Is Europe becoming uninvestable?

[Loss Horizon]

In the world of EBIT and EBITDA who cares about taxes.

 

But seriously, Defense Manufacturing is a very risky business. There is no moat, and demand depends on unpredictable events.

 

In a peace time, demand depends on momentary government decisions.

 

In a war, the products are becoming obsolete very quickly. But any manufacturing business needs certain continuity of products to be profitable.

 

The technological race will not stop for a while, even when the active battles slow down and some form of peace is reached.

 

The modern war is largely fought with consumer products, like JDI drones, Discord internet messenger and Toyota trucks. The traditional weapon technology is not the only part of the battle any more, and the share is dropping.

Edited June 4, 2025 by Loss Horizon

[John Hjorth]

1 hour ago, Loss Horizon said:

In the world of EBIT and EBITDA who cares about taxes.

 

But seriously, Defense Manufacturing is a very risky business. There is no moat, and demand depends on unpredictable events.

 

In a peace time, demand depends on momentary government decisions.

 

In a war, the products are becoming obsolete very quickly. But any manufacturing business needs certain continuity of products to be profitable.

 

The technological race will not stop for a while, even when the active battles slow down and some form of peace is reached.

 

The modern war is largely fought with consumer products, like JDI drones, Discord internet messenger and Toyota trucks. The traditional weapon technology is not the only part of the battle any more, and the share is dropping.

 

Great post, @Loss Horizon,

 

Thank you.

 

Innovation and development in this space is triggered by ongoing wars. 

[Spekulatius]

10 hours ago, Loss Horizon said:

In the world of EBIT and EBITDA who cares about taxes.

 

But seriously, Defense Manufacturing is a very risky business. There is no moat, and demand depends on unpredictable events.

 

In a peace time, demand depends on momentary government decisions.

 

In a war, the products are becoming obsolete very quickly. But any manufacturing business needs certain continuity of products to be profitable.

 

The technological race will not stop for a while, even when the active battles slow down and some form of peace is reached.

 

The modern war is largely fought with consumer products, like JDI drones, Discord internet messenger and Toyota trucks. The traditional weapon technology is not the only part of the battle any more, and the share is dropping.

LOL, are you serious?

[Loss Horizon]

21 hours ago, John Hjorth said:

 

Great post, @Loss Horizon,

 

Thank you.

 

Innovation and development in this space is triggered by ongoing wars. 

 

Thanks! I would be happy to contribute to the forum.

 

I really enjoy reading it. Unfortunately, the Value Investing of Graham and early Buffet is obsolete since long time ago, and there are very few communities who still try to look beyond speculation and stock gambling.

Edited June 5, 2025 by Loss Horizon

[Loss Horizon]

12 hours ago, Spekulatius said:

LOL, are you serious?

 

What do you have in mind?

[Spekulatius]

10 hours ago, Loss Horizon said:

 

What do you have in mind?

A B52 that is in service for 70 years as a starter. Also explain to me why no defense contractor of size went bankrupt the last 50 years,

[Loss Horizon]

18 hours ago, Spekulatius said:

A B52 that is in service for 70 years as a starter. Also explain to me why no defense contractor of size went bankrupt the last 50 years,

 

Good point, a timeproof weapon indeed. Some weapons will of course be in use for a long time. But not all.

 

I try not to follow the Russian war closely, I can't handle the horrors. But I already saw that there have been multiple shifts in technology, as it's the first full scale war between big industrial countries since WW2.

 

Tanks lost relevance and importance. During the war, there were zero tanks against tanks battles. Expensive rockets are often less effective than cheapest drones. Traditional anti-air defenses are all developed against big, fast and expensive targets, they struggle against cheap drones. Military-grade encrypted communication systems are too slow, and high-speed digital connections like Starlink are much more important. Jammers against drones are largely obsolete by drones controlled via fiber optics, which China supplies at scale and at low cost, and also by AI path finding. Fighter jets and bombers don't approach the front line any more, they deploy the new gliding bombs from a distance. The war at sea is changed completely by naval drones.

 

Not going bankrupt is not a sufficient reason to invest in a stock, a relatively good return is also necessary. But I wouldn't count on defense contractors not going bankrupt. Their operations might be critical and essential for national security, but their equity is not. They could possibly restructure and wipe out all shareholder equity, and continue the critical operations after that as if nothing happened.

 

According to this article, defense contractors do go bankrupt:

https://www.cambridge.org/core/journals/business-and-politics/article/leveraging-national-security-private-equity-and-bankruptcy-in-the-united-states-defense-industry/A6DC30F360EF19EF1BECB9BF2D5EB9A7#tbl1

 

"Bankruptcy among defense contractors is a rare event. Since 1990, only 207 of 8,658 contractors have gone bankrupt as classified by Capital IQ. The approximately 2 percent of defense companies that filed for bankruptcy is consistent with other economic sectors including consumer staples (2.1 percent, 1,105/ 52,199) and energy (2.6 percent, 795/30,285). Many sectors experience lower levels of bankruptcy than defense, with some as low as 0.1 percent including banking, consumer discretionary, and information technology."

