Monday, September 4, 2017

The bullish implications of the North Korean Bomb

In the wake of the news of the latest North Korean news, Donald Trump responded with his usual tweetstorm.

The markets have learned that Trump doesn't necessarily follow up presidential tweets with action. Official statements, on the other hand, are another matter. In the aftermath of the North Korean missile test which overflew Japan, the statement that "all options are on the table" was far more serious and chilling.

After the North Korean H-bomb test, Trump met with his senior advisors and Secretary of Defense released the following statement to the press:
Good afternoon, ladies and gentlemen. We had a small group, a national security meeting today with the president and the vice president, about the latest provocation on the Korean Peninsula. We have many military options. The president wanted to be briefed on each one of them.

We made clear that we have the ability to defend ourselves and our allies, South Korea and Japan, from any attack. And our commitments among the allies are ironclad: Any threat to the United States or its territories, including Guam, or our allies, will be met with a massive military response. A response both effective and overwhelming.

Kim Jong-Un should take heed of the United Nations Security Council's unified voice. All members unanimously agreed on the threat North Korea poses, and they remain unanimous in their commitment to the denuclearization of the Korean Peninsula. Because we are not looking to the total annihilation of a country, namely North Korea. But as I said, we have many options to do so. Thank you very much, ladies and gentlemen.
It was a measured response that made the following points:
  • The United States is not looking to preemptively annihilate North Korea, but
  • Any threat to the US or its allies will be met with "a massive military response".
How should investors react in the face of escalating tensions? Is the world on the brink of nuclear war, or another Korean war?

The full post can be found at our new site here.

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