Defense contractors want Congress to block a rule that would let the Pentagon approve their stock buybacks. Not ban them. Approve them. The lobbyists are fighting for the right to buy back shares without asking anyone first.
This is the same industry that gets paid whether the product works or not. The F-35 was over budget for so long it became a grandfather clause. Now these companies want to take taxpayer money, turn it into revenue, then use that revenue to buy their own stock back, which pumps the share price, which triggers executive bonuses tied to share price performance. The circle of life, but for defense contractors.
The trade groups are very concerned. They say requiring approval would create uncertainty. Uncertainty about what? Whether you can legally manipulate your own stock price with government money? That does sound stressful.
Retail traders will read this headline and think it's bullish for defense stocks. More buybacks mean number goes up. They'll ignore the part where the buyback is funded by the markup on a missile system that may or may not hit the target. The stock buyback always hits the target.
Congress will probably cave because defense lobbyists have more pull than physics. The Pentagon will keep writing checks. The contractors will keep buying back shares. Executives will keep cashing out. And some guy in Iowa will keep buying RTX calls because he saw a jet fly over a football game and got patriotic.
The technical analysis on this is simple: draw a line from the Treasury to Lockheed's buyback program, and you've found support that never breaks.
Photo by Kevin Doyle on Unsplash
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