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War in Korea
Antonio VIvaldi
Posted: 12 October 2017 17:48:30(UTC)
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Last month, the very knowledgeable think tank RUSI published a report saying that the chances of a war between N.Korea and the US were very high, and the effects of such a war would be devastating, even if it were non-nuclear. So, why is the world investment community so studiously ignoring this possibility? Are all those very highly paid people with MBAs just keeping their fingers crossed?
Antonio VIvaldi
Posted: 12 October 2017 17:50:53(UTC)
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Apologies for the double post.
Jay Mi
Posted: 12 October 2017 18:05:13(UTC)
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Some thinktanks get things wrong. Others get things right. If I did everything a thinktank said I wouldn’t be doing anything as different thinktnaks say oposite things.
Korea rumbles on for a while, then it rumbles off. I can’t be cautious forever and keep waiting for something to happen. If I worried, panicked or sold off over everything that potentially could cause a downturn, I’d forever be in cash and miss out on any gains /(losses).
I’d rather take my chances, stay invested and keep dripping money in.
2 users thanked Jay Mi for this post.
Keith Cobby on 12/10/2017(UTC), Tim D on 18/10/2017(UTC)
King Lodos
Posted: 12 October 2017 18:15:47(UTC)
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A chart on how stocks behaved through various calamities:

https://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/charts/2017/08/1502291660_events.jpg

Markets get jittery, and often sell-off on uncertainty .. But on the whole I wouldn't say war's terribly bad for stocks .. You'd have made good returns through WW1 and WW2 (albeit a little volatile).

I suspect if half the market did decide to sell-off on fears of war, the other half would happily be buying .. Stocks are good defence against inflation, and a sell-off now would likely be seen as an opportunity
11 users thanked King Lodos for this post.
Tim D on 12/10/2017(UTC), Keith Cobby on 12/10/2017(UTC), Chris Howland on 12/10/2017(UTC), Will Morris on 12/10/2017(UTC), Mickey on 12/10/2017(UTC), Dian on 14/10/2017(UTC), john brace on 14/10/2017(UTC), Cyrus Zaydan on 14/10/2017(UTC), Abstract Artist on 17/10/2017(UTC), Mike L on 18/10/2017(UTC), wydffart on 19/10/2017(UTC)
Sara G
Posted: 12 October 2017 18:18:09(UTC)
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I'm keeping my fingers crossed too, but also thinking long term and holding a significant weighting in cash and gold to hedge my bets (not only on N Korea) and suspect many others are too. It isn't that investors are ignoring the possibility, but there are risks associated with being over-cautious.
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King Lodos on 12/10/2017(UTC)
Hank Elvis Dobbs (texan)
Posted: 12 October 2017 18:30:38(UTC)
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Greggs are doing a pasty drop TMR ...that should sort it
Keith Cobby
Posted: 12 October 2017 19:43:22(UTC)
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It's a known/unknown (thanks Don). Of course North Korea and its leaders would be obliterated after firing one round and so I doubt the current leader would want to lose his country and his life.

If you worry about events you wouldn't invest. An asteroid is passing close by today and there may be a big one we don't know about lurking nearby. So always plenty to worry about.

I shall remain 100% invested as usual.
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Sara G on 12/10/2017(UTC), Hank Elvis Dobbs (texan) on 12/10/2017(UTC), Mickey on 12/10/2017(UTC), Dian on 14/10/2017(UTC), Abstract Artist on 17/10/2017(UTC)
Antonio VIvaldi
Posted: 12 October 2017 19:51:02(UTC)
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I suggest people digest the possibility of the complete destruction of Seoul (and therefore a large chunk of S.Korean economc activity) and the inevitable huge disruption of the economies of China, Japan and Taiwan, not to mention the ripple effects across the rest of South East Asia and the Pacific. Then chuck in the idea of "nuclear" war as well.
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Mickey on 12/10/2017(UTC)
Jay Mi
Posted: 12 October 2017 20:03:43(UTC)
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Antonio VIvaldi;51913 wrote:
I suggest people digest the possibility of the complete destruction of Seoul (and therefore a large chunk of S.Korean economc activity) and the inevitable huge disruption of the economies of China, Japan and Taiwan, not to mention the ripple effects across the rest of South East Asia and the Pacific. Then chuck in the idea of "nuclear" war as well.


