russia's new weapon. And he wanted them to know that it's almost impossible to stop it by using existing technology.
You see, the Oreshnik is a "hypersonic" missile. As the name implies, this type of missile travels at many times the speed of sound (767 miles per hour).
The missile also carries six warheads that can be controlled independently. And each warhead has six additional "submunitions."
Notably, the attack on Dnipro wasn't a nuclear strike. However, Russian officials confirmed that the Oreshnik could be fitted with nuclear warheads.
Missiles like the Oreshnik were banned under the Intermediate-Range Nuclear Forces Treaty. The U.S. and the Soviet Union signed this treaty during the Cold War. But it collapsed after the U.S. withdrew in 2019. That gave Russia the right to develop missiles with a range of up to 5,500 kilometers.
In short, a new chapter is beginning for militaries across the globe...
America Is Lagging in an Arms Race With Hypersonic Weapons
Hypersonic missiles have the potential to disrupt the delicate balance that prevents nations from attacking each other.
Put simply, they're extremely difficult to intercept. And that's not just because of their speed...
The general definition of hypersonic is Mach 5. That's five times the speed of sound (or roughly 3,836 miles per hour).
But most experts agree that maneuverability is also a requirement. That's because traditional ballistic missiles exceed Mach 5 as they plunge from high up in Earth's atmosphere.
Modern defense systems can intercept ballistic missiles because they follow a predictable path.
But hypersonic missiles use a combination of speed and maneuverability that makes them almost impossible to intercept.
Countries like Russia, China, and even North Korea have spent many years focusing on hypersonic weapons.
America can't risk falling far behind in the hypersonic-missile race.
Our military bases and other assets would be vulnerable. And our opponents might view this weakness as an opportunity that's too good to pass up.
Regardless, the U.S. will need to pour money into hypersonic-weapon research in the coming years.
The problem won't get fixed overnight. But hypersonic weapons will be a critical focus going forward.
In fact, there are already signs the U.S. military is addressing the issue...
The Pentagon's latest budget request included $6.9 billion for hypersonic research. That's up nearly 50% versus 2023. (For 2024, the Pentagon didn't break out hypersonic research as its own category. It was part of an $11 billion request for "long-range fires.")
Notably, the Pentagon has plenty of related projects in progress. For example, the Multi-Service Advanced Capability Hypersonics Test Bed (MACH-TB) program is aimed at ramping up the U.S. military's hypersonic-weapon development.
As the name implies, the goal is to build the testing system (or "test bed") needed to test prototype vehicles.
If the U.S. military wants to speed up its hypersonic-weapon development, it needs a high-quality test bed. This is a critical part of turning prototypes into combat-ready weapons.
The first stage of MACH-TB began in 2022. It focused on the early-stage design of the test bed.
The second stage is called MACH-TB 2.0. It's starting now.
Folks, some stories are as old as time...
Humans have been in some kind of arms race since they first learned to throw sticks and rocks at each other.
That's still true. And it means that today in the markets, no matter what the modern rhetoric is, aerospace and defense will continue to create opportunities for investors.
So I recommend you continue to keep an eye on this corner of the market.
Good investing,
Marc Chaikin
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