Serious Iran Deterioration & War Stock Analysis.

What is happening in Iran? In this video, we're going to break down all of the latest, including Donald Trump arguing that we might walk away from nuclear discussions with Iran. We'll talk about the Fineberg directive that was just leaked where the Pentagon is begging defense firms to build weapons as the Iran war deplate stockpiles. In addition to that, we will analyze Rathon stock ticker RTX and LMT Loheed Martin because both of those are seeing increasing contracts and to some extent increasing margins because bombs have pretty good pricing power. Some would say there is no war without PPE. But when there's war, there's PPE. Pricing power in the munitions, right? because the government pays. Anyway, we're also going to talk about some of the other headlines coming across the tape. If you want free access to the tape for now, go ahead and check it out. You can get it. This is what it looks like. Trump says the US is lowkeying it with Iran. We'll talk about this. Breaking Iran to release footage of the Supreme Leader. You could get these as they come through tick for tick. I filtered this just down to Iran, but you could get this tick for tick if you download the Meet Kevin app in the Android or Apple App Store. Totally for free to use this wire service, by the way. It costs us like an arm and a leg to provide it, but it's pretty good. Uh anyway, let's get into the actual content here because there is a lot to talk about and I hate to say it, but as usual, it seems like a war is the troops will be home for before Christmas, no more. In other words, my guess is this is unfortunately going to last a whole lot longer and Donald Trump is seeking a strategic pause while at the same time he's reloading. We just heard leaked evidence that Bloomberg and the Washington Post have gotten their hands on that a Fineberg directive uh Fineberg is Steve Fineberg, he's the deputy defense secretary, uh who wrote on August 5th to defense leaders like Lockheed and Rathon and so on, uh a letter directing them to propose accelerated delivery schedules and increase production and uh provide sort of a plan for that within 21 days. They want to plan for interceptors, missile tracking, air defense sensors, wide area surveillance, you name it. It's worth knowing what we've already gone through. In like the first period of this war, the first 30 days of this war, we blew through 850 tomahawks, 1,000 Patriot and THAAD missiles, those are interceptors, and potentially 1300 other ballistic missiles. Each THAD, by the way, costs 10 to 12 million. And what's crazy is when you burn 815 tomahawks, you got to ask yourself how long it took to make those 850 tomahawks. We started making those 850 in 2012. It took 14 years of output to produce what we blew up in 30 days. And now we are in a worse off position than where we were before we blew up 14 years of tomahawks. So obviously Trump is like, "I guess we need more bombs." [laughter] Uh, the US Army is is also believed to have used up virtually all of its um uh tactical missile and strike missiles and precision strike missiles. Tripping over my words there. Uh the Patriot missile batteries are expected to be near depletion, if not yet depleted. Uh of course, Donald Trump counters this. Uh some say that the reason this comes through is because you've got generals going, "Bro, we're out." And they still have some, but they're really low and they're like, "Please get Washington to get us more missiles." Right? And then of course Trump doesn't want anybody to feel unsafe. So then of course he goes on Truth Social. We have more patriots than anyone else in the world. And that could also be true because we might have 5% left, but that 5% could still be more than what anybody else has. [laughter] It's you always got to kind of read between the lines. Uh but you know, I I think there's some poopy dupy in some people's pants. Or as uh Negan would say, I hope you got your pants on. General Kaine says we need an off-ramp because this is turning into a problem. Rathon has just reached a $745 million new contract for missile defense uh and another $535 million uh contract for tow weapon systems. Those are tube launched, optically tracked, and then either wire or wireless guide anti-tank or anti-fortification missiles. Those are kind of interesting. Uh, and it's worth noting that their bomb margins are around 12.6%. Their commercial Prattton Whitney engine margins are like 8.3%. Which means you've got almost 50% more margins in bombs. That's in addition to, of course, Collins Aerospace, which is the afterparts market that has really high margins at 15.9%. Aftermarket, it's kind of like with cars, that's how they get you. you know, you got a plane down, you're gonna pay whatever. [laughter] You know, you got a car that's not driving, you're gonna pay whatever to get the darn thing rolling again. You know, um that's kind of how they can take advantage of you. I hate to say it, but take a look at some of the numbers for uh Rathon and then Loheed Martin and then let's get into what's actually going on with Iran and Israel because it's going to give you an idea of how much longer this is actually going to last. And so a lot of people have been asking me about these two particular stocks because well that's what I do. RTX uh has seen net sales increase about 1445% year-over-year. Their total costs are up 12.75 which does inc indicate an increase in PP. I do have to say they've only got $ 8.3 billion in cash with 14 billion in receivables and they have yet $63 billion of bills. Even if they got all of their receivables tomorrow, they would still have nearly three times as much money in debt that is due within the next 12 months. What? Dude, Rathon is basically broke. [laughter] A $300 billion company is basically broke. See, on