Senior Analyst, Freeport Strategic Opportunities
Hello, Fellow Navigator.
It’s an open secret. One our government doesn’t really like to talk about.
Nazi scientists built the U.S. space program. And it was all by design.
Going back to World War II, German technology was far outpacing what the Allied powers could produce.
For instance, bombs.
While most Allied bombs fell from the belly of propeller-powered planes during the war, the Germans worked on long-range missiles. By late 1944 they had one model ready for live testing. Also known as “vengeance weapon two,” they called it the Vergeltungswaffe 2, or the “V-2” for short.
V-2 Rocket Test Launch
Source: Encyclopedia Britannica
For its time, the V-2 was cutting edge. The 27,000-pound, 50-foot-tall, 5-foot-wide missile packed a 2,200-pound warhead. That’s about twice the punch of a modern-day Tomahawk cruise missile.
After a few hundred tests, the Germans launched more than 3,000 of these rocket-propelled missiles into enemy territory.
The total cost of the V-2 program was over $2 billion at the time, the equivalent to about $35 billion today. It was more than the entire cost of the Manhattan Project that developed the first U.S. nuclear weapons.
But Germany soon had a problem. By the time the V-2 got off the ground, the Nazis were already a weakening power. Essentially, time was running out.
That’s when the U.S. saw an opportunity. It wanted that technology.
So, in 1945, with Germany on its back foot, the United States pounced.
Operation Paperclip
The U.S. Army intelligence already had information on a number of German scientists. Their goal was to urge these experts to switch sides and work for the U.S. government.
At first, they didn’t have room for all of them, so they hand selected a chosen few and their families, and put a silver paperclip on the file of each scientist they wanted.
After a year of rounding them up, President Harry S. Truman signed an order approving their temporary detention. They called the secretive program Operation Paperclip.
For some, their final destination was the 3,200-square-mile White Sands Missile Range in New Mexico, the largest military instillation in the U.S.
And for the next two and a half decades, they would quietly build the U.S. space program.
Four-star U.S. Air Force General Samuel C. Phillips – who commanded the Apollo missions – said without those German scientists, we would have never made it to the moon.
Today, there’s a new space race. One that includes returning to the moon after a five-decade hiatus.
But this time, the government isn’t rounding up captured German scientists to make it happen.
In fact, the government isn’t doing much of the heavy lifting.
Instead, we’re going back to the moon on the backs of private industry. NASA is handpicking innovative companies with solutions to the problems of deep-space exploration.
And that’s about to kick-off a flood of investment opportunity with the companies that are making that happen.
A New Frontier
The last space race wasn’t just a race to the heavens. It was about superiority. It was about idealism. Ultimately, it was a race between the principles of a free society versus a controlled, communist nation.
When the Soviet Union launched Sputnik 1 in October 1957, it sent shockwaves of fear across America. It was the height of the Cold War, and it showed that Russia’s space program was far ahead of the United States’.
Source: The New York Times
There was also fear that the Soviets could somehow launch nuclear weapons from space. No one felt safe.
That motivated the United States to push harder and faster, leading to the creation of NASA. And within 12 years, Neil Armstrong set foot on the moon. The space race of the time was over.
It was no small feat. This monumental achievement, indeed “one giant leap for mankind,” reshaped American scientific, educational, and defense policies for years.
In fact, space is far more important than most people realize.
What I mean by this is, the best way to learn about an industry as an investor is to go meet the experts behind it.
Some of my biggest successes were heavily influenced by things I learned from asking questions to experts and carefully listening to their answers. It’s far more valuable than just looking over financial statements.
Back in late 2018, I attended the D60: Darpa’s 60th Anniversary Symposium.
John at the D60 Symposium
The Defense Advanced Research Projects Agency (DARPA) is the Pentagon’s research and development arm. Some of our nation’s most innovative tech breakthroughs started at DARPA.
For example, DARPA shepherded the U.S. space program through development. It also played a key role in integrated circuits… the first silicon microchips… the GPS navigation system… stealth technology for fighter jets… and, most notably, the internet.
While there was a lot to take in and plenty of conversations with other D60 attendees, one gentleman stood out above the rest. As far as I’m concerned, his insights could lead to making more money on the new space race than even those we could gain from reading every book on the subject.
At the time, Michael D. Griffin was the Under Secretary of Defense for Research and Engineering… and he has previously served as the NASA administrator in the latter half of the 2000s. That’s about as highly ranked as a career defense employee can get. Dr. Griffin made it clear he works for the country and doesn’t seem to care about the political climate of the day.
One audience member jokingly asked about the newly formed U.S. Space Force. Many in the audience chuckled. If you remember, when then-President Donald Trump announced the Space Force in 2018, the media mocked him mercilessly.
But Griffin took it very seriously. He told the small crowd that space will become a warfighting domain. He said it already is and blamed our rivals for weaponizing it first.
He was obviously pointing to the Russians and the Chinese.
Griffin told the crowd that the U.S. economy can’t function without control of space. Specifically, he said, “You can’t process a point of sale transaction without GPS… you can’t pump gas… nothing functions.”
According to the National Institute of Standards and Technology, 14 out of 16 industries deemed critical to U.S. infrastructure rely on GPS.
The U.S. government derives its power from taxing its $27 trillion economy. If that economy goes offline, its tax revenue goes with it.
“The U.S.’s ability to project power in space will match maritime and air dominance,” Griffin said.
He encouraged the crowd to think of the current state of space exploration as comparable to where the Vikings were when they developed longships. That was around the 11th century, when 20 men rowing oars and one wool sail about the size of a bedsheet could propel a ship at around 5 knots.
That was enough to achieve dominance on the seas.
My Takeaway From This
The investment implications of a new space race are tremendous.
Imagine buying Lockheed or Raytheon stock in 1955…
Companies involved in the last space race saw decades of spending as the U.S. threw every resource at the effort.
That’s where we are in the new space race today. And according to market research firm Spherical Insights, the global space exploration market should hit nearly $1.9 trillion by 2032. That’s compound annual growth of 16.2%.
It’s rare to see an obvious multitrillion-dollar investment trend unfolding right in the open with so little coverage. Maybe it’s just that so many of us are obsessed with the current election cycle. Plenty of folks still think the Space Force is a joke, or that space exploration and colonization is just a playground for billionaires.
That’s not true at all.
Attending an event like DARPA’s 60th anniversary conference gave me the chance to hear unelected career defense executives casually discuss what’s really going on. It gave me more insight into how to invest. And it’s leading to new opportunities, like investing in the companies the government needs to make all of this happen.
We’re also eager to invest in the new space race because it fits nicely under The Freeport Society’s core principle of seeking Parabolic Returns From Exponential Progress (The Freeport Investor subscription required).
For a more in depth look at where the new space race could take us – and how to join in on its emergence – don’t miss our latest monthly issue of Freeport Strategic Opportunities, launching today.
Subscribers can access my analysis and potentially lucrative warrant opportunities by clicking here.
Until next time…
Stay vigilant, stay nimble,