Image by Washingtontimes.com

A veil of darkness continues to shroud over America with hardly any light of optimism paving the path of its immediate economic future. As a result, the chances of formulating any sort of economic strategy to counter the impending doom of recession are almost negligible. To add to its woes, January 2, 2013 will watch the colossal budget cuts of America, which embraces automatic cuts for the defense market sector to the tune of approximately $55.0 billion.

That the above axe was sure to fall had been hinted at, by various corporations, time and again, to the masses. They had warned that America’s gross domestic profit (GDP) would suffer heavily next year and in effect, the economic condition would deteriorate further, if the government did not take urgent steps to improve the financial position and prevent the budget cuts from being enacted. 

Unfortunately, even in the midst of such a grim scenario, when it is expected of the politicians to unite and try to find a solution in order to prevent the occurrence of such a catastrophe, they are presently only exercising the art of warding off the blame away from them.

David Hess, the president of Pratt and Whitney, a subsidiary of United Technologies Corporation, in accordance with the Warn Act (a law provision that directs employers to notify employees that there will be layouts or plant closures at least sixty days in advance) has indicated that there will soon be notifications sent to the company’s employees that might be laid off, because of the company’s financial prediction and the ominous budget cuts. Despite the fact that the company is abiding by the law, the U.S. labor department has conveyed that due to the uncertainties in the job cuts, those companies in the defense market sector should refrain from issuing such warnings. As a result, many of the firms in the defense market sector are confused about whether they should follow the law or whether they should abide by the statement of the U.S. labor Department.

With corporations within the defense market sector at a loss to make proper decisions, how much more difficult will it be for the average investor to try to judge what could be a correct plan for investing in such a situation of utter chaos and approaching economic calamity? This uncertainty in the administration only succeeds in affecting investors and corporations that are accountable for the creation of jobs. It is highly impossible to forget the fact that the guesstimated job cuts over ten years attributed to the defense market sector consisted of two million jobs with $500 billion in cuts.

In all probability, the Obama administration is trying hard to thwart the negative sentiment that has been brought about by workers who have been made redundant in the defense market sector preceding the election. This looks like a deliberate move; to reschedule notices until after the election, so that the Obama administration will endeavor to acquire faith of those employees who would otherwise, tend to vote against this political party that did not come to any steadfastness as regards the budget cuts, which was the reason they lost their jobs.

United Technologies, the parent company of Pratt and Whitney, has already suffered due to the investor sentiment of predictable cuts in the defense market sector. Its stock has seen a decline in the share price. To believe that the politicians will come to a decision regarding the budget cuts crisis would be one investment strategy. Resultantly, the stock could be on the brink of breaking out from its present level of resistance. But it is well known that there is always a fair amount of risk involved as far as making decisions based on anticipating political moves is considered. Hence it is with extreme vigilance that one should build an investment approach within the defense market sector, because despite some cheap values within this market sector, there are substantial perils associated with the uncertainties.

By Contrarian Investing

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