Treasury bond yields will have to go up alot given the reckless spending our government is engaged in. The Obama budget is insane and will lead to higher yields as we finance our deficits with more treasuries then ever before. This will continue for several years to come. Be alert for this and do not get burned as treasuries fall and yields skyrocket. I would short the long treasuries by buying (TBT) which is a short ETF that goes up when treasuries fall and yields go up as I am predicting will happen. You can hold this long if you would like, but I would get out when the yield on the 10 year gets around 4%. This is because the economy will still be very weak and people will demand bonds. Then as it comes off the 4% level you can get back in, after you made some easy money.

Northrop Grumman (NOC) closed Friday, March 13th 2009 at $36.57, almost 60% below its intraday high of 85.21 on November 7th 2007. Is this the result of something ominous on the horizon for the defense giant, or is it just one of many victims of the broad market sell off that has occurred over the last 12 months? I lean heavily toward the latter. I can find no massive loss of revenue or scandal that warrants such a price correction. It is true that Northrop has been involved in the circus that is United States politics in regards to the Air Force tanker refueling contract. In fact, Northrop and EADS winning the original contract was seen a huge surprise and was a bonus. Had Boeing won the contract as was widely predicted, Northrop would not have seen a major long term sell off. Now that is still in limbo, but I do not see significant downside no matter how it turns out.

While boasting a 3.40% dividend yield and trading 60% below its high, Northrop seems quite attractive to me. There is some risk of a new administration scaling back weapons purchases, but no president is getting rid of nuclear powered aircraft carriers anytime soon and when it comes to that, Northrop Grumman is the only game in town. To be clear, I fully expect the Obama administration to make big defense cuts but I believe they have already been factored into the price. They will also replace some cuts with purchases in other areas. Simply put, the world is a dangerous place and investors need to protect themselves. Looking back at some historical prices from years ago, I discovered that one of the greatest days this stock ever had came on one of the worst days for the market and our great country.

On September 10th 2001 the DOW closed at 9,605.51. After the horrific events of September 11th the market reopened on September 17th and closed at 8,920.70. This drop of 684.81 was enough to scare the most seasoned investors. About a year later the market fell to well below 8,000. As we always do though, America and the stock market roared back from 2003 to 2007. The question remains though, how do we protect our portfolios from such a jarring terrorist attack in the future?

While the DOW was diving almost 700 points on the day the market reopened after the attack, one stock soared over 15% and went even higher in the coming weeks. That stock was Northrop Grumman. They build aircraft carriers and other things that go boom and have been a good long term performer. With hindsight it is easy to see why this huge pop happened on a day when almost everything else tanked. Looking for a safe haven, investors concluded that the USA was going to make someone pay for killing our citizens no matter what the cost and Northrop Grumman was as likely a candidate as any to benefit. While it will almost always be a decent long term performer, any type of national terrorist attack or global instability in the future will benefit companies like Northrop Grumman in a big way.

This might seem a bit unethical to some people by essentially profiting off tragedy. I do not follow that logic as I must point out that this is the harsh reality with which investors are faced, and there is nothing wrong with protecting yourself. If I had to trade a 15% increase in a day for the World Trade Center and 3000 American lives, I would forfeit my capital gains in a heartbeat, but since none of us can predict the future or control events we should be prepared for any and all eventualities. If you want to sleep well at night knowing your portfolio is safe, do what I do. Get some defense stocks like Northrop Grumman, and pray that nothing bad happens.

I am heavily invested in the defense sector and it will remain a stalwart in my portfolio.
I own shares in…

Northrop Grumman (NOC)
General Dynamics (GD)
Boeing (BA)
Lockheed Martin (LMT)
Raytheon (RTN)

Though I am pessimistic about our current economic prospects due to inept government policy, I remain a long term investor because I still have hope that we (America) will come to our senses eventually and that the market will heal itself in time. How much pain we face in the meantime is up to us though.

It would not surprise me at all if the market fell another 20%, so I am keeping some cash in reserve to take advantage if prices fall. However, I believe picking a bottom is almost always a fruitless endeavor so I have begun initiating positions in commodities and equities. I have been entirely in Cash and Short Term Government Bonds for the past 6 months which was highly unusual for me. I recently liquidated my Bond positions.

I am now keeping an eye on Gold (GLD) and Agriculture for possible entry points.
I have bought positions in…
MO,BP,NOC,LVS,MGM,T,NTGR,CHK,RIG,DE,UA,INTC,COP,DHIL,GD,BA,LMT,RTN,GROW