0:05 spk_0

Welcome to Warrior Money. The show devoted to supporting our brother and sister veterans in business. I’m Patrick Murphy, and I’m Dan Coons. Today’s guest is a distinguished Marine Corps pilot turned investment professional. He serves as the portfolio manager for Gabelli commercial Aerospace Defense ETF and at Gabelli funds, where he leverages his extend.military experience to provide unique insights into the aerospace and defense sectors. Please welcome Tony Bancroft. Tony, welcome to Warrior

0:31 spk_1

Money. Thanks for having me.

0:33 spk_0

You’re welcome. All right, listen, you know, we’re army guys. You got a marine here. Um, we start these shows with bluff. Bottom line up front. So let me go right this week.Defense Secretary, President of the United States said we’re gonna have our first ever $1 trillion defense budget. What are your thoughts, Tony? Yeah,

0:50 spk_1

youknow, so covering the aerospace and defense industry, historically, defense spending is almost directly correlated to, uh, geopolitical instability. And I’d say if any time in history post World War II, Vietnam and, uh, OAF 1 and 2.I would say this is probably the most, you know, there’s two hot wars going on essentially right now, the Houthis, um, and in the Red Sea, and then, you know, what’s going on, obviously, uh, in the Spratly Islands, Taiwan, there’s a lot of, a lot of things that are, uh, that are probably in need of, of defense, uh, defense posturing by the United States and globally. So I think it’s probably it’s righteous and um it’s probably going to see more of it, all things being. Yeah,

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especially when you look at the fact that we have the tariff issue with the countries andYou, I always say, look at where, why we pivoted to the Pacific. Look at where the largest increase in middle class families where we want to sell American products to are really in Asia. So and the geopolitical aspects

1:44 spk_1

there. Um, and the pivot Pacific is definitely the focus, and I’d love to talk more about that, uh, as we go on, but I think we’re gonna see a lot of, uh, effort being put into that area.

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Yeah, Patrick, Patrick just mentioned like we’re in a shifting.I, I don’t even know, geopolitical environment where you’ve got new headlines that are coming out every single day. You’ve got the tariffs, you’ve got our interest our interests on debt. You’ve got Europe and NATO having to step up their government, their spending on defense.How, how do you think and how do you make sense of all the noise to navigate what you need to do on a daily basis to make good investment decisions for the workyou’re doing?

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Yeah, you know, I think the US has, has, you know, has been sort of the world’s protector for, you know, since the post-war in the post-war environment, and, um, you know, uh, the US is the largest defense industrial base by far. There’s, there’s no one even, you know, no other country even close to it.Uh, obviously what has happened in February of 2022, uh, you saw that Europe essentially woke up and, uh, started, started spending, you know, we’re still actually below the 2% target from NATO. We’re, we’re, you know, slightly, still slightly under that on a whole basis, still about $40 billion short of.Of, uh, of spending for the NATO, um, the NATO members. But that’s obviously gonna change going forward. You see news from Germany, and the reality is that the capacity is limited in Europe, right? And so, it’s gonna fall on the, on the shoulders of the, the US defense industrial base and you’re going to start seeing more defense spending, uh, coming here, tariff, no tariff, you know, we’re essentially the epicenter of where, uh, where it’s built. Yeah,

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February2022 is the start of Ukraine with the Russian invasion of Ukraine and that start that kicked off of that war. And so, um, I was.I was involved in that conversation. I kind of saw, saw what was going on during it. Can you talk a little bit about how the pivot from UCO or Europe to Southeast Asia, what that means for the defense spending and defense industrial base?