top of that, then they've got another $32 billion of long-term debt. Uh, and another like 7.3 billion and other long-term. They got a lot of debt. There's a lot going on here. Now, even though on a six-month basis, their net cash flow or their net income is up 33 or 31.5%. And they do have free cash flow. They got free cash flow about 8.4 on an annualized basis. It's about a 2.8% cash flow yield. That's pretty good. They've got the cash flow, but honestly, they need it. They need every dime of that just to pay their freaking bills. And what they're actually doing though in the meantime is they're paying off about a mill uh sorry a billion dollars worth of debt and they're paying nearly $2 billion of dividends in just a six-month period. This is why Donald Trump has gotten a little bit pissed. It's like wait so you have $60 billion of bills you which is three times as much in cash as you have and you got a lot a lot of long-term debt. You're using your free cash flow. You're using any of it to what? Did I hear that right? You're paying dividends. I It's one thing if you're paying down your debt, but you're paying dividends. And so, Donald Trump signed an executive order. Now, keep in mind, if you cut the dividends, the stock could tank and that could then make the company less able to actually fulfill more expansion of its capacity, right? So, so there's like always a give and a take here, but Donald Trump doesn't care. We got midterm elections 85 days away. And so he signed executive order 14372 uh which seeks to ban dividends and buybacks with [clears throat] immediate enforcement potential. This actually doesn't need Congress to make it not bite. It can already bite today because he's the commander-in-chief. He can guide contracts and he can include restrictive clauses in contracts for new weapons with these companies that basically prevent dividends and buybacks, which I mean, whatever. they're just going to shift to paying down their debt, which frankly they should be doing anyway because, well, at least RTX is kind of a broky here. But anyway, uh Donald Trump says this only applies to underperforming companies, but underperforming includes the refusal to de uh deploy corporate capital to expand and improve physical manufacturing facilities along with of course missing deadlines. But it's actually an or. So, if basically Trump looks and goes, "Oh, looks like you guys had uh a lot more cash flow than you ended up investing. Sounds like you violated executive order 1437 372." To me, it's pretty farreaching. It's actually one of the executive orders that has bite. Usually, I look at the EOS and I'm like, "Bro, that doesn't mean anything. Like, nothing's going to change, right?" This actually has bite. And it's no different for Loheed Martin. Loheed Martin's a smaller company, but you know, they're getting a $59 billion deal to triple Patriot missile production over seven years. Uh the interesting thing about Loheed Martin, and then I'll give you a quick price projection, and then we'll get into some of these other stocks. Interesting thing about Loheed Martin is their sales are up 10.5% and their costs are stable. So, their PP actually massively exploded. I mean, for sales to go up 10% and your cost to go up nothing, incredible. Part of this is because of a shift to more F-35 deliveries, which of course there are higher margins in bombs. Said it before, and so they make more money on this stuff, even though doesn't necessarily cost them more. So that goes to profit. And so when you look at their assets, I've got 7 billion of cash and receivables, 11.6 of bills, plus another, you know, 29 billion of other long-term debts over here. So, another company that really should be paying off their debt, plus they have as many pension liabilities as they have cash. That said, their net earnings did increase 61% year-over-year on a six-month basis. And they, too, are uh seeing a cash flow yield of about 3.9%. 2.6 billion of free cash flow in just 6 months. That works out to about 5.2 billion of free cash flow, money that's not being invested, right? So you see that's just the difference between this net cash that they receive 3.4 billion and their actual capital expenditure is 829 billion. Now in fairness to these companies they can't blow it all on capex. They need to have this money for all the debt they have because they're so freaking buried in debt. I hate to say it but they are deep in debt. So of course this leads a lot of people to say well Kevin you know what do you think the valuation is for both both these companies? I think they're high. I think both of these companies, I hate to say it, are overpriced. I mean, you're looking at this one is Loheed Martin is sitting at a 3.75 price toearnings growth ratio. It's because it trades for 19 times earnings, forward earnings divided by 7% growth puts us at a 275. That's high for a company with 9% margins. Rathon's no better. They have like 8% margins and they're growing at about 9%. And uh you know, Rathon's got a three peg. So if you go to our stock AI where you don't have to wait for Kevin to tell you, you could just go to the stock AI tool. You can actually see the balance sheet is a yellow flag over here uh on RTX. So it's, you know, flagging the balance sheet risks. 