 

Edited June 6, 2025 by Loss Horizon
typo

[Spekulatius]

I agree that tanks lost relevance  but it’s also a result of the stalled nature of the Ukraine- Russian theatre that has many similarities with WW1.

 

On drones, both parties have not managed to create an air cover against drones , which is not that hard to do. It requires something like Rheinmetals Skyranger, which can probably clear  everything that’s line of sight. I have also seen cheaper truck mounted version of this using similar or smaller guns

https://www.rheinmetall.com/en/products/air-defence/air-defence-systems/mobile-air-defence-skyranger

 

I think jamming was the weapon of choice until the workaround with glass fiber controlled drones came out. As always, the war and the weapons are constantly evolving  - you only need to look at We1 and WW2 to see the huge difference in weaponry and tactic just a few years into the war. I don’t think drones are as devastating and in c one than people make it out to be.

[Dalal.Holdings]

The only thing that new technology does is create the need for more defense spending & investment, not less.

[Sweet]

Cultural or ethno-nationalism is now a terrorist ideology.  

 

So if you think European culture is being eroded by mass immigration that’s a terrorist ideology.  And if you think European should be for Europeans, terrorist ideology.

[formthirteen]

4 hours ago, Sweet said:

Cultural or ethno-nationalism is now a terrorist ideology.  

 

If you ask Amnesty, the UK's Prevent strategy violates our most fundamental rights:
https://www.amnesty.org.uk/files/2023-11/Amnesty UK Prevent report (1).pdf

 

 

I will visit the Stasi archives this summer. Maybe I can learn something there, e.g., "How can I report my neighbors to the thought police?". "What should I do when I noticed my neighbors are watching House of Cards":

 

Quote

Great British Railway Journeys, was singled out by Prevent for being capable of ‘encouraging far-right sympathies’ (other programmes also named by Prevent included House of Cards, Tinker Tailor Soldier Spy and Yes, Minister)

 

https://archive.is/qXXJL

 

Doublespeak, 1984?

Edited June 8, 2025 by formthirteen

[cubsfan]

7 hours ago, Sweet said:

Cultural or ethno-nationalism is now a terrorist ideology.  

 

So if you think European culture is being eroded by mass immigration that’s a terrorist ideology.  And if you think European should be for Europeans, terrorist ideology.

 

Very sad to see. Not unlike the USA under Biden. If you oppose open borders, you're branded a racist. It's not really your country - and damn the consequences.

 

That's how the facists roll.

[Spekulatius]

Sounds like @cubsfannand this a Keith guy lack reading comprehension.

 

The Uk government does condemn right wing terrorism as active and vocal support of discrimination and violence against minority groups. Then it expands on the ways this gets expressed.

 

The key is the first sentence which most people would agree with.

 

 

 

[cubsfan]

2 hours ago, Spekulatius said:

Sounds like @cubsfannand this a Keith guy lack reading comprehension.

 

The Uk government does condemn right wing terrorism as active and vocal support of discrimination and violence against minority groups. Then it expands on the ways this gets expressed.

 

The key is the first sentence which most people would agree with.

2 hours ago, Spekulatius said:

Sounds like @cubsfannand this a Keith guy lack reading comprehension.

 

The Uk government does condemn right wing terrorism as active and vocal support of discrimination and violence against minority groups. Then it expands on the ways this gets expressed.

 

The key is the first sentence which most people would agree with.

 

Yeah, if you love your country and are concerned about open borders and you think that mass-migration may threaten your culture - then we'll arrest you for voicing your opinion. 

 

100% facism.

[gfp]

I thought that mass migration was our culture

[cubsfan]

4 minutes ago, gfp said:

I thought that mass migration was our culture

 

Are sovereign borders useful anymore?

 

Why does any country have borders anymore?

 

Or should we just let in 12 million illegals and 500,000 criminals - ALL unvetted and all unvaccinated?

 

These last 4 years we got a preview of what open borders looks like and how

one might destroy your country.

 

That will be Old Joe's legacy in 100 years: how to destroy your country.

[Sweet]

4 hours ago, Spekulatius said:

Sounds like @cubsfannand this a Keith guy lack reading comprehension.

 

The Uk government does condemn right wing terrorism as active and vocal support of discrimination and violence against minority groups. Then it expands on the ways this gets expressed.

 

The key is the first sentence which most people would agree with.

 

 

 

In this case Spek they read it right.

 

This part of the ‘Prevent programme’.  It’s anti-radicalisation government scheme were anyone can report another person.

 

However, the problem is that people can be referred to on the basis of held beliefs.

 

The issue with this is that you might get your name logged by the police and put on the safeguarding database, and employers doing background checks might have a red flag raised against your name for having the wrong view.