3:38 spk_1

Yeah, that’s a question I think, I think that’s probably what’s defining everything overall national defense strategy and you know, 2018, they, they sort of they sort of put that out.Um, you know, uh, uh, General Mattis sort of aligned that, and the priority is everything, as you said, pivoting to the Pacific and the reality of the Pacific, you know, I was on the USS Carl Vinson spent 9 months deployed there and did a Westpac, visiting essentially every, uh, uh, every Asian, Asian country.Uh, and it’s huge, you know, the Western Pacific is a monster and it’s much different from Europe and South, um, um, Southwest Asia. You just need long legs, and, uh, I think a case in point is, uh, and I’m just referring to my fellow, uh, my army brethren here, uh, the armies have a new program called the Flora program, which I’m sure you’re familiar with replacing, replacing the Black Hawk. Black Hawk.had a great run. It’s going to have a great run. It’s going to continue to have a great run for multiple years for for MFF FMS sales, but the United States needs to pivot, and the only way they can do it is, is vertical lift on, on tilt rotor and the, you know, Textron, one of our largest holdings in our, uh, aerospace ETF, uh, GCAD fund, and it’s going to be building that. They’re going to build, you know, at least 2400 of them, probably going to build 4000 or 4000 Black Hawks globally, and you’re going to see that.You know, and it, and by the way, it can be fly autonomously if it needs to, and it’s gonna be, uh, the airframe for the US and the world for the next 4 years.

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Yeah, I’ve beenat their plants for seeing it. I mean, it’s what what Techtron and the helicopter are doing, it’s remarkable, um, and their CEO is at Air Force Academy. Her name was Cherry. I know yours was something different, D-agg, I believe, but you won’t go there. I didn’t call you that. That was, that was aboutthe D bag be clearum.So, but when you look at that, I mean, I look at that, uh, the future vertical lift. I mean, why that’s important not just for our warfighters, but also when one of our warfighters gets hurt, they go twice as fast or twice as different because of that golden hour. When you have a trooper in harm’s way that we need to excavate him or her out, we gotta get there. I mean,

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so many, there’s so many reasons for it and that. I think the penultiated, but I think, you know, you take that, you multiply that with the capability to to.Go over the horizon, you know, uh, bringing those troops to those ranges. It’s, it’s a no brainer. And then all the, the beneficiaries, uh, uh, from all that and all of the defense stocks that I, a lot of that I have my ETF, uh, are going to be suppliers to that, that industry. Yeah,

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we’ve gota really interesting, not only do we have the the geopolitical shifts that we’re talking about, but we, we like have a truly a retiring of a legacy generation of platforms. Uh, like how do you retire?Or systems that have been in place for 50 years and just into an autonomous system and then keep the, keep the my words keep the army rolling along. But how do you, how do you do that? How do youthink about it

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like you said, it’s gonna, it’s gonna happen. There’s no question, you know, the future is going to be drone warfare, autonomy, uh, AI that’s all gonna be, but there is going to be, you know, sort of like, uh, uh, you know, natural gas is sort of the transition fuel. There is going to be the semi-autonomous or highly AI driven systems and.And that that’s gonna happen in the midterm. And, and I think case in point was the F-35, um, bombing in, in Iran, uh, by, by Israel. I mean, there’s no other weapons system platform, including any drone that China, whoever it has, you name it, DARPA has that could do what, um, you know, what the Israelis did in Iran. They they, they took out, you know, all these SA20 sites, which no one in their right mind would be touching in any 4th generation.Uh, plus platform. There’s no aircraft in the world can do it except the F-35. So you’re going to see that and you’re going to see the F-35 like you were saying it will have aloy wingman, you know, entourage, and then on top of that, and you see the F5047 coming and then the FAXX coming as well. And then that will eventually transition to full, probably full some form of autonomy. So no question you’re right, I think that sounds, yeah.

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You know, I, you have to sometimes pinch yourself, Tony, because, you know, when you were at the Naval Academy, you’re 98 grad and then eventually went to Columbia Columbia Business School. But, you know, you were probably was a midshipman. You probably weren’t thinking about, hey, I want to be an F-18 fighter pilot in the Marine Corps, but I’m really gonna be an investments. I’m really gonna be in the sector, you know, knee deep in AI autonomous systems.