The possibility...
Other possibilities include, volcanoes wiping out large economic areas, earthquakes, tsunamis, nuclear power station leaks etc.

It’s a possibility, if it happened just like a nuclear war, not ideal, but I can’t worry about situations which may or may not happen.

If a war with Korea did happen and was nuclear I wouldn’t be prepared for it, but that’s a chance I’ll take and something I have no control over happening.
Hank Elvis Dobbs (texan)
Posted: 12 October 2017 20:12:23(UTC)
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Antonio VIvaldi;51913 wrote:
I suggest people digest the possibility of the complete destruction of Seoul (and therefore a large chunk of S.Korean economc activity) and the inevitable huge disruption of the economies of China, Japan and Taiwan, not to mention the ripple effects across the rest of South East Asia and the Pacific. Then chuck in the idea of "nuclear" war as well.


You written a load of index call's..?....Have you tried relaxation tapes..?

..I don't think your cut out for the stockmarket son.
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Guest on 14/10/2017(UTC)
Dian
Posted: 14 October 2017 00:53:33(UTC)
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King Lodos;51904 wrote:
A chart on how stocks behaved through various calamities:

https://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/charts/2017/08/1502291660_events.jpg

Markets get jittery, and often sell-off on uncertainty .. But on the whole I wouldn't say war's terribly bad for stocks .. You'd have made good returns through WW1 and WW2 (albeit a little volatile).

I suspect if half the market did decide to sell-off on fears of war, the other half would happily be buying .. Stocks are good defence against inflation, and a sell-off now would likely be seen as an opportunity


Collapse of Bearn Stearns was severe. After 250 days S&P 500 had dropped nearly 41% where as Germany’s France invasion had dropped only 19.6%. After 250 days there had been gain in S & P 500 in events like Brexit, Pearl harbour, Iraq war and JFK assassinated.

Those who experienced Second World War never want to see another war. Under at any cost all types of wars should be stopped through out the world.

During period of war uncertainty sectors like transportation and some consumer staples (food and medicine) are more likely to thrive in the short run. Military contractors are not likely to benefit much from a short war because such a conflict would not increase their revenue in big margin.
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Mickey on 14/10/2017(UTC)
King Lodos
Posted: 14 October 2017 01:57:04(UTC)
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Dian;51952 wrote:
Those who experienced Second World War never want to see another war. Under at any cost all types of wars should be stopped through out the world.

During period of war uncertainty sectors like transportation and some consumer staples (food and medicine) are more likely to thrive in the short run. Military contractors are not likely to benefit much from a short war because such a conflict would not increase their revenue in big margin.


But you know, statistically, people are generally happier during wartimes .. We're not really built for the level of safety and security we have today.

Plus war is one of the best ways to deal with debt – we get monster inflation, and we get to tear up a load of government debt.

So what me and my friends at the Illuminati will sometimes do is orchestrate a war, because if we didn't, the economic turmoil or stagnation from insurmountable debt would likely be much more damaging
Micawber
Posted: 14 October 2017 06:40:18(UTC)
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It's not about binary 'predictions' and wearisome clichés about nobody knowing the future, but about a reasoned assessment of probabilities.

It is reasonable to say that the probability of military action in Korea has increased over the past year. "Military action' encompasses a range of actions each with different assessments. Unless you have extremely sensitive intelligence material at your disposal, you're not really in a position to make them. RUSI is better informed than most public institutions but does not get such material.

But you can try to apply the overall probability increase to weighting in your pf compared with your earlier position when the probabilities were less. E.g. reduce somewhat in Korea, Japan. Maybe increase in US defence sector, etc.

