Kiss the Economy Goodbye

You may have heard of sequestration. If you haven't, here's a quick rundown: Sequestration is across-the-board cuts to federal programs like defense, National Weather Service, Medicare, etc., that would go into effect if lawmakers can't come to an agreement on a new budget by the end of the year. While across-the-board cuts may sound unpleasant but doable, the ramifications from these particular cuts are enough to scare even lawmakers. Sen. Lindsey Graham (R-S.C.) went so far as to say, "We do dumb things in Congress. This sequestration idea is the dumbest thing."

Arguably, the companies that'll take the biggest hits are defense contractors like Boeing (NYSE: BA ) , Northrop Grumman (NYSE: NOC ) , and Lockheed Martin (NYSE: LMT ) -- Boeing's biggest contract, the KC-46 tanker, could face a 57% cut, according to The Economist. Northrop Grumman CEO Wes Bush stated in a recent earnings call that sequestration would lower revenue, profits, and cash flow, and Lockheed Martin went so far as to state that they "believe sequestration is the single greatest challenge facing our company and our industry." Would sequestration affect shareholders' profits? Absolutely. And that's not all.

Source: Motley Fool

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