When the Defender Gets a Third Die
From EuroMIC to NWOMIC™. Repositioning the 🐿️'s global defense basket. The Blind Squirrel's 'Monday' Morning Notes. Year 4; Week 16 of 2026.
I am sending this ‘Monday Morning’ Note very early this week. A new record!
As kids, when horizontal Scottish rain (in August) forced the 🐿️ and his brother off the golf links of East Lothian, we were soon pleading with our father and uncle to sit down for some family male bonding via a game of Risk, the 1950s board game based on world domination.
The game would often end in tears when invading armies engaged with the wrong ‘Armchair General’.
My pal Chase Taylor made me laugh the other day when he mentioned everybody’s favorite Risk strategy - the occupation of Oceania with a massive blocking army in “Siam”. It works about as well as building 4 houses on those statistically significant orange properties on the Monopoly board.
But it got me thinking. There is a better analogy. When Risk was designed in the 1950s, the game perfectly captured the military doctrines of WWII and the early Cold War. The rule whereby the attacker gets 3 dice while the defender gets only 2 reflects an era of mass mobilization and Kursk or El Alamein style mass tank battles.
In this industrial era model, concentrating mass and taking the offensive yielded a statistical advantage. With three dice against two, the attacker can expect to have the 2 highest dice 37.2% of the time, while the defender only has them 29.3% of the time. This 8% spread in favor of the aggressor - even after accounting for the fact that defenders win ties - dictates the entire strategy of the game.
The Ukraine battlefield and the current conflict in the Middle East have inverted the math. In a world of cheap FPV drones, loitering munitions and electronic warfare, the defender is no longer defending static trenches with inferior armor. They have their cheap and lethal eyes in the sky (and on land and sea). Additionally, sheer volume dominance of naval and air materiel no longer guarantees supremacy.
The defender just got itself a 3rd die - with a profound impact on the game probabilities.
If Risk were to adopt this rule, the game would immediately devolve into a brutal, grinding stalemate. Nobody would ever attack because pushing forward mathematically guarantees disproportionate attrition. Nobody would play the game. I guess there is a (John & Yoko-ish) message in there…
It also means that we need to rethink our positioning in global defense stocks. I first introduced EuroMIC, our basket of UK and European defense stocks in November 2024 (“Lost Umbrella”).
EuroMIC has comprehensively outperformed the broad-based European and US Aerospace and Defense sectors. However, on a growth adjusted basis, this European group still looks inexpensive relative to the US Military Industrial Complex giants.
Consistent upgrades to consensus earnings for the Europeans has kept the group’s average PEG (NTM) ratio reasonable - only 0.29 above where it was in November 2024. The US comps - now on a PEG (NTM) of 2.52 - trade 0.2 below where they were 18 months ago.
So far, all is going to plan. However, I do think the 🐿️’s defense portfolio requires an upgrade. The focus of the original thesis was what I then saw as an inevitable response by Europe to the risk of impairment to its NATO-led security umbrella.
As the US security blanket gets stretched too thin to cover the Middle East and Asia simultaneously, the scramble for sovereign defense has become a worldwide necessity.
Current Positioning
18 months into this strategy, the composition of EuroMIC has shifted significantly. At the individual stock level, EuroMIC was turbo-ed by 3 stocks (Rolls-Royce, Rheinmetall and Saab) returning over 100% in 2025 alone.
No complaints from the 🐿️ but due to some epic stock price moves the current basket is now heavily tilted towards the giants of the old world of defense procurement.
I am not saying that some of these great businesses will not play an important role in the drone / asymmetric war era. It is just that the contribution (and profits) will likely get lost in the context of wider civilian aerospace activity.
Introducing the upgrade: NWOMIC™
NWOMIC™ is the ‘New World Order’ Military Industrial Complex. The portfolio is being expanded to capture a broader geography (especially Asia) and adjusted to reflect the sub-sectors of the global defense landscape most likely to receive a disproportionate share of the spending wallet.
In March of last year (“Drones: Crashin’ or Cash in?”), I wanted to add more ‘drone beta’ to the EuroMIC basket but ultimately could not get comfortable with chasing the parabolic charts and valuations of some of the speculative pure play exposures.
We will remedy this now as part of a broader focus on the world of asymmetric warfare.