 

I don’t think there have been too many cases where this has actually happened, but it is being challenged by the ‘Free Speech Union’ because it “skews away from suspicion by conduct to the mere possession of beliefs that are perfectly legitimate but regarded by Prevent policy wonks as problematic”.

 

Which follows in a long line of free speech issues in the UK.

 

Edited June 8, 2025 by Sweet

[cubsfan]

2 hours ago, Sweet said:

In this case Spek they read it right.

 

This part of the ‘Prevent programme’.  It’s anti-radicalisation government scheme were anyone can report another person.

 

However, the problem is that people can be referred to on the basis of held beliefs.

 

The issue with this is that you might get your name logged by the police and put on the safeguarding database, and employers doing background checks might have a red flag raised against your name for having the wrong view.

 

I don’t think there have been too many cases where this has actually happened, but it is being challenged by the ‘Free Speech Union’ because it “skews away from suspicion by conduct to the mere possession of beliefs that are perfectly legitimate but regarded by Prevent policy wonks as problematic”.

 

Which follows in a long line of free speech issues in the UK.

 

Controlling speech is the first step in facism.  Good luck over there.

 

The USA is watching closely, as we've had our near miss here.

[Spekulatius]

2 hours ago, Sweet said:

In this case Spek they read it right.

 

This part of the ‘Prevent programme’.  It’s anti-radicalisation government scheme were anyone can report another person.

 

However, the problem is that people can be referred to on the basis of held beliefs.

 

The issue with this is that you might get your name logged by the police and put on the safeguarding database, and employers doing background checks might have a red flag raised against your name for having the wrong view.

 

I don’t think there have been too many cases where this has actually happened, but it is being challenged by the ‘Free Speech Union’ because it “skews away from suspicion by conduct to the mere possession of beliefs that are perfectly legitimate but regarded by Prevent policy wonks as problematic”.

 

Which follows in a long line of free speech issues in the UK.

 

Thank you for explaining. A “Snitch” program doesn’t sound like it will solve any issues.

 

The post above however was talking about

[Dalal.Holdings]

Europeans try and try to suppress them, but in France/Germany/UK, the "far Right" (according to them) is just becoming more mainstream

 

https://www.dw.com/en/germany-far-right-afd-draws-level-with-conservatives-poll/a-72150148

 

https://brusselssignal.eu/2025/04/frances-national-rally-lead-polls-for-presidential-race-amid-le-pens-legal-challenges/

 

https://www.politico.eu/article/labour-win-reform-uk-crucial-by-election-scotland-nigel-farage-britain-polls/

[Dalal.Holdings]

 

Nice tailwind for those who purchased Euro denominated assets recently

 

[John Hjorth]

29 minutes ago, Dalal.Holdings said:

 

Nice tailwind for those who purchased Euro denominated assets recently

 

 

That certainly depends on ones functional currency.

 

Not everybody on CofB&F are measuring everything in USD. Here, I'm just saying.

 

Personally, I don't even at our broker have the option to change functional currency at my own will. I voted 'yes' to Euro 28^th September 2000 in the Danish currency referendum and got overruled by a majority of 53.2% to keep the Danish Krone, and then the Danish Nationalbanken just pegged the DKK to the EUR, so the currency referendum diden't really make any sense in the first place at all, it was just a bunch of *BS*, 'the people has to decide' spin and *BS* in the end anyway, and, and, and ... I can't file tax returns in any other currency than DKK. - Just venting! - *sigh*

[Dalal.Holdings]

4 minutes ago, John Hjorth said:

 

That certainly depends on ones functional currency.

 

Not everybody on CofB&F are measuring everything in USD. Here, I'm just saying.

 

Personally, I don't even at our broker have the option to change functional currency at my own will. I voted 'yes' to Euro 28^th September 2000 in the Danish currency referendum and got overruled by a majority of 53.2% to keep the Danish Krone, and then the Danish Nationalbanken just pegged the DKK to the EUR, so the currency referendum diden't really make any sense in the first place at all, it was just a bunch of *BS*, 'the people has to decide' spin and *BS* in the end anyway, and, and, and ... I can't file tax returns in any other currency than DKK. - Just venting! - *sigh*

If you live in America though (where all your spending is in USD) and bought European assets, you’ve done well.
 

If the opposite (live in Europe and buy American assets), it’s the opposite (headwind). And a lot of Foreigners have been buying American stocks and I’m not sure all of them realize the fx related headwinds they face

[Loss Horizon]

I remember 3 years ago EUR was considered done for good, it sank below 1 USD.

European industry faced obliteration because of the energy war, and sentiment for the currency was so negative.

On top of that the dollar paid significantly more interest.

 

Fast forward to now, USD combined with its superior interest was not worth it versus just holding EUR, contrary to all "common sense" forecasts.

Edited June 12, 2025 by Loss Horizon

[whiskybravo]

3 hours ago, Dalal.Holdings said:

 

Nice tailwind for those who purchased Euro denominated assets recently

 

Also Nok!