Owen West traded natural gas for 20 years. Most days nothing happened. Then a hurricane or a cold snap hit and prices went wild. Statisticians call that pattern fat tails. A trader buys the hedge while the storm is still a forecast. In Wednesday's Journal, West makes that case for the U.S. military.
President Trump has asked for a one-time jump in defense spending to $1.5 trillion. West wants Congress to pass it. His numbers go like this. In 1986 defense took more than 6% of GDP, he writes. By 2026 it was about 3%. Personnel costs rose, and what was left for weapons fell by roughly 75%. About 1,500 new rules have piled up since 9/11. The result, he writes, is a budget full of must-pay bills with little room for new ideas. The request works out to 4.4% of GDP, by his count. That's a third less than Reagan's budgets.
His example of money well spent is small by Pentagon standards. The $1.1 billion Drone Dominance program made hundreds of companies compete. Troops tested the drones. A few winners got contracts. The Army and Marines expect to have 200,000 of them in the field within a year, at a tenth of the 2024 price. He wants the $1.5 trillion, including $350 billion through budget reconciliation, spent the same way. Cheap systems at scale, instead of decades locked into manned platforms. “Better to buy insurance while it is relatively cheap,” he writes.
Read the byline
West isn't a neutral observer. He's the CEO of Project Agincourt, the Pentagon program building the Autonomous Warfare Command. He served as a Marine officer and an assistant defense secretary. The Journal prints that, and so do we. The argument is his. Whether Congress spends $1.5 trillion is a political choice, and we don't take a side on it. One number from Monday's paper belongs beside his. Interest on the national debt now costs more than the military. That makes the premium harder to find.
Our read
This is Insurance (M11), with Investments/Risk (IN04) for the holdings. The practice holds Lockheed Martin (LMT) in 29 books, General Dynamics (GD) and RTX (RTX) in 19 each, and Northrop Grumman (NOC) in 16. All at weight, nothing added. Lockheed raised its quarterly dividend to $3.60 from $3.45 this week. A budget fight doesn't change a position we size for years. What we take from West is the frame. You price danger while it's still theoretical. You add coverage as the tail gets fatter. And you do it before the storm, because after the storm the premium is the loss.
Here's your check this week. Pull out your own policies and read the limits, the way a trader reads a hedge. Term life, if someone depends on your paycheck. Disability, which most people skip. The umbrella policy on top of your home and auto, which usually costs little and covers the fat tail, the lawsuit. Ask whether each limit still matches your life, or the life you had when you bought it. Premiums tend to rise after a claim and after a birthday. Bring the declarations pages to your next review. Buy the umbrella on a sunny day, and check that it still opens.