Global government budget look to allocating a higher spend towards military in the coming decade. With geopolitical tensions on the rise, VC firms shift their focus towards defense tech.
The motives behind the leading narratives in the market is driven by money. And, it is people with centralized power who determines the flow of big money that control the narratives. As Brett said in the comment below, the narratives are simply designed to drive common people to support one side or the other depending on their political tribal affiliation without reason. And people in position of power know very well how to leverage the herd psychology to make disproportionate quantity of money for them, while everyone else on the street is bickering away or following rules. Strange society.
One wonders how venture capsters square war mongering with “ESG”. Answer…follow the money…
ITA iShares Aeronautical and Defense ETF is one way to go if you want to avoid the minefield that is private equity. Personally I’m on the look out for a Peace and Goodwill ETF. Any sensible suggestions?
Love the idea of peace and goodwill ETF. I think the movement behind ESG has led many big money managers to allocate funds to ESG related ETFs. But ESG to me has always been politically driven, with no transparent guidelines for measurement and results. May be we should build a peace and good will etf ourselves.
The second part of this post will be all about trends within defense and how to position your portfolio accordingly. For now ITA, XAR are the safest ways for someone to invest in US Defense industry.
Thanks for the restack. And yes, if only peace was profitable. Unfortunately, the human incentive system design is not built around maximizing peace, but centralizing power. Here’s to hoping that more global conflicts can ultimately be resolved through diplomacy and not physical war.
War serves two purposes. For the architects of war to benefit from the prosperity war provides and to depopulate the lower classes who have to fight these wars.
Interesting and surprised to see Canada at the top 2nd though. I fail to understand why it has to invest and rebuild its armament. Canada had the lowest military budget and spend for a long time because of its border and peaceful relationship with the US. But it seems we are following the US now seeing an opportunity in defense technology or perhaps a threat possibly from Russia.
Good observation but I suspect a lot of the spend is in line with the increased global military spending. One way to view this theory would be to look at the per capital military expenses Canada incurs versus other countries.
I checked SIPRI's database and Canada's per capita spend currently stands at ~$700. Its in the median range since many European countries such as Denmark, Sweden, Netherlands outspend Canada on military expenses per capita.
That's actually a very good observation. I didn't consciously pay attention to the fact that Canada is No. 2. I would dig into how military spend as a % of Canada's GDP to better understand its priorities. Interestingly though, Canada though No. 2 in military spend is not in the top 10 countries for arms export market share.
If you play in the microcap space that I do there are some terrific mid-term trading opportunities in some of these defense names. If we do see a slowdown next year as I assume we will they should be good defensive plays. I mean defense, it’s right there in the name.
I did a separate restack where I mentioned ESP and OPXS. Both have backlogs and revenue expectations that suggest we should see earnings increase meaningfully going forward. You can read their respective Q’s for details. Not the kind of thing you can put a lot of money in, but I think it’s highly likely I make money in one or both over the next 3-6 months which is my typical holding period. I’d describe myself as a fundamentals based trader.
Yes. Some of my research on the typical mega caps in this space suggest the same that backlogs are rising faster than current growth. At the end of the day it depends on the investors risk appetite like you rightly pointed out. Microcaps - bet small, megacaps- less risk but comparatively lesser returns.
You brought a great point. Apart from Defense budgets, even Cybersecurity budgets are expanding. Apart from governments, CIO's in every company are looking at tools to combat the surge in cyber hacks, spywares etc. Geo-tensions on the ground is what we see but nothing compared to cyber warfare.
We actually are in the process of researching and drafting a deep dive into the Cybersecurity Stocks space.
The one I'm thinking of was a start up that then got its primary contract from another country and was ran out of CA. There's so much I'd be in the rabbit hole forever right now but this sums up some of the concerns I'd have. It's at a point where if your using tech you're being spied on and what starts with good intentions sometimes can be not so good in the long run. If I had the money I'd stay out of it just due to a three letter agency more than likely being present. Just me though. If I did I'd probably cash out fast as possible.
We will do a deeper dive into individual companies in this space in Part2 of the post. But we follow these 3 big cap defense companies: Lockheed Martin (LMT), Raytheon (RTX) & Northrop Grumman (NOC). All 3 of them are in aerospace defense, arms and intelligence security with minor difference between them. Valuation wise, these companies are much better priced compared to many other tech companies in the market.
Kinda F*cked up, how we(not me) went from "Just wear a mask, even if it saves just one life" to chanting "WAR, WAR, WAR!" in a jiffy.
The motives behind the leading narratives in the market is driven by money. And, it is people with centralized power who determines the flow of big money that control the narratives. As Brett said in the comment below, the narratives are simply designed to drive common people to support one side or the other depending on their political tribal affiliation without reason. And people in position of power know very well how to leverage the herd psychology to make disproportionate quantity of money for them, while everyone else on the street is bickering away or following rules. Strange society.
