The Pentagon's Shelves Are Emptying Fast


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Editor's note: The U.S. is getting more vulnerable by the day...

We boast some of the world's most powerful and advanced weapons. But our military still faces a stockpile shortage. Between the war in Iran and supply bottlenecks, our munitions inventories are rapidly dwindling.

And that translates to plenty of work for defense contractors.

In today's Masters Series, adapted from the September 22 issue of the free Altimetry Daily Authority e-letter, Joel Litman – chief investment officer at our corporate affiliate Altimetry – details why defense companies are practically guaranteed to be working for the U.S. government – whether another war strikes or not...

The Pentagon's Shelves Are Emptying Fast

By Joel Litman, chief investment officer, Altimetry

The U.S. spent years stockpiling some of the most sophisticated weapons on Earth...

This includes Patriot interceptors, Tomahawk cruise missiles, and Terminal High Altitude Area Defense ("THAAD") interceptors. These high-end weapons are designed for difficult missions – from knocking ballistic missiles out of the sky to striking targets hundreds of miles away.

Unfortunately, the war with Iran is showing just how quickly our inventories can vanish... The military has already burned through much of its existing supply of certain missile types fighting in this conflict.

Complicating matters, military planners have been warning for years that a major showdown with China could exhaust important weapons stockpiles within a few weeks. The Iran war has now reduced the amount America would have available going into another conflict.

That changes the way America needs to think about defense spending...

Today, we'll show just how quickly America's most important munitions are being depleted... and explain why rebuilding our inventories could support defense suppliers for years.

Our munitions stockpiles are dwindling...

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Years of effort to build up critical weapons supplies can disappear surprisingly fast when demand surges.

Estimates suggest the U.S. may have consumed more than half of its Patriot-interceptor inventory during the Iran war.

America spent much of the past decade steadily accumulating these missiles. Our supply grew 17-fold between 2015 and 2025. Then, in a short period, wartime demand erased a huge portion of that progress. Take a look...

At this point, fewer than half of the missiles remain. And Patriots are only one part of the story.

Our military may have also used roughly one-third of its global Tomahawk-missile inventory and around 40% of its THAAD interceptors. Stockpiles of some smaller, newer missiles are in even worse condition.

The U.S. is using munitions faster than factories are making them...

A military can absorb heavy usage for a short period... if it can replace what it uses. The challenge here is that replacement happens on a completely different timeline.

These weapons rely on specialized components and tightly controlled manufacturing processes.

That means a missile can be used up in minutes... while replacing it can take months or years.

For example, replenishing the Patriot inventory is expected to take more than two years. Tomahawk and THAAD stockpiles could remain low for even longer.

The issue is, the U.S. can't let its adversaries think its munitions reserves are depleted...

After all, if enemy nations believe America is vulnerable, they may be more likely to strike.

That creates an unusual kind of demand...

Normally, the Pentagon plans ahead to make sure it has enough weapons for future needs. But with its munitions stockpiles being used as quickly as they are, it needs to plan even further ahead. That's why the Pentagon has already committed billions of dollars to buying more weapons and expanding production.

Just last month, it signed a nearly $23 billion contract with RTX (RTX) to make more Tomahawk missiles.

All told, defense companies now have a better idea of what the Pentagon will need to begin rebuilding its stock. And even if the conflict with Iran ends tomorrow, they can continue to profit for years as America works to replace the weapons it has used.

The U.S. has spent years debating how large its defense budget needs to be...

But when we're depleting arms at such a rapid rate, the hypothetical doesn't matter. We could run out of missiles if we don't do something – and fast.

A significant amount of expensive military hardware has already left the shelves. Replacing the stock will take years at current rates.

That gives defense suppliers more certainty that they'll have the government signing contracts in the coming months and years.

The rebuilding process has already begun... and it's only going to grow as the U.S. uses up more of its missiles. If you're looking for somewhere to put your money today, defense companies are a good place to start.

Regards,

Joel Litman

Editor's note: With the U.S. weapons supply drying up, our nation's leaders are scrambling to replenish our military's stock. And with potentially $1.5 trillion about to be spent to make that happen, Joel sees what he says is one of the biggest stock market events in 45 years.

The White House will do whatever it takes – going on a spending spree to restore our inventories and investing in expensive next-generation technologies – to maintain security.

Many companies will receive new contracts from the Pentagon... but only a select few companies have the potential to send your portfolio soaring.

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An Activist Fund Just Took Aim at a $125 Billion Gas Giant

Elliott Management Air Liquide activist investing concept image

Industrial gas companies don't usually make headlines. Elliott Investment Management just changed that.

The activist fund has built a stake in Air Liquide, the French industrial gases giant worth roughly €108 billion.

Elliott is pushing management to close a stubborn gap in profitability against its biggest rival, according to a Reuters report.

The numbers tell the story. Linde, the rival in question, runs at a 30% operating margin.

