Get ready for the new Cold War

With most of his people's material needs now being met, it now looks like Putin wishes to reassert Mother Russia's old swagger on the world stage. While he has the ability to throw Western Europe quite literally back into the dark ages by cutting its access to natural gas, he cannot give up the old czarist ambition to obtain military hegemony on the continent. So back to an arms race we shall go.

Nukes in the sky

Stripped to the waist like an ancient warrior king in the photos published last week, Putin apparently wished to show that unlike the dissolute, draft-dodging elite in Western capitals, he is a fit product of Spetsnaz training who's ready to lead his nation into the first really big battles of the 21st century.

In February, he told a security conference in Munich that he objected to the Bush administration's attempt to create a "unipolar" world governed by "one sovereign" from "one single center of decision-making." Then earlier this month, Putin horrified peaceniks by announcing that he had relaunched a Cold War effort to have a fleet of nuclear-capable strategic bombers in constant flight. The Russian president also recently blasted U.S. plans to put an anti-missile defense battery in Poland and the Czech Republic, which are two of Russia's old Warsaw Pact allies.

And, of course, Putin is at odds with Great Britain over the radiation poisoning of dissident KGB agent Alexander Litvinenko in London last year, with each side refusing to cooperate in the other's investigations. Taking the tit-for-tat up another notch, Putin has lately engaged in a row with Estonia over dissident arrests, threatened to cut off gas supplies to Belarus and withdrawn from a key disarmament pact known as the Treaty on Conventional Armed Forces in Europe.

Stratfor, a geopolitical think tank, has speculated that Putin wishes to have a confrontation now rather than later as his country is demographically doomed with a low birth rate and soaring death rate. Stratfor analysts say that the Russian population is thinning by about 750,000 people per year just as the average Russian grows older and, therefore, less productive. They conclude that as a country, Russia is quite literally dying, and therefore its leaders believe they must stake out their territorial objectives now, before it's too late.

• Video: Putin's topless shots create a stir

While I can't speculate any further on Putin's motives, I do feel confident that his efforts will spark retaliatory rhetoric and arms spending here in the United States. The easiest way to participate as an investor is to buy one of the two exchange-traded funds focused on U.S. defense: iShares Dow Jones U.S. Aerospace & Defense (ITA, news, msgs) and PowerShres Aerospace and Defense (PPA, news, msgs). They're up 51% and 44%, respectively, over the past 20 months. The cheapest and best-managed two individual contractors, in my opinion, are Lockheed Martin (LMT, news, msgs) and General Dynamics (GD, news, msgs). All should be on track for 18% to 22% annual gains over the next three to five years no matter what happens in the broader financial markets.

The fine print

To keep up with news and opinion about military spending and other geopolitical issues, visit Web sites of the Defense Department, GlobalSecurity, The Center for Arms Control and Non-Proliferation, The Brookings Institution and Global Issues.

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At the time of publication, Jon Markman owned shares of Lockheed Martin.

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