Trader: ‘And Then I Realized They Weren’t Talking About The Korean’

Oh, good.

Days like Tuesday are the days when everyone is glad that there exists in the world a man called Richard Breslow.

Richard is someone who doesn’t suffer fools gladly and the thing you have to understand is, there are a lot of fools out there and Breslow is aghast that they’re allowed to move money around.

If something notable has happened that’s moved markets you can bet your ass that Richard doesn’t approve of how people are trading it and Tuesday is no exception.

See Richard is “no expert on handling rogue geopolitical provocations,” but he figures he knows just as much about foreign policy as all the avocado-eating “millennials” with their fingers on the button (not that button).

While the following post is certainly a Breslow classic, there are some rather glaring inconsistencies. For instance, he flags the YTD performance of the Kospi as evidence that no one is too worried. But one could pretty easily make the argument that that’s one reason people are concerned. That is, I can certainly imagine less dangerous setups than near-record-high prices for the risk assets of a country where the only thing standing between civilians and an unhinged, nuclear-armed dictator who’s barely older than the millennials Richard mentions is a land-mine-riddled DMZ.

Anyway, read Breslow’s latest below and do note the punchline:

I was taken aback this morning when someone said to me that this was an especially concerning time because of the crazy person in charge. And then I realized they weren’t really thinking about the Korean.

Via Bloomberg

The reaction to the latest poking from North Korea has been very understandable, futile, logical and utterly inconsistent with the facts, however you want to evaluate the situation. I’m no expert on handling rogue geopolitical provocations. But neither are most millennials sitting in trading rooms in late August. So, I’ve been relieved thus far to be, mostly, spared exegeses on how this is necessarily going to play out as we wait around for the core PCE deflator and NFP. Market reaction, and most commentary, at this point, reflect the feeling that traders are supposed to do something in response to the news rather than a useful analysis about what it all means.

• I get the move in gold. But in the context of the tail risk involved here, the move has been minuscule. It looks more like momentum traders chasing the break of the triple top just under $1300 than a serious flight to safety. This just doesn’t show panic
• Which brings us to the question of what is a safe haven when we’re talking about really scary stuff rather than some passing distraction? Yes, the Swiss franc went up. But so did the MSCI Asia ex-Japan currency index. Not what you would expect if trade is under imminent and lethal threat
• Bond yields tanked, but the KOSPI slipped a mere 0.25%. Quantitative models won’t “see” the intraday swings just the day-over-day change. And the index remains up over 16% YTD, which keeps it in a pretty elite and enviable group
• North Korea may be the powder keg, but what happens between the U.S. and China is what needs to be watched. America isn’t at risk of going to war with the Hermit Kingdom. The question there is whether they choose to commit suicide or not. Meanwhile, their next door neighbor’s Shanghai composite is flying, as is the renminbi
• This is all pretext for issues such as the South China Sea, freedom of navigation and tariffs, which the markets have been ignoring all along. It’s a bitter irony that it takes Kim Jong Un to remind traders that carry trades aren’t endlessly risk-free
• The truth, as we all know, is situations like this can’t be adequately priced before the fact. And investors have pretty much given up trying. That they do at your own risk. I was taken aback this morning when someone said to me that this was an especially concerning time because of the crazy person in charge. And then I realized they weren’t really thinking about the Korean