Air Liquide runs at 21%. That's a nine-point gap that analysts say has been widening, not shrinking.

Linde has executed an operational optimization plan that's clearly working. Air Liquide's own plan has left more room on the table.

Buybacks are part of the contrast too. Linde repurchased $4.6 billion in shares in 2025 alone.

Air Liquide authorized buybacks last year but only executed about $193 million worth, spread over a few months in early 2026.

Elliott has been quietly engaging with Air Liquide's management for months before this stake became public.

The timing isn't random. Air Liquide has an investor day scheduled for early October.

Investors are hoping management uses that stage to lay out a real margin improvement plan and bigger buybacks.

There's also a growth story tucked inside the boring industrial-gas label. Air Liquide's electronics division supplies gases used to manufacture AI chips.

Some investors see that unit as a hidden growth engine buried inside an otherwise sleepy business.

Elliott has a long track record of pushing for change at companies most people overlook, from London Stock Exchange Group to chipmaker Synopsys.

This is one of its rare forays into a European industrial name, and it won't be the last time Elliott shows up somewhere unexpected.

Air Liquide isn't a struggling company by any normal measure. It's profitable, dominant in its niche, and has paid a growing dividend for decades.

The complaint isn't that it's a bad business. It's that a good business is leaving money on the table compared to its closest peer.

Activist investors like Elliott typically don't push for radical change at companies like this. They push for discipline.

That usually means tighter cost control, sharper capital allocation, and a clearer roadmap for closing gaps like the one with Linde.

Air Liquide has not publicly responded to Elliott's specific demands, and the company did not respond to comment requests when Reuters first reported the stake.

What It Means for You

Boring businesses can still be undervalued businesses. The market rewards efficiency, not just excitement.

When a big activist fund spots a fixable margin gap, it's often a sign that patient operational improvement, not a flashy new product, is the real opportunity hiding in plain sight.

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Don’t Confuse a Bad Day With a Broken Thesis

Bitcoin got hammered as much as 4.3% yesterday, and I know exactly what a lot of you were thinking.

Is this the start of another leg lower?

I don’t have a crystal ball, so I can’t answer that question.

What I do know is this: for the first time in a while, bitcoin is giving us a price I’m interested in buying.

If you’ve been waiting for a chance to add to your bitcoin position — or start a new one — I believe this pullback is giving you one.

But I don’t want you rushing in just because the screen is red.

First, let me separate what happened in the headlines yesterday from what actually changed with bitcoin’s fundamentals, because those are two very different things.

Go back and look at the tape from yesterday.

Bitcoin fell as much as 4.3% intraday, touching $74,913 at the low. Stocks were in the red, too. The Dow closed down 0.63%, the S&P 500 fell 0.45%, and the Nasdaq dropped 0.78%.

Then look at oil and bonds.

Brent crude settled at $108.75 a barrel after jumping 2.9% as the war with Iran and fresh Houthi attacks disrupted Saudi Arabia’s oil-export operations. At the same time, the 10-year Treasury yield briefly reached 5.041%, its highest level since 2007.

With oil shooting above $108, Wall Street is worrying that inflation is going to stay hotter for longer.

That was already feeding into a bond market that was on edge. Investors were staring at stubborn inflation, another possible Fed hike, and the $40 trillion debt mountain Washington still has to finance.

Friends, money doesn’t sit still. It goes where it’s treated best. When Treasuries are paying above 5%, some investors are going to look at that return and decide they don’t need to take as much risk in stocks and crypto.

I’ve seen this happen plenty of times.

When institutions and high-net-worth individuals decide they want less risk, they start raising cash wherever they can do it quickly. And because bitcoin is so liquid and trades around the clock, it gets sold first even when nothing has changed with bitcoin itself.

We’ve already seen that dynamic play out during this Iran conflict.

When the first major U.S.-Israeli strikes hit Iran in February, bitcoin dropped below $63,000. By the next day it had rebounded toward $68,000.

Then in June, another stretch of higher oil prices and rising bond yields helped push bitcoin below $60,000. When a U.S.-Iran deal sent oil sharply lower, bitcoin climbed back above $65,500.

When you pull back the camera, you see that bitcoin can get hit hard by macro forces that have nothing to do with bitcoin itself — war, oil, inflation and interest rates are just a few examples. When those pressures ease, bitcoin can snap back just as fast.

We saw how fast that can happen again in August.

On August 19, after Treasury announced larger long-term bond buybacks, bitcoin jumped 7% in one day and about $1.4 billion in bearish positions were liquidated. Over the next several days, bitcoin climbed from roughly $65,000 to $80,000.

That shows how quickly bitcoin can respond when the macro pressure starts to ease. And it’s why the buying opportunity starts to make sense to me at these levels.

Yesterday’s selloff looked ugly. But when I look underneath it, I see more support for bitcoin than the price action suggests. (More on that in a moment.)

