The Hazards of Defense Industry Investment
Still timely today, this piece on the defense industry offers some fascinating insight.
Like any industry, the defense industry as an investment has a lot of pitfalls the number one pitfall being excessive disclosure.
“Recommendations for stock purchases” said E. F. Hutton & Co.. “Are obliged to include explanations of the innate hazards involved, and contract renegotiation considerations deserve particular mention when discussing the defense industry. Congress has been highly critical of Pentagon procurement policies, especially on the use of negotiated instead of fixed-price contracts and, as a result, the renegotiations law has always been short-term legislation.”
Consequently, defense contractors have been subject to the uncertainties of possible refunds, aggravated by the fact that sometimes the Renegotiation Board consumed a long time in determining excess profits.
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