7:52 spk_1

Yeah, I was just very fortunate. I, um, you know, it’s getting out of the Marine Corps. I was an instructor out in Miramar, uh, teaching how to fly the F-18.To students and, you know, my, my contract was up and I was, I was asking LSO landing signals officer in the Marine Corps, which, uh, means that I’d probably be going back to the boat just because there’s just not a lot of LSOs in the, in the Marine Corps. So that was coming and, and I just got married, my first child on the way and, and, you know, I knew it was time to, uh, not bleed green anymore even though I still bleed a lot of green. But, um, uh, I, I, I was fortunate enough to meet, um, obviously, uh, a very famous uh Wall Street.Investor Mario Gabelli, and he gave me an opportunity. He took a chance on me. He said, Hey, you got to go back to business school and learn and learn the trade, and, um, I’ll give you an opportunity to, uh, to, to cover stocks.

8:37 spk_2

That’san interesting point. We talk a lot about transitions here. Why, why do you think he said, Hey, you got to go back to business school? That’s cool. Like sir, were you, are you going to pay me the $2000 that I need to? Like how are you gonna do this? So, so like talk about like, hey, I need you to go back to business school, and then how did you do it? Like how did you

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afford it? Yeah, I mean, making it happen was one thing. I know I was I was an engineer.

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Go back to business.

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So

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good luck.Sounds great.

8:59 spk_1

I was, no, I, I, so I was, I was an engineer at the academy. I, I had never taken, I sort of always had a secured this interest in, um, in finance. I was in the Wall, you know, the, uh, stock picking team in high school, and I just, my parents would always picked stocks, own stocks, and so I’d always, I always loved it, um, but just, you know, I sort of got into the world of the military and, and in the Marine Corps and, and engineering and all that. So, um, so I, I, when the time came, I, I, I had to learn finance and I, I actuallyI really, you know, I was like really interested. I wanted to do it and I did it right in the middle of the financial crisis,

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which was a lot of time with me learningtariffs like last week.

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I can figure this out. It’s easy. So I, so I, um, was fortunate enough to, uh, you know, to use the, um, post 9/11 GI bill and the yellow ribbon fund, and it paid for a, for a, you know, a vast portion of my, um, of my business school. So I was very fortunate, you know, that, that, that worked out in that transition

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and Columbiahas such a great program for.Veterans like Ton. I mean, they’re so military friendly, as you mentioned, yellow ribbon school, you know, how many of your classmates did you have that were veterans and, and because I know I, I teach you Wharton, right? 100%, but just about 10% of our class, 850 per year, uh, are veterans or governmentservice.

10:08 spk_1

Yeah, so it’s oddly, that was the, those are the two schools. I, I had some friends that had just graduated from, uh, Wharton and went into Wall Street, um, and they were sort of the ones, actually one of them was my old squadron, my squadron.101 at the training squadron in Miramar and he was probably the first one that said, hey, you should look into this, you know, I know your timeline, how, how it is and what you’re going to do. And he got me, uh, involved, you know, looking at business schools, taking the GMAT, and then I actually, uh, followed another classmate of mine, um, actually Joe Feinia, who’s, who’s, um, uh, Navy SEAL is at Golden now he’s the head of one of the head of, head of Jeffrey’s, and, um, he was the one that sort of got me into thinking about Columbia Business School. So a lot of, oh, there’s a lot of, uh,You know, uh, fellowship and and classmate, help in

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that. Yeah, I mean, it’s not only just the Columbia Business, it’s just the, the military and veteran 100% 1st place and how, how you can leverage that to be able to build your career and kind of build your network out. I’d love to hear a little bit more

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about that. Yeah, and no question that. And then on top of that, not just all my classmates, guys that I flew with the fleet were still flying. I’m fortunate enough to stay in touch with them and, you know, they’re still flying pointing those aircraft and sort of tip of the spear kind of stuff. And I get to talk to them, you know, sort of about.Industry and understanding, you know, what the thought process is, what’s sort of what’s next, and uh it’s really helpful to me to to make, you know, sort of my investment decisions, um, talking to them. Yeah,

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like theanecdotal versus like the macro, it’s like it’s aggregate enough of the anecdotal, then you can actually apply that to the trends that you’re seeing. It makes a little bit of sense.