Are markets "shrugging it off" or do we see that those now more at risk have indeed done less well than others or less well than earlier expected? I don't know - but I for one have reduced exposure to Japan somewhat, have minimal exposure to S Korea except via a tech trust, have not further increased in China and have favoured India and Blackrock frontiers for adventure beyond US and EU.

3 users thanked Micawber for this post.
Mickey on 14/10/2017(UTC), Sara G on 14/10/2017(UTC), Mike L on 18/10/2017(UTC)
colin overton
Posted: 14 October 2017 12:00:08(UTC)
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I've owned Baring Korea in the past for a long time. I sold it completely for no great reason - it seemed to be going nowhere. However as a one country UT there were always ups and downs, so I perhaps traded it rather than invested. On reading this topic I looked at it again. there is certainly no evidence of a Korean sell off at the moment. I was surprised, particularly as the management of Samsung made the news again this week.
King Lodos
Posted: 14 October 2017 12:31:47(UTC)
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I'm in Baring Korea as a long-time value investment – I'd say it's an easy decision for a small investment .. Say 1% of your portfolio .. Maximum loss is very limited; maximum upside is unlimited.

Two metrics I like: average PE 10, PEG ratio about 0.5 .. And you get Samsung, which is surprising the market and on track to beat Apple's profits in 2017.

I think Korea's extremely cheap (the 'Korean discount') given the education system, tech infrastructure, the Korean people .. I'm not normally an optimist, but I'd put the likelihood of Korean unification far above war .. And with valuations the real problem across all markets today, in some ways Russia and Korea are the things I feel least nervous about (at least you know there is decent upside).
Stephen B.
Posted: 14 October 2017 13:58:40(UTC)
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I'd agree with the general points made - war with North Korea would be bad for all sorts of reasons, but the economic impact on most of the world would be fairly small, no more than many other possible risks.

By the way, as I understand it we can mostly cross asteroid strikes off the list of catastrophic risks, they have now all been mapped down to a reasonably small size. That still leaves things which could destroy a city, but that's doubly improbable since the vast majority of the Earth's surface is not heavily populated. For that scale of risk I think a California earthquake would be at the top of my list.
King Lodos
Posted: 14 October 2017 15:23:51(UTC)
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I believe a large proportion of near-earth objects aren't tracked .. There are at least a million untracked asteroids.

I'd still see anything short of a near-extinction event as neutral for stocks, and not necessarily good for cash – and bonds, I suppose it depends where they hit.

The biggest financial risk for me would be the derivatives bubble – because it's so unquantifiable .. Derivatives are sort of like betting slips banks can issue .. Which I suppose makes them a form of debt, which makes them a weird form of money .. And banks have been able to create as much of this as they want – and no one knows how much exists, but some estimate it's over $700 trillion (10x the size of the global economy) .. What kind of chaos this could unleash, I don't think anyone knows .. But I think at the very least banks and financial services would be in big trouble .. Hedge fund traders, who are around this world a lot, tend to keep a lot of their wealth in real assets (property, cars, gold, art, etc)
Stephen B.
Posted: 14 October 2017 15:40:18(UTC)
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There's more or less an infinite number of things that aren't tracked, but they're small - bigger objects are fewer in number and easier to see, so it's possible to identify everything above some size, and that size is continuously reducing.
King Lodos
Posted: 14 October 2017 16:15:01(UTC)
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We're certainly getting there .. But then there are space events that can wipe out life (and likely have done in the past) that we couldn't see before they reached us – such as a gamma-ray burst.

That could blast the atmosphere into space like a Tibetan sand mandala left out in a hurricane.

Sufficiently large solar flare could wipe out all our electronics and take us back to cooking on open fires and using horse-drawn transport .. Presumably what's left of the economy would be bartering with apples and gold coins
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Abstract Artist on 17/10/2017(UTC)
JohnW
Posted: 14 October 2017 17:50:15(UTC)
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Korea has been in a state of war since 1950. During that time the situation has ramped up several times. Will it amount to anything this time? Who knows? Certainly not the think tanks.

John
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JohnR on 15/10/2017(UTC)
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