“…game theory suggests that the North Korean leadership has a strong incentive to bring forward the final phase of the Game of Chicken.”
She packed my bags last night pre-flight;
Zero hour nine AM;
And I’m gonna be high as a kite by then…
Kim Jong-Un looks like he’s losing his ability to move markets.
It’s all green screens out there early on as the relief rally gathered steam in the overnight. Bottom line: Hurricane Irma wasn’t as catastrophic as feared and North Korea decided maybe it wasn’t a fantastic idea to launch another missile ahead of a new sanctions vote in the Security Council where it still enjoys the…
As noted late last week, things would look quite different on Monday, one way or another.
“The recent self-defense measures by my country, DPRK, are a gift package addressed to none other than the U.S. The U.S. will receive more ‘gift packages’ from my country as long as its relies on reckless provocations and futile attempts to put pressure on the DPRK.”
The bottom line is that between another powerful hurricane approaching the U.S. mainland, U.S. markets catching up with their global counterparts in terms of pricing in North Korea after the long weekend, the DACA decision which portends more bickering in Washington, and the looming debt ceiling debate (with the specter of a technical default showing up in today’s decidedly poor 4-week bill auction), it was death by a thousand cuts.
Ok, so following the latest news out of the Korean peninsula, where Kim is apparently using the cover of darkness to move an ICBM fitted to a wheelbarrow to a launch site in preparation for another provocation ahead of (or on) founding day, South Korean shares fell again.
So that’s all fine and good, but the thing is (and we’ve been warning about this for months), you’ve gotta wonder about an equity market that’s seen an avalanche of YTD inflows and until recently was sitting near record highs when, at least by proximity, the country it represents is the most dangerous place on earth (hyperbolic, but you get the idea).
“Though considered a tail risk, a military confrontation on the Korean peninsula could see Asian currencies falling 5% to 10% and the region’s equities plunging 20%,” UBS Wealth Management Global CIO Mark Haefele and head of Asia Pacific investment Min Lan Tan write in a new note.
The oil issue has been contentious for its potential to spark a humanitarian crisis. “Eyes are on whether countries will push for an oil embargo on North Korea, which in the past, has served as a trigger for physical conflict,” Takahashi adds.
“I think that the risk of a nuclear weapon being used somewhere in the world today is higher than it has been in a very very long time, arguably going back to the Cuban Missile crisis.”
So for all the talk of how risk assets have largely ignored the threat of nuclear war, we would note that not everything was in fact immune…
Ok, so if you were going to make a list of things that Donald Trump should definitely not do right now, “start trade war with South Korea” would probably be somewhere close the top. You know, maybe right below “nuke North Korea” and right above “shut down the government until Congress funds the border wall.”…
Spoiler alert: the picture is not pretty.
