Pub Talk
Pfäffikon SZ, Switzerland – Over the last week, the markets moved more than we are used to in recent months. An altercation between the leaders of North Korea and the US increased the flight to safe havens. The question is whether the war rhetoric has been taken seriously or that it is like pub talk.
Selling Pressure
For the first time in months, investors experienced selling pressure on the global stock markets. The stock market volatility is still limited, even though the writing press is all fire and brimstone. The recent sales pressure is –for the moment– weakness without giving anxiety. Despite extreme overvaluations based on our calculations (CAPEX), the market behaves remarkably healthy. Nonetheless, the market already requires extra monitoring for years, although all signals are apparently green. This is caused by the point of the cycle in which we find ourselves, combined with overvaluation. No investor who seems to worry.
Fire and Fury
The question is whether the “fire and fury” threat of Trump impresses in Pyongyang. Additionally, Kim Jong Un is not at all waiting for a conflict with the US. North Korea has enough examples of how ruling regimes like Iraq have been knocked down. Alos, the US knows well that overthrowing regimes did not result in the desired goal last decades.
But what then drives Kim Jong Un? The answer is simple. The leader of North Korea wants to be equated with the world’s most powerful president; Donald Trump. It is Kim Jong Un’s main reason to act like this. Also, it frightens the inhabitants in his country, and he stays internationally on the radar. The risk of a serious conflict is limited. North Korea is completely dependent on China and will not want to go against the grain. The recent war rhetoric can be considered as pub talk.
It remains for me to wish you a good weekend.
Jan Dwarshuis is CIO at Thirteen Asset Management AG. Dwarshuis writes his columns in a personal capacity. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in above mentioned shares and has no intention of doing so in the next 72 hours.
