Defense / rearmament (new) Contrarian constructive ▲

Hay (Jul 9 Ringside alert, re-posted Jul 11): defense joins the contrarian book — bears price "the shooting war is in the rear-view mirror" (the same mispricing template as oil) while the global Patriot MIM-104 shortage (Ukraine nearly out of inventories, even the US short) locks in years of production, and worldwide defense budgets surge beyond what non-US (non-China) producers can serve at scale — European primes are "comparative newbies" at sophisticated systems, and buyers won't source critical components from CCP-tied suppliers. US primes are pivoting to next-gen armaments (aerial + marine drones): LMT just bought Ultra Maritime and may shop for Ukrainian drone makers. The expression: LMT at 17× clean earnings vs the S&P's 21× (its "E" not inflated by non-recurring private-stake markups), flat-lined four years despite breakouts — another run to a new all-time high north of ~$700 "highly likely"; the kill-switch is a decisive break above 4.6% on the 10Y / 5% on the 30Y (America no longer able to deficit-spend on defense). Context from the desk: Clifton (Jul 6) argues the Iran/Ukraine lesson is defense tech (drones) wins — large-cap defense rose then badly underperformed after past conflicts, "that's where the new model is going to be" (his clause lives on the Oil/Hormuz page); Larson (Jun 16) saw post-war "rotational money leaving" defense and wanted the washout first. 2026-AUG-03 (Nomi Prins / Prinsights): a compliance cost landing on the primes — EO 14415 (Jul 20) gives the Pentagon 180 days to require every prime and subcontractor at every tier to map its supply chain to the raw material and file a full bill of materials, with suspension or termination for those that don't, and from Jan 1, 2027 a nonavailability waiver requires a documented exhaustive search plus a China-removal timeline. Copper is "the second-most-used material by weight in the defense sector," from artillery driving bands to aircraft landing gear, and is one of the materials contractors must now trace to source. 2026-AUG-11 — CNBC Halftime (Terranova): "significant, significant exposure in the defense industry — a $1.5 trillion defense budget on the table. RTX and General Dynamics are the two strongest names in the defense industry that we still maintain the exposure to." Corroborated by the day's single largest options trade in the entire market: a $70M stock-replacement roll in RTX (7,000 deep-ITM 125-strike December calls closed, the same strike reopened in February), driving five times average option volume. 2026-AUG-02 (Gromen): Post-NATO, the US, Japan, Germany, UK and Korea all landed on the same plan — the COVID-stimmy playbook with Patriot missiles instead of TVs: inflate the debt down while rebuilding the defense industrial base. Corollary: all their bond markets sell off together, so they devalue against gold and the yuan, not against each other — DXY weaker near-term but "managed." 2026-AUG-17 — Jay Singh (David Lin Report): a defense super cycle and geopolitical realignment is the theme that carries unchanged into 2H — "countries all around the world realize that they need to invest more in defense," extending across Europe, North America and Germany, with NATO pressed to spend more as a % of GDP. 2026-AUG-26: Prins: the Iran war “heavily depleted American stockpiles of precision missiles and interceptors,” and the Pentagon's 2027 budget asks to lift missile procurement by 188% — more than the defense industry can build at today's supply. Every such weapon needs aluminum; the highest-performance ones need the high-purity grade the US has no domestic source of. (Nomi Prins, Prinsights 2026-AUG-26) 2026-AUG-27: Every's simultaneous-escalation map: whispers of 50,000 North Korean troops to Ukraine; possible Russian mobilization after the Sept-21 Duma election as Ukrainian drones halve Russian refined-product exports; a possible Putin “foot over the line into a NATO country, just to test” Article 5 — “don't rule out Iran escalating on the same day… if one front is going to escalate, it makes perfect sense for all of them to escalate in tandem.” Market volatility implied: “we ain't seen nothing yet.” (Michael Every, Thoughtful Money 2026-AUG-27) 2026-AUG-23 — Jay Singh (SSR call, 