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And on top of that, I would go and visit these companies, for example, this company command up in Connecticut. I, their defense aerospace and defense manufacturing I just bought out last year, butUh, did very well, and we were large owners. Um, they would take me to their facilities and show me some of these like they make these bearings or these, uh, self-lubricating bearings which essentially go on every aircraft. And I said, I would look at and say that was on my F-18. I to use the example, the one they had like in the model was an F-18 nose gear, and I’m like, that was, that was my plan. So it’s very helpful using that. Yeah,

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that’s amazing. Well, listen.We’re gonna take a quick break. By the way, me and Dan, we’re venture capital partners and we’re about to do a pitch competition at a couple of the at Wharton on the 24th, I think of April where we’re gonna give lots of money out. But, uh, you know, part of that, a couple of the competitors will be veterans. So continue that tradition to give them back and what we can do for our brother and sister veterans. So this is Tony, we’re on pause right now. We’re right back, more with Tony Bancroft.All right. Welcome back to Warrior Money. We’re joined by Tony Bancroft. Tony, before we left, you talked about your transition from the Marine Corps to Columbia Business School, uh, and then your role obviously in the private sector. But you are a girl dad. You have 6 kids, 5 are girls. All 3 of us are girl dads, by the way.Awesome. His daughterMara is a handful. She’s, that’s awesome, um, but like, you know, talk to us about and your wife obviously is very successful in her own right, but is it an effect.Family affair, you know, what you do, whether it’s the Army Navy game or whether it’s what you do now for defense in the.

13:09 spk_1

Yes, for sure, we got and, you know, great that you bring that up. We actually, uh, uh, we go to a Navy game every year and everyone when when Army Navy is in Philadelphia, we definitely always go or Giants Stadium, of course, um, we, we definitely go or at MetLife, we go there every, every time, uh, but yeah, my family definitely is a, uh, you know, Marine Corps loving.Military, pro-military Naval Academy family. They, they love, they love the whole thing and my wife’s, you know, very, very into it. And, uh, you know, I think it’s just a great, it’s a great experience. It’s a great environment. It’s very positive. We go to games, you see my daughter sees a midshipman. She wants to be a midshipman. She wants to fly. So it’s, it’s been a very, uh, good, good experience for us.

13:49 spk_0

Yeah, I think every year we host what we call the Army Navy policy conference. So this year it’s gonna be in Baltimore, the Army Navy game this December.So we’re doing it, I believe at Johns Hopkins where we’ll have it. We’re very proud to say that, you know, the Annapolis is the capital of Maryland. The governor of Maryland happens to be an Army veteran, but we won’t go partisan here. But, you know, we like to point that out that it’s running, you know, running a great state. But, you know, you also host two different conferences I saw, right? We always say.And we tell, and we advise young veterans and military families, your network is your net worth, right? Why do you host those two conferences? Tell us about

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that. Um, you know, Mario’s been, uh, Mario Gabelli has been hosting, um, uh, conferences, uh, you know, for, for, for all the investments that he looks at.Uh, you know, where I think we’re on for the auto, the auto industry we’re almost 40 years or 40 plus years. Uh, we have a pump valve on 35 years. Uh, the aerospace one, this is coming up on 30, 31 years, uh, and then I have an Environmental Services and waste coverage, which we just had our 11th 1 last week. So, I, you know, it’s, it’s really how you, um, can, you know, it’s really how you go and you understand the fundamentals of the business. You talk to the CEOs.You see, you, you bounce. I mean, we had our conference on April 3rd right after, you know, so there’s a lot of questions about tariffs and you just got it, you know, just like a little bottom line up front, you, you got how they’re looking at the world right after, you know, T subzero of, of, of, of tariffs and how they’re going to go to, go to market with that. So there’s no reason, there’s no question that’s, that’s the best way to invest.

