The Great Space For Money Race

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The move from airspace to deep space meant significant investor opportunities in the 1960s, as outlined in this historic piece from that era. And the investment advice still rings true today, as the space program continues to reach new heights.

The recent changeover in our nation's defense from manned aircraft to missiles has brought a far-reaching and fundamental change in the industry structure as well as investors interest in the industry.

This is evidenced by the grand entry of defense contractors into electronics or avionics. The following are just a few examples: the acquisition of Page Communication Engineers by Northrop Corp., of Norden-Ketay Corp. by United Aircraft Corp., of AMF's Associated Missile Products Co. division by Marquardt Corp., of Stromberg-Carlson by General Dynamics, of an 80 per cent interest in Fenske, Frederick 8c Miller by Temco Aircraft. Lockheed's electronics facility was built around Stavid Engineering, a New Jersey firm acquired in 1959.

The change in the structure of the defense industry is a fundamental one, most strikingly illustrated by Martin, an old-line aircraft maker, which completely abandoned plane-making in December 1960.

Martin's facilities now are used exclusively for missile and space projects, including the production of the Titan intercontinental ballistic missile at its Denver division, of the Pershing and Bullpup missiles and the Missile Master (an electronic antiaircraft fire control system) at its Orlando, Florida, division, and of the Mace missile and an ICBM launcher for the Dyna-Soar boost glide vehicle at its Baltimore home plant. Today, more than 40 percent of Martin's engineers are engaged in electronics work.

With its changeover to missile-making, Martin increased its volume by more than $100 million between 1952 and 1960 while in the latter year it used 2 million fewer square feet of floor space. Along with other defense contractors, Martin expects a substantial increase in business due to nationwide concern over America's missile and space programs.

However, the industry's real, long-term future rests on its role as the gateway to the space age. Even if disarmament canceled U.S. defense contracts, as much or more business would subsequently develop for space projects.

America's expenditures for space activities should soar to $12 billion to $15 billion a year over the next decade. In January, 1962, the President announced that expenditures of the National Aeronautics and Space Administration, for example, would be budgeted for the fiscal year 1962-3 at more than double those for 1961-2.

There have been ever-increasing indications on the part of private industry for exploration and economic development of space without government contracts. Frederick R. Kappel, president of the giant American Telephone $c Telegraph, has announced that his company would seek to set up a worldwide communications systems using a space satellite.

This was the first indication that an American company wants into space on a private enterprise basis. He was followed by Ralph J. Cordiner, president of General Electric, who indicated his company's readiness to head spaceward on its own.

As of now, companies which have found commercial applications for space or missile components are rare. The principal benefits from current space projects, as far as most firms are concerned, is know-how that will be useful in future, and perhaps more profitable, space work.

But Wall Street has been in the habit of looking at the future rather than at the past or present. It is earning potential, instead of realized earnings, that is given top market evaluation. That's why, for example, General Electric channeled most of its 1960 spending of $135 million (compared with $91 million in 1959) into such relatively new technologies as atomic energy, computers, space vehicles and related activities.

The world of space may be glamorous and exciting, but companies turning out rockets, satellites and related gear are by no means exactly profitable, at least not now.

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