That’s because people derive their opinions based on their political tribal affiliation rather than reason or principal.
💯
🙏🏼🙏🏼
One wonders how venture capsters square war mongering with “ESG”. Answer…follow the money…
ITA iShares Aeronautical and Defense ETF is one way to go if you want to avoid the minefield that is private equity. Personally I’m on the look out for a Peace and Goodwill ETF. Any sensible suggestions?
Love the idea of peace and goodwill ETF. I think the movement behind ESG has led many big money managers to allocate funds to ESG related ETFs. But ESG to me has always been politically driven, with no transparent guidelines for measurement and results. May be we should build a peace and good will etf ourselves.
The second part of this post will be all about trends within defense and how to position your portfolio accordingly. For now ITA, XAR are the safest ways for someone to invest in US Defense industry.
If only peace was profitable...
Thanks for the restack. And yes, if only peace was profitable. Unfortunately, the human incentive system design is not built around maximizing peace, but centralizing power. Here’s to hoping that more global conflicts can ultimately be resolved through diplomacy and not physical war.
War serves two purposes. For the architects of war to benefit from the prosperity war provides and to depopulate the lower classes who have to fight these wars.
Couldn’t have said any more accurately. The world should always seek to resolve differences through diplomacy.
Interesting and surprised to see Canada at the top 2nd though. I fail to understand why it has to invest and rebuild its armament. Canada had the lowest military budget and spend for a long time because of its border and peaceful relationship with the US. But it seems we are following the US now seeing an opportunity in defense technology or perhaps a threat possibly from Russia.
Good observation but I suspect a lot of the spend is in line with the increased global military spending. One way to view this theory would be to look at the per capital military expenses Canada incurs versus other countries.
I checked SIPRI's database and Canada's per capita spend currently stands at ~$700. Its in the median range since many European countries such as Denmark, Sweden, Netherlands outspend Canada on military expenses per capita.
That's actually a very good observation. I didn't consciously pay attention to the fact that Canada is No. 2. I would dig into how military spend as a % of Canada's GDP to better understand its priorities. Interestingly though, Canada though No. 2 in military spend is not in the top 10 countries for arms export market share.
If you play in the microcap space that I do there are some terrific mid-term trading opportunities in some of these defense names. If we do see a slowdown next year as I assume we will they should be good defensive plays. I mean defense, it’s right there in the name.
We're not as much into micro-caps but I'm curious - what microcaps stocks/etf's do you suggest in this space?
I did a separate restack where I mentioned ESP and OPXS. Both have backlogs and revenue expectations that suggest we should see earnings increase meaningfully going forward. You can read their respective Q’s for details. Not the kind of thing you can put a lot of money in, but I think it’s highly likely I make money in one or both over the next 3-6 months which is my typical holding period. I’d describe myself as a fundamentals based trader.
Yes. Some of my research on the typical mega caps in this space suggest the same that backlogs are rising faster than current growth. At the end of the day it depends on the investors risk appetite like you rightly pointed out. Microcaps - bet small, megacaps- less risk but comparatively lesser returns.
Exactly right
Cutting up a mammoth provides more meat than butchering a buffalo calf.
https://carnegieendowment.org/2023/03/14/why-does-global-spyware-industry-continue-to-thrive-trends-explanations-and-responses-pub-89229
You brought a great point. Apart from Defense budgets, even Cybersecurity budgets are expanding. Apart from governments, CIO's in every company are looking at tools to combat the surge in cyber hacks, spywares etc. Geo-tensions on the ground is what we see but nothing compared to cyber warfare.
We actually are in the process of researching and drafting a deep dive into the Cybersecurity Stocks space.
The one I'm thinking of was a start up that then got its primary contract from another country and was ran out of CA. There's so much I'd be in the rabbit hole forever right now but this sums up some of the concerns I'd have. It's at a point where if your using tech you're being spied on and what starts with good intentions sometimes can be not so good in the long run. If I had the money I'd stay out of it just due to a three letter agency more than likely being present. Just me though. If I did I'd probably cash out fast as possible.
Subtle hints but I get the gist. 🥸
😁
I’ve no idea about the defence sector, so it would be great to have a list of the most important stocks!
We will do a deeper dive into individual companies in this space in Part2 of the post. But we follow these 3 big cap defense companies: Lockheed Martin (LMT), Raytheon (RTX) & Northrop Grumman (NOC). All 3 of them are in aerospace defense, arms and intelligence security with minor difference between them. Valuation wise, these companies are much better priced compared to many other tech companies in the market.