54% downside though to get to a fair valuation for Rathon. Loheed Martin 33%. I think some this one has, you know, also the the balance sheet risk. I think the problem that you're finding is that these companies are a little hyped up because of the war that's going on. People are like, "Oh yeah, of course the war stocks are going to do well." I don't know, man. They're between a rock and a hard place. But I can see why Donald Trump is pissed and lashing out, you know, from an optics point of view. But, you know, in part, all the bombing we've done also hasn't done great work at actually accomplishing our mission in Iran. Now we're seeking a $1.15 trillion defense budget. All at the same time as Donald Trump is allegedly quote unquote lowkeying the war in Iran. Yeah, that's a new quote. Trump from an interview with Axios. Trump to Axio, we are low-keying it with Iran. Trump wants to allow economic pressure to amount on Iran like over time. He thinks the inflation that they're experiencing is going to kill them. He thinks that Iran doesn't have enough money to pay the troops in Iran. And Trump says we're only semi-negotiating with them, calling this a chess match. Uh, hints from US officials suggest that we're actually trying to sneak 8 million barrels of oil at night through the Omani shipping lanes. That's going to be the uh, you know, Oman side of the straight of Hormuz, not the Iranian side. Let's just look at a map of that really quickly. problem is it seems like every night we hear of well maybe not every night but I mean just last night we heard it or the night that's over there given the timing of when we're filming this but uh you hear regularly including just the last night in the straight of Hormuz ships getting attacked and they don't necessarily know who it is we obviously know who it is it's the hardliners in Iran that don't want people using the Omani side this is Oman right here this little you know peninsula Right. And then this over here is Iran. [clears throat] I'm announcing that to make it a little more clear. Iran wants ships to go around their little islands over here so they could toll them at 7% or whatever or just block all US and allied traffic. Uh Oman is like, um maybe people could come on this side and we could share some fees. And the US is like a we'll just try to sneak some ships by. They're still getting struck. It's not great. Not great at all. So this is where Iran is now saying, "Hey, look, we want more money. We said we wanted reparations and then you tried to twist our words into arguing that this was just, you know, an established investment from a bunch of other countries in the Middle East." No, we want more demands than what we have previously said. So what do we want? We want the war in Gaza, Yemen, Iraq, and Lebanon, and obviously in the straight of all over. We do not want Iran threatened anymore. We want the blockade lifted, which is still in place against Iran. We want sanctions lifted. We just added more sanctions Friday, so we're going in the wrong direction. And Iran wants full compensation, a full release of funds as well. Now, this is very interesting because back in April, those were the conditions for a nuclear deal. Now, this has decayed. Those are the conditions just to get the straight open again. So, this talk about Donald Trump going, "Oh, yeah, we're very close to a deal." No, we're not. This is probably going to go on for a very long time now. Markets are kind of turning a blind eye to this. You know, people are buying the buying up these defense stocks because I I don't think they're doing fundamental analysis on these puppies. I don't fundamentally these these I mean, the stocks have performed really well, but I don't think it's going to last. I mean, look at look at the relative strength on RTX. You're sitting at a 71. And this is in overbought. On the weekly chart, it's at overbought. Uh on the weekly chart, you're at 58 on Loheed Martin. So, not as bad. It's come off some of its highs a little bit, but I mean, people throw money at these going, "All right, fine. The war's going to last longer." But in the meantime, buy the dip, baby. Market going to keep going up. Meanwhile, you know, the uh Bank of America bull bear indicator is at the highest screaming sell that I think we have seen ever. I have a chart of it right here. Uh this is the bull bear indicator which is at 9.7 which is a screaming sell for Bank of America. We have been this high December of 2020, October of 25, February 26, August 26. You can kind of see like you know we're we're up here in the uh extremely bullish side. [laughter] uh you know obviously you know we were over here in um March and so we barely came down on the bull bear scale right we got down to like a six but we haven't been bearish since really well a couple times in 2023 over here per this you know scale so uh in my opinion this unfortunately is just going to last for a very long time and I think that's why these defense stocks are at these high levels because people look and go, as much as Donald Trump tacos or says he's going to walk away from nuclear talks or this, he's also priming to get more weapons so we can just keep striking Iran. And so far, it doesn't actually sound like we're getting any closer, especially since BB, who's got an election coming up in Israel on October 27th, is now going, "Hey, Trump, f your Gaza deal." Yeah, BB of Israel literally just said, "F your Gaza deal, and as long as I'm prime minister, there will never be a Palestinian state in Gaza." These are really aggressive comments that are either because he's trying to hardline to say, "Hey, Israel is going to strike Iran itself. Vote for BB. BB's going to defend you. Trump's not going to do it. Vote for BB." Right? That's probably what's going on in part. But some people say it's because Donald Trump is quietly walking away from nuclear talks that Donald Trump is now saying, "Hey, you know, we're just [clears throat] going to walk away." For the Wall Street Journal, Donald Trump is now privately quote floating the idea of just walking away from Iran without a nuclear deal so that he could declare victory. Obviously, you know, that needs confirmation, but if that's true with midterms 85 days away, that's not really good. Especially since Donald Trump doesn't want any taxpayer money going to Iran, but Iran wants actual reparations. Like, they're