There’s a war going on.
Buy oil.
Those are the ‘fear’ assets. Well, they used to be anyway.
Not anymore. Even perpetual war in the Middle East can’t boost gold and oil these days.
Free Reports:
If you want to profit from ‘fear’, you have to look elsewhere…somewhere that’s much more obvious…
As always, we’re not saying you shouldn’t own gold; you should.
In our view, gold should be a part of every portfolio.
And we don’t mean the 2% or 3% that some weak-kneed mainstream financial advisors recommend. We’re talking about 20%, 30% or more.
Gold is the one asset that you can own today that you know will still be around 50 years from now. Although it’s likely that some of the blue-chip stocks you own will still be around, you can’t guarantee it.
But that’s the long term. And besides, owning gold is more about protecting the value of your money rather than making money. If you want to make money from war and fear, there’s a much better way to do it.
First of all, you may object to the idea of profiting from war.
You may think it’s tasteless to make money from bloodshed.
If you take that view, fine. We won’t try to convince you to change your mind.
But if you see it as an obligation to grow your wealth to the best of your ability by taking advantage of current market dynamics, then read on.
Buying gold was a pretty good move in 2003, just as the US invaded Iraq to topple Saddam Hussein. In Aussie dollar terms, the price climbed from around AU$500 an ounce to a high of AU$1,806 an ounce.
Even today, after the price has fallen to AU$1,373 an ounce, it’s still a 174% gain. That’s pretty good.
However, a better investment in 2003 would have been to buy into the industrial war machine. We’re talking about buying shares of Northrop Grumman [NYSE:NOC], Boeing [NYSE:BA], and Halliburton [NYSE:HAL].
As you can see from the chart below, all three of these war machine stocks have outperformed the Aussie dollar gold price (blue line):
Since the invasion of Iraq in 2003, Halliburton shares have gained 504%. Boeing shares are up 388%. Northrop Grumman shares are up 198%.
That’s the payback for investing in war machine stocks. And it doesn’t include dividends either.
Of course, there have been other influences on these stock prices apart from war.
The whole aerospace industry has been buoyant. That includes commercial airline supplies, and projects for near and deep space exploration too.
But there’s no doubt that war is a big moneyspinner for these firms. The US defence budget is the largest national defence budget in the world by a long shot.
According to the International Institute for Strategic Studies, in 2013, the US defence budget was US$600 billion — that’s almost twice the Aussie government’s total budget. The next biggest spender was China at US$122 billion.
Former superpower Russia was a distant third, with a defence budget of just US$68 billion.
In fact, the US accounts for around 40% of the world’s annual defence spending. It’s no wonder that US arms firms are among the biggest in the world.
With a state of perpetual war, and the likelihood that military budgets will rise in the years ahead, defence and arms firms look set to enjoy many more years of government spending.
As the Financial Times reported yesterday:
‘Air strikes launched by the US and Arab allies against Islamists in Syria were the “beginnings of a sustained campaign” that could last years, the Pentagon said on Tuesday.’
Australia’s top military chief agrees. Chief of Army, Lieutenant General David Morrison, says combat in the Middle East could last ‘decades’. Oh dear.
The way we look at it is that if governments insist on using taxpayer dollars to buy bombs, fighter jets, and aircraft carriers, why shouldn’t investors reclaim some of those tax dollars by investing in the tech companies that get the big contracts?
And don’t think this is just an American thing. In 2013, the Aussie government spent US$26 billion on defence. That’s just under 10% of the government’s budget. Or put another way, about 10% of your taxes go to the military and its suppliers.
If you want to ‘grab back’ some of those dollars, buy defence stocks.
In truth, that’s hard to do on the Australian share market. But there is one Aussie stock that Revolutionary Tech Investor analyst Sam Volkering tipped to his subscribers last year. The company plays a key role in supplying parts for one of the military’s biggest hardware buys.
It’s also a company that could play a big role in the development of the robotics industry — another subject that Sam has covered in depth.
As the chart above shows you, like it or not, the defence sector is a big moneyspinner if you get in at the right time. The stocks can be volatile, and most of their business relies on big government spending.
But one thing is for sure: There doesn’t seem to be any let up in the thirst for war among the world’s politicians. As long as that remains so, it looks to be the perfect environment for ‘fear’ stocks to keep making money.
Cheers,
Kris+
The post Investing in Tech Companies to Reclaim Those Tax Dollars appeared first on Stock Market News, Finance and Investments | Money Morning Australia.