15:18 spk_2

Yeah, especiallyin a post-COVID era, right? Like when you, prior to COVID, I remember.I’m a professional salesperson. I like, you can go into people’s office before COVID. Like you knew where they were going to be. And I know there’s this return to work. Like I get, I get that they’re trying to do that. But conferences and bringing people together in that capacity really is taking the form of the only way you really engage in person directly with folks. So it’s a really, really goodway to do it.

15:41 spk_1

And you’re seeing that, you know, they talked about COVID now, no one’s ever going to go back to.Uh, business travel, business travel is down, you know, almost, almost completely and it almost all came back. There was a little bit of a mix of, you know, it’s a shift that they have the they got bleacher, you know, er travel. So but it’s back. I mean, people are going to conferences. Our conferences are more, are more attend are more highly attended now than before COVID.

16:04 spk_2

There’s there’s been a whole lot of talk about the tariffs, like a whole whole lot of talk about tariffs andIt’s hard to make sense of all the languages out there. The $1 trillion that came out of the defense spending. But also, how do you, there’s also a promise of future tax cuts that they’ve been talking about as well. Like, so you’ve got massive tariff changes, you’ve got massive defense spending, and now there’s corporate tax cuts. Like how do you position yourself through all that? And and in my mind.Like, how do you navigate increasing defense spending while reducing revenue of the government? It’s a really hard, really hard math to figure out.

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Yeah, you know, I, I look at defense spending as, as capex. That’s, I think that’s the endgame, and I think you really got to look at it as, hey, whatever percent, whatever percent of your GDP or or your or your budget or however you want to drive it.It has to be based on, it’s a structural operational cost of doing business in the free world, right? And, and the US is a driver of that. And uh how, you know, relates to tariffs. Listen, in the end.The defense industry should likely do well, uh, do relatively better than maybe the rest of industrials. Uh, you know, for most of all, most of the industry is domestic, right? So almost all of the sourcing, uh, you know, Boeing had a conference the other week and the CFO was saying that just a commercial business alone.80% of their, their, their sourcing is domestic and on the defense side, 90% is domestic. So all things being equal, it should be relatively insullated from, from tariffs. I know that on, on, on the, you know, there is going to be some fractional amount that is gonna be, they’re, they, they buy aluminum internationally and all that, but you know, all things being equal, you’re probably buying most of these avionics, these landing gear, these engines from.US companies. So, you know, that being said, and the second thing is the US, you’re, if you’re gonna go and want defense, which I think the rest of the world has woken up and realized, we’re the biggest market. I mean, we’re by far the largest market we make most of the weapon systems in the world, and they’re probably gonna come to us, a tariff or no tariff, you’re probably gonna be,

18:07 spk_0

and I think we’re seeing a tariff, even with the tariffs, we’re looking at.You know, arguably, is it like the Treasury Secretary has been like, hey, this is just a negotiation tactic because it’s not just about the tariffs, especially against China, it’s their currency manipulation and how they’re triggering it. So it’s like, how can we get back to fair trade, not necessarily justfree trade,

18:23 spk_1

yeah. And I think, you know, listen, I mean, there’s a lot to be said about that, but I think in the end, uh, you’re going to see, you know, and then on the commercial aerospace side.There’s only 2 suppliers of aircraft, right? And we’re one of them, and there’s a decade-long backlog. Boeing has $5 trillion of, and there’s no one else to go. I mean, people want to fly. The baby boomers have how many trillions of dollars and they all want to fly and see the world.

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Myfavorite part about the work that we get to do is when you actually realize how much dual use goes into this. Like, you think about all the innovations that come from DARPA that have.For the civilian life, people don’t have any sort of idea how, how much better civilian life is because of the capabilities in defense. I

19:03 spk_1

mean that that that theory, you know, keeps being brought up all the, yeah, and that’s where it was driven by. I mean, you, you read all this, all the, all the Apollo books, everyone acknowledges, you know, MIT, you know, the integrated circuit all driven from NASA, NASA requesting funds.For that, I just read the book, uh, uh, the, the, um, the, um, Paltier book, and you know the same thing, all driven from defense spending, all this, all this growth, all this, you know, Silicon Valley, you name it, is all, it’s all defensen Paltier.