demanding billions to hundreds of billions of dollars from the United States to repair the damage that has been caused. And Trump's going, "We're not paying that. Hey, other people can invest in your country, but we're not paying that." So, Trump is trying to brand this as, "Oh, yeah, countries are going to invest in Iran." Irran's like, "Nah, f you." and the straits remaining closed. Well, all that is problematic as is the fact that we still have not resolved the very nuclear issue which was the whole basis for starting the war. [clears throat] At the same time, you've got the Houthis that just struck the Saudi Saudi Aramco Jazan oil refinery. No injuries reported. Uh but the Houthis have also resumed their attacks on the Mocha port per the Yemeni military. And Houthi rebels killed 58 government troops on Thursday, one of the deadliest single days in years. That's an overlapping contract. So you got the Houthies attacking the military in Yemen. And at the same time, the Houthis are attacking the Saudis. The reason they're attacking the Saudis could be because the Sa Saudi Arabia just signed a defense pact with Turkey and Pakistan. sort of like a P5 or article five an attack on one is an attack on all kind of deal. Israel, by the way, is really pissed about Pickax Mountain. They call it an escalating threat. I agree with them. This was my suspicion since we bombed uh, you know, Fordo and Espahan during Operation Midnight Hammer in Natans last summer. I said, why did we not bomb Pickax Mountain? Probably because we can't. That's a problem. Pay attention to it. Those of you who have been subscribers here for a while, you know that I'm not not click baiting that. Uh so now Israel is ramping their concern on that. And this isn't a chance for me to go, "Oh, see, I was right. Pickax Mountain matters." It's actually a way of saying, "Crap, pickaxe mountain matters so much that the Israelis are like, "Fine, we'll we'll attack Iran ourselves. We'll keep the war going." Which, you know, obviously keeps r the risk elevated that the straight of Hormuz situation is going to keep going on for a while. And so hence, you know, we're seeing uh the oil market at these elevated prices. Brent sitting around $80 to $85 here recently. Uh even though we did get to a lower dip, that was really only during the memorandum of misunderstanding. So we had sort of this false bottom in oil prices here. And it seems like right now we're we're balancing out somewhere in the 80s level, which is certainly a whole lot higher than where we were at the end of last year. I mean, the high at the end of last year was about $70. low is about $59. A little unfortunate. The longer this drags on, obviously, the more inflationary pressures we're going to see uh for the medium-term, you know, the next 6 months or more. Uh we got to get through elections in Israel. We got to get through elections midterms in America. Uh there is a chance that this just unfortunately gets worse before it gets better. Uh Iran is also getting stronger with the missiles and the munitions they're using. For example, they use these uh Kiar Shakans missiles, and these can be kept loaded with fuel versus prior ones that they'd have to kind of wheel out and then fuel them up, and they made them easier to target. This is an example of a destroyed one right here. This missile can also allegedly vary its trajectory, which is really important for avoiding interceptor attacks. These are deemed to cost somewhere between 500k to a million dollars per rocket. cost us somewhere to between two to five potentially as much as $10 million to down or intercept these. And so bottom line uh out of all of this is I think war stocks are hyped up. They're full of debt. They are pricey companies with terrible margins at the bottom line on the net basis. And you know Trump's aggression against them probably isn't going to get Trump what he wants. Not anytime soon at least. But it does risk creating some issues for the stock. But we'll see. Long-term, they're not investments that I would make. Could they perform well for the next six months under momentum or hype? Sure, anything can. Uh, next, and that's not personalized financial advice, just my opinion. Number two, uh, Donald Trump royally pissed off BB, at least in part here, I think. uh which does signal potential the potential for more escalation in the Middle East and not less which does again suggest that these higher oil prices will last longer and does unfortunately increase the risk of the Federal Reserve hiking rates though they're a little bit of a coin toss for September right now next straightfor is likely to remain closed for quite a while next Iran is ramping up their demands we're probably not going to get any kind of nuclear visibility which does create a longerterm World War II risk In the near term, it's a geopolitical buy the dip. But in the long term, this nuclear issue is a big poopy dupy and it's worth being less aggressive and more careful with debt [music] or just avoiding debt if you can. Obviously, there is a very clear also risk that Iran can escalate during a time in which we are depleted in weaponry. None of this is great, but if you want more of my analysis, including the alpha report coming out again tomorrow morning for course members, make sure you go to meet.com. Join us in the course in the courses on building your wealth. Next coupon code expires on Friday. And folks, we'll see you in the next one. Goodbye and good luck. >> Why not advertise [music] these things that you told us here? I feel like nobody else knows about this. >> We'll we'll try a little advertising and see how it goes. >> Congratulations, man. You [music] have done so much. People love you. People look up to you. >> Kevin Praath there, financial analyst and YouTuber. Meet Kevin. Always great to get your take.