Hot Stocks for the Coming Arms Race

Yet there's a sense of dissatisfaction that the dollars spent on jet aircraft and nuclear subs aren't getting us very far with the hide-and-seek enemies we now face, and that is why some of our generals pine for a good old-fashioned conventional conflict that would pit battalions against battalions rather than a rifle squad against a neighborhood warlord.

Up until four or five years ago, there wasn't much that Russian officials could do about the spending disparity and their own disenchantment, and embarrassed Russian army leaders simply wept in their vodka. But in 2003, energy prices began to triple amid a surge in demand from Asia and a decline in Saudi Arabian production.

By the time Putin was elected to his second four-year term in 2004, Russia found its coffers overflowing with dollars and euros, thanks to nature's gift of the world's largest reserves of oil and gas beneath its frozen eastern tundra. A new spending spree was on.

For a while, Russia seemed content to pursue its agenda as an energy superpower rather than in its old role as a nuclear superpower. Rather than squandering its riches solely on weapons systems, this time around its cash has fueled a broad-based manufacturing and service economy growing at up to 7% per year that supports millions of urban migrants from the mountains of the Caucasus to the steppes of Central Asia.