“What you are trying to let go of ... is already gone.”
― Sanober Khan

Those of you who actually follow this blog religiously know that I periodically blog about the performance of the government contracting  industry in the stock market. Once again, I thought it might be a good moment to return to a perennial topic of focusing on the performance of the stock of Government contractors. I last covered this topic on last on October 5, 2022. https://www.awrcounsel.com/blog/2022/10/5/should-i-quit-my-job-and-day-trade-government-contractor-stocks?rq=FEDX. And before that on June 22, 2022. See https://www.awrcounsel.com/blog/2022/6/22/dont-quit-your-day-job-to-trade-government-contracts-stocks-and-dont-expect-government-bailouts-of-any-but-essential-industrial-base-contractors?rq=FEDX%20.

My proxy for the performance of government contractors has been the Emiles Trust Federal Contractor  (Symbol “FEDX”), an exchange traded fund (“ETF”) for which I purchased one share back on December 29, 2020. Through most of my blogs, the FEDX ETF had been range bound, down between 5% to 7% the three times I have blogged about it, mostly steady as it goes, albeit slightly negative.

So, I just went to check the performance of FEDX in my portfolio and noted that the one share I owned is no where to be found. I was thinking that I inadvertently sold it, but I could find no record that was the case. Then I google it, and the only record I can find suggests it stopped trading sometime in November 2022.  I can’t find anything that explains why on the internet, including at the Emiles website, the ETF sponsor. But I would hazard a guess that they just pulled the plug on a failed ETF with assets of less than $5 million dollars.

So, what is the meaning of this? It means that the returns of government contractors have trailed the market in the recent past and are slightly negative overall. It also means that the real return with annual inflation now running in between 6% and 8% is more sharply negative. The impact of the pandemic, the war in Ukraine, and the resultant wild federal spending apparently has not really trickled down to the wider government contracting community. So much for war profiteering. As a defensive group of investments, one would have thought the government contract world would have done better than average, not worse, in that period of time.

Who is to blame? In one of my 2022 blogs I blamed the inflation bogey man. https://www.awrcounsel.com/blog/2022/9/28/inflation-relief-for-government-contractors-were-here-to-help-chapter-two. It simply hard to produce a satisfactory return on your investment doing fixed priced government contract work in an inflationary era. I asked plaintively: “if defense contractors can’t goose their stock prices during a European land war of uncertain duration, when will the good times roll? I guess the lesson is that inflation hobbles and eventually destroys everything in its path, even large defense contractors.”  https://www.awrcounsel.com/blog/2022/6/22/dont-quit-your-day-job-to-trade-government-contracts-stocks-and-dont-expect-government-bailouts-of-any-but-essential-industrial-base-contractors?rq=FEDX%20.

Without any good ETF proxy to follow, I just took a look at the largest pure government contractor, Lockheed-Martin (symbol.: “LMC”) which I see is down -1.28% so far this year. That is a road to nowhere. But that stability beats Northrop Grumman (symbol: “NOC”) which is down -15.05% year to date. I guess Ukraine isn’t demanding enough of their inventory of arms to matter.

What does it mean? Beats me. But it is clear few are getting rich off a land war in Europe involving an American proxy. In the consensual hallucination that is the US stock market, however, it appears that government contracting is certainly less volatile than most business sectors, albeit also less lucrative.