It’s really hard to find anything good to say about China right now.
The country continues to make provocative moves in the South China Sea.
The Chinese military recently deployed an advanced surface-to-air missile system to Woody Island, which is also claimed by Taiwan and Vietnam, ratcheting up geopolitical tension.
Further, China has been credibly linked to an escalation of global cyber-warfare, targeting both private companies and public entities.
U.S. Steel has alleged that Chinese government hackers stole plans for developing new steel-making technology.
And a report issued by the U.S. House of Representatives’ Science, Space, and Technology Committee in July concluded that Chinese spies hacked into computers at the Federal Deposit Insurance Corporation from 2010 until 2013.
Meanwhile, the Middle Kingdom aspires to be the world’s “leading space power.”
“Chinese President Xi Jinping recently told the Chinese Air Force to more closely integrate its air and space capabilities. That was then breathlessly communicated and spun by other media outlets as Xi saying he wants China to militarize space — presumably by building a Death Star and staking a territorial claim on the moon.” – Vice News
The China Aerospace Science and Technology Corporation (CASTC) is already at work on a successor to the Space Shuttle.
The key to the effort is a hybrid, combined-cycle engine that will allow a “spaceplane” to take off horizontally, rather than vertically, from an airport landing strip and fly straight into orbit.
The spaceplane’s takeoff will be powered by turbofan or turbojet engines. At a certain altitude, ramjet propulsion would take over. Then, as speed increases, a scramjet engine with supersonic airflow will take the spaceplane to “near space” – the part of the atmosphere between 20 kilometers and 100 kilometers above sea level.
The hybrid spaceplane would use rocket power to push into orbit.
One CASTC engineer noted that the spaceplane would facilitate “ease of access to space for untrained persons,” suggesting the potential for space tourism.
More ominously, the Chinese military is likely to identify many uses for the combined-cycle engine technology, including international defense efforts.
Removing the rocket, the combined cycle engine would be a good fit to power hypersonic unmanned aerial vehicles (UAV) as well as manned aircraft.
As Popular Science notes: “Flying in near space at speeds above Mach 5, such aircraft could have global reach, while their speed and high altitude would make them effectively immune to all existing air defense systems.”
That’s quite a gauntlet China’s thrown down.
So, what’s next, Ridley?
That’s the question Chuck Yeager (Sam Shepherd) asked his best friend Jack Ridley (Levon Helm) after Yeager broke Mach 2.0, then spun out, and finally regained control after breaking the canopy of his jet with his head in the 1983 film The Right Stuff.
It was perhaps the most poignant expression of Tom Wolfe’s title in action.
John F. Kennedy is most often credited with providing the vision that led us into the Space Age with his “We Choose to Go to the Moon” speech on September 12, 1962. But it actually started under his stodgier predecessor, Dwight D. Eisenhower.
And over the course of many decades, the efforts of the National Aeronautics and Space Administration (NASA) led to the creation of innovations and inventions that we use every day – the handheld vacuum, light-emitting diode (LED) technology, memory foam, infrared ear thermometers, firefighting gear, baby food, and freeze-dried meals.
Okay, maybe those aren’t so awesome or revolutionary… but artificial limbs and the ability to perform more precise heart bypass operations certainly are. And without NASA, we’d have neither.
I haven’t even mentioned Tang – the fruit-flavored drink made famous by John Glenn when he became the first American to orbit the Earth on his February 20, 1962 spaceflight.
It may seem like NASA is a vestige of the Era of Big Government, that its best days are behind it, and that we no longer have “the right stuff,” but that’s not the case, at all. Indeed, we haven’t given up our interplanetary ambitions.
Last week, NASA took another step forward in its plan to visit Mars by the end of the 2030s, as it selected six companies to design prototype deep-space habitats.
These six companies will share a $65 million grant to research and develop ground prototypes, as well as perform habitat concept studies, over the next 24 months.
According to NASA: “The ground prototypes will be used for three primary purposes: supporting integrated systems testing, human factors and operations testing, and to help define overall system functionality.”
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The list also includes privately held Sierra Nevada Corp. Founded in 1963, it’s a major contractor for the U.S. military, as well as NASA and private spaceflight companies.
Also participating in the project are smaller-fries such as Bigelow Aerospace, founded in 1999 to create a modular set of space habitats for creating or expanding space stations, and NanoRacks, founded in 2009, which develops products and offers services for the commercial utilization of space.
NanoRacks is hosting a CubeSat Deployer and equipment for experiments on the International Space Station.
The last of the six is Orbital ATK Inc. (OA), a $4.5 billion company formed from the February 9, 2015, merger of Orbital Sciences Corp. and Alliant Techsystems.
Through its Flight Systems, Defense Systems, and Space Systems group, Orbital researches, designs, develops, and manufactures rockets, rocket motors, satellites, and spacecraft.
The stock has performed extremely well since the merger last year, posting a total return of 16.5% versus 6.2% for the S&P 500.
That includes a recent steep selloff last week.
In addition to the NASA project, Orbital management announced on August 10 that it would restate fiscal 2015 financial results and delay the announcement of its fiscal 2016 second-quarter earnings report.
The stock was hit hard. But an internal investigation revealed that the accounting irregularities that gave rise to the restatement are limited to a single contract among Orbital’s top 30.
Management reported that revenue was overstated by $100 million to $150 million and says the accounting error-related forward loss provision will reduce its fiscal 2015 after-tax net income by approximately $250 million to $280 million.
The company doesn’t expect the restatement to have a material impact on future operating results, cash balances, or order backlog.
The stock is now trading at 17.6 times trailing-12-month earnings, a steep discount to a recent high multiple of 22.5 times.
And it’s yielding 1.6% at current levels. This looks like a decent opportunity to pick up a high-quality but beaten-down stock.
That’s a pretty good way to look at NASA right now: high quality but beaten down.
So the Chinese are going to the moon. Been there, done that.
We’re going to Mars.
On Thursday, August 11, 2016, the Dow Jones Industrial Average, the S&P 500 Index, and the Nasdaq Composite all hit new highs on the same day, which hasn’t happened since December 31, 1999.
The Russell 2000 – the primary gauge of small-cap stocks – lost just 0.6 last week to finish at 1229.82.
The German economy, Europe’s biggest, grew 0.4% during the second quarter, slower than during the previous three-month period but faster than economists expected.
U.S. retail sales were flat in July after three months of gains, including a 0.8% increase in June. Economists expected an increase of 0.4%. Excluding automobiles, retail sales were down 0.3%, the weakest showing since January.
Baltimore’s own Michael Phelps added four more Olympic Gold Medals to his collection, including a win in the 100 meter butterfly over South Africa’s most famous horse’s ass, Chad Le Clos.
Editorial Director, Wall Street Daily