Before I show you where that support is coming from, let’s deal with the news out of Washington that helped push bitcoin lower yesterday.

The CLARITY Setback

If you haven’t been following it closely, the CLARITY Act is Congress’s big crypto market-structure bill. It’s meant to put clearer rules around digital assets and spell out how the SEC and CFTC divide oversight of the market.

Yesterday, the Senate held a vote to move the bill forward and start debating it. That required 60 votes. They got 49. Fifty senators voted no, so the motion failed and the bill stalled.

There’s one detail worth knowing. Sen. Thom Tillis of North Carolina switched his vote to no so he could file a motion to reconsider, preserving a procedural path for the Senate to bring the vote back up. So the bill stalled yesterday, but the door is not completely shut.

There’s no sugarcoating it: this was a setback for crypto.

At the same time, it happened in what has otherwise been a much friendlier regulatory environment. Over the past 16 months, crypto has made real progress in Washington.

In March, the SEC issued an interpretation, joined by the CFTC, explaining how federal securities laws apply to crypto assets. Bitcoin, Ethereum, Solana, Cardano and Chainlink were among the assets specifically identified as examples of digital commodities.

Stablecoins already have their own regulatory framework through the GENIUS Act, which became law in July 2025.

And under Project Crypto, the SEC is still moving ahead with new rules designed specifically for digital assets. In August, it proposed Regulation Crypto Assets, which would create a tailored framework for certain crypto offerings.

One failed Senate vote doesn’t wipe all of that away.

Of course, it would have been a big win if the Senate had moved forward with debate on the CLARITY Act. But yesterday’s vote did not send crypto regulation back to square one.

If anything, crypto has more regulatory legitimacy in the U.S. today than at any point in its history.

Why This Is a Buying Opportunity

I want you to look past Capitol Hill for a moment. Because the money coming into bitcoin tells a different story.

U.S. spot bitcoin ETFs took in about $1.9 billion during the week ending August 21, their strongest week of 2026. And just before this week’s selloff, bitcoin’s options market had turned bullish, with traders betting on a move toward $80,000 or higher by December.

Again, I don’t have a crystal ball. So the next move to make is to dollar-cost average in. I like to get really active down at the 200-week moving average (MA).

Over the long term, that’s been an incredible place to buy bitcoin. Buying near the 200-week MA, roughly a year after the peak, has historically led to average peak gains of 970% over the past two bull markets.

What keeps me bullish in the face of bearish news?

I look at what’s happening underneath the price. Institutional money is still coming in and a friendlier regulatory framework is still taking shape — I see the long-term story of greater adoption moving forward.

That doesn’t mean bitcoin can’t go lower from here. It absolutely can, and I hope it does.

I would be doing metaphorical cartwheels if we saw $48,000 bitcoin. And you should be, too, because the profits from those levels would be life changing.

So yesterday's 4.3% drop is a gift – if you have the right perspective and can think in a two-year time frame.

The Rollercoaster Ride Is Worth it

I want to be clear: We’re not out of the woods yet. And with an asset like bitcoin, you never really are.

There’s always another headline or macro event that can knock the price down 30-50% in an afternoon. That’s the reality of the asset and you ignore it at your own peril. Because we might have one of those afternoons coming today.

At 2 p.m. Eastern, the Federal Reserve announces its latest interest-rate decision — just a few hours after this essay lands in your inbox.

The market is overwhelmingly expecting a quarter-point hike, which would take the federal funds target range to 3.75%–4% and mark the Fed’s first rate increase in more than three years.

Higher rates are generally a headwind for bitcoin because, suddenly, investors can earn a solid return without taking nearly as much risk.

But don’t get hung up on the first headline you see after the Fed’s meeting. Markets don’t just react to what the Fed does – they react to what they expected the Fed to do.

With a quarter-point hike already in the cards, what Fed chair Kevin Warsh says about what comes next could matter just as much.

If he signals more hikes are coming, we could see another bout of selling. If the Fed sounds less hawkish than investors fear, some of that pressure could come off.

I’m telling you this for one reason: I want you prepared for more volatility this afternoon. If bitcoin gets knocked around again, don’t automatically assume something broke with the thesis. It hasn’t.

That’s why I view this pullback as a buying opportunity.

My long-term price target is $1 million bitcoin over the next five years. From today’s price, that would be roughly a 1,200% gain — or about 68% annualized.

Even if we only get half that return, it’s still worth the rollercoaster ride.

If you’ve had cash on the sidelines waiting to build a bitcoin position, or judiciously add to your stack, you don’t have to catch the exact bottom today.

Watch out for the 200-week MA (currently at $70,200). If it comes into play, it’s a place where history suggests you could make as much as 970% during the next bull market.

Keep your position sizes rational, and don’t bet more than you can afford to lose.

Let the Game Come to You!

Big T