EU Defense Spending Surge

Scott Galloway believes that European defense spending is about to create one of the greatest unexpected increases in capital expenditures in modern history, presenting a significant investment opportunity.

Key Points:

• The EU has reached a "painful conclusion" that it can no longer rely on the US for military support and consistency

  • Planning to increase defense spending from 1.9% to 3% of GDP
  • This represents an incremental spend of approximately $200 billion per year
  • This massive increase wasn't expected even 12-24 months ago

• Investment implications:

  • Defense stocks in Europe have already "ripped" and may be too late
  • The additional spending will be stimulative to European economies
  • Technology spillover will likely help the tech sector
  • Could inspire an "upward spiral" in some European stocks

• Broader investment thesis:

  • Capital flows are about to reverse after 15 years of unprecedented inflows to the US
  • "Regression to the mean is an incredibly powerful force"
  • US has been on an economic "tariff" for 14-15 years, while cycles typically last 8 years
  • Planning to be "almost entirely out of the US market within three or four months"

• European market opportunity:

  • "If you ask anyone about Europe they just roll their eyes and go 'no they're fucked, it's a museum, it's overregulated'"
  • "That's when you invest - when something's been left for dead"
  • Good European companies trading at single-digit P/E ratios
  • Contrasts with US companies like Apple trading at 34-36x P/E while only growing 1%

• Personal investment approach:

  • Seeking uncorrelated positive income streams (citing Ray Dalio's advice)
  • Investing in companies like Vertical Aerospace
  • Investing in funds like Atlanta Partners that focus on small/mid-cap special situations in Latin America and Europe