19:37 spk_0

I mean, even like, look at Elon Musk, right, my gosh, like again, he had about $2.5 billion in tax breaks for his plants in Texas for the 2500.Dollar, you know, tax break you get for electric vehicles, etc. Uh, so when you look at that, and he says, you know, he’s, he’s more of a, he’s more of a free trade guy than a fair trade, but like, but there’s got to be a balance here moving forward, especially as it relates to the American worker.

20:00 spk_1

I, I can’t agree more and um, yeah, I agree

20:03 spk_2

with that. Yeah, but it’s also interesting like the, the, the space economy is becoming a trillion trillion dollar economy over the next several years, right? And so like.Is that $2.5 billion in tax cuts they’re putting into Texas for SpaceX or whatever? Like, is that, that’s obviously a trade-off between the amount of money you’re putting there to open up a trillion dollars dollar economy in space. Like that’s, that’s really the math at the macro level with that we’rethinking.

20:25 spk_1

I mean, there’s so much, there’s so many opportunities. I mean, just, just Starlink itself, just thinking about the, you know, the, the, the, the, the addressable market.There is, you know, it’s just, it’s sort of mind blowing if you actually put some numbers on it, it’s impressive.

20:36 spk_0

Yeah,you know. So, obviously there’s Yahoo Finance, largest business platform in the world. So we, we have a lot of C Suite executives that, that watch our show. There’s also a lot of transitioning veterans, and every year there’s about 200,000 active troops that become veterans, military spouses. It’s about 24% unemployment rate with military spouses.That’s not, that’s not great. Um, what do you advise young midshipmen, young marines, young sailors that are getting out of the military, what they should donext?

21:02 spk_1

Yeah, you know, I, I think, you know, if you come to the, the, the, the, the, the, the, the fork in the road where you’ve decided it’s time for me to, uh, you know, pull chalks and go into the, into, uh, Civ div, I think the first thing you need to tell yourself is, is you, you have a ton of value. The leadership skills you’ve learned in the military.You’re just, we, we inherently, I don’t know why as people in the military, we undervalue ourselves, and I just, I just, I think the younger, I wish I would tell a younger myself that I have, you have a lot of value and I cause you’re, you’re, you’re, you question yourself, you’re getting out, you know the whole world, and then the next phase is a lot of unknowns and just rely on the skills that you had and you know, go, I think go back and get schooling, you know, get, get, get, get schooled in, in the next phase of what you’re gonna be doing. But uh people say, hey,I can lock you in a room and you will solve that problem. That’s a skill that, uh, it’s, it’s, it’s hard. It’s rare. It’s hard to find and they, they can find it in the military. That’d be my biggest piece of it.

22:02 spk_0

All right, Dan,

22:04 spk_2

before we let you go, we have work, Q and A. It’s a couple of rapid fire questions. First one is, it’s my favorite question we ask everybody, what is one thing you know about money now that you wish you knew when you wereyounger?

22:13 spk_1

You know, I fully didn’t, I didn’t appreciate the, I just didn’t read enough and, and, you know, Warren Buffett, you know, compounded interest that was.it’s just like it’s so, it’s so, it’s so important, so critical and everything, you know, just starting early and, you know, just understand that concept and I try to teach my kids that it’s hard, you know, it’s it’s it’s a big boy skill, it’s an adult skill, but, um, I wish I would have learned that a long time ago. We appreciate you, brother. Oh, thank you. Thanks, Jen. It was awesome. Great to be here.

22:40 spk_0

Well, that’s gonna wrap up our show, so listen, subscribe, and review Warrior Money on Apple Podcasts, wherever your podcasts, or frankly, finance on Yahoo Finance. I’m Patrick

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Murphy and I’m Dan Coons. We’ll see you again next week.

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This content was not intended to be financial advice and should not be used as a substitute for professional financial services.