2026-AUG-23): a $500 billion missile and air-defence funding request, with the Navy awarding RTX a $23B Tomahawk contract — "very positive for defense companies." The itemised 2027 request (~$600B Patriot interceptors, $400B THAAD, $200B Navy missile defence) "adds up to almost a trillion dollars," because "the 70 billion that we've spent on the Iran war is not accurate" — his estimate is ~$500B of munitions already expended. Same fact drives the deficit past $3 trillion. Luke Gromen (Goldfinger Capital, 2026-AUG-14) frames the G5 rearmament as fiscal policy in uniform: "within like a five-day period we had the US, the UK, Germany, Korea and Japan all come out and say we're going to borrow more money and spend it on the military. That's basically just defense stimmies" — circular, because US dollar liquidity is what stops those bond markets forcing Treasury sales, "like we saw during COVID, and we know how that played out from an inflation and risk and gold and bitcoin standpoint." He then prices the "let's go to wartime footing like 1940" slogan: a 25%-of-GDP deficit (~4× today's 6%, i.e. $8trn a year), a Fed balance sheet up 10× in three years funded at 3/8 of a percent, 30–50% inflation for three to five years, plus the parts nobody quotes — capital controls ("strict capital controls end the dollar's reserve status… that's your big reset right there, it's forced") and a 90%+ top marginal tax rate. "Still want to go to wartime footing?" On the war itself: the IRGC claim that "we can produce these offensive weapons faster than the enemy can produce defensive weapons" matches what he heard from a well-placed US source three months earlier, and is what the leaked stories of Dan Caine and Pentagon generals counselling restraint were about. 2026-AUG-24 — John Polomny (ex-Navy, 292 days at sea): asymmetric warfare has obsoleted the forward-deployed carrier — cheap drones and missiles invert the cost exchange against capital ships and fixed bases (he cites Martin van Creveld and William Lind). The Fifth Fleet's Bahrain headquarters is "destroyed… there is no more fifth headquarters," destroyers can no longer operate inside the Gulf, and he disbelieves the official cause of a carrier casualty event. His frame is Suez: "almost like the final nail in the coffin for the Empire… we're in a similar situation" — empires "get overindebted, overextended militarily and then some other power emerges"; the Kissinger petrodollar bargain is "fraying at the seams." Pieter Slegers (Compounding Quality), 2026-MAR-26: a budget datapoint recorded inside the TransDigm deep dive — "Recently, Trump raised the defense budget from $1.5 trillion to $2.0 trillion annually" — cited as the reason 43% of TransDigm's revenue sits in "another structurally growing end market" alongside commercial aerospace. Corroborating market evidence from the same week's watchlist: Northrop Grumman was the fourth-best performer of the year to date at +23.6%, in a table otherwise dominated by quality names that had fallen. 2026-AUG-28 (McCracken, Value Hive): tungsten as the cleanest pure play on rearmament, and demand that is literal destruction — "Russia, Ukraine was constantly blowing shit up made of tungsten. And now in the Middle East… just vaporizing it. So the demand is absolutely there… shortages with missiles," with Trump "saying he wants to move to a military economy" on top. He calls under-sizing it "my biggest mistake" and still says "tungsten is still great here" (EQ Resources / EQR the named vehicle). The structural point, from the host: direct pure-play missile exposure via a defence prime is almost impossible — every contractor is a conglomerate — so the consumable metal is the instrument. Amati's Theon International adds the European-content angle: a Dutch-listed, Greek-domiciled maker of night-vision and thermal augmented-vision systems sitting "at the sweet spot of a number of focus areas in defence spending, including Battlefield Communications, Modern Soldier Programme and drones," and "a clear beneficiary of Europe's decision to expand its domestic defence industry over the coming decade." The spending is rotating toward soldier-carried systems and drones rather than platforms, and toward European suppliers. (fund pitches compiled by SSR, AUG-03)