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Korea

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odysseus2000
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Korea

#46086

Postby odysseus2000 » April 15th, 2017, 6:14 pm

The are numerous & wild media reports circulating regarding the potential for another Korean War.

It is difficult for me to see how North Korea could survive a war, so logically they would not wish to start one, but who knows what is in the minds of the North Korean military.

This then translates into market uncertainty & the potential for volatility even if nothing happens.

If we consider the worst case scenario, we would probably have North Korea hit Seoul, Tokyo & the USA plus any other US allies on their list. This would only be possible if US anti missile systems fail as might happen if the fleet of North Korean Balistic missile subs is able to escape destruction long enough to fire & the launch stage anti missiles plus the defence stage interceptors all fail. Possible if not probable.

If any of this happens markets will tank.

The best case military scenario would be US & allies take out all of North Korea's ground & sub-missiles & then threaten to obliterate the North if it does not surrender, meanwhile having had agents assassinate major North Korean politicians.

If this happened quickly one would expect markets to rally, if it happens after markets have already sold off a very big rally would likely happen.

Perhaps more probable is a stand off adding uncertainty to the markets & likely causing gold to rise while equities fall, rally a little, fall further, rinse & repeat.

The big unknown here is Trump. Is this all brinkmanship to make the North abandon its planned nuclear tests or does he mean to have regime change?

Should the military return to the Obama, strategic patience game, the odds on a rally increase.

Kind of makes me feel that having high levels of cash plus some gold is not too bad a position.

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Re: Korea

#46088

Postby Snorvey » April 15th, 2017, 6:21 pm

Don't markets go down before the shooting starts and then rise when hostilities break out?

N. Korea will do nothing though. They know that they will be destroyed in a day.

odysseus2000
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Re: Korea

#46090

Postby odysseus2000 » April 15th, 2017, 6:38 pm

Snorvey

Don't markets go down before the shooting starts and then rise when hostilities break out?


Yes, this was the pattern in the Gulf wars, so if markets are open & first reports show overwhelming US victory then probable.

But if things go wrong, S Korea & Tokyo etc get hit, land forces get bogged down, China comes in on N. Korea's side...then the Gulf war template will likely not hold.

I have no idea about the probabilities of any of this, but think this has some probability to go bad quickly, although for now the do nothing option still seems most probable, but that can change in a tweet.

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Re: Korea

#46125

Postby odysseus2000 » April 16th, 2017, 12:50 am

Perhaps the most useful precident for any military action by the US is the way Bush built up a concensus before he launched Gulf War 1. Trump has been all about the US doing something, preferably with China, then in later tweets with allies.

Thinking of the logistics, it took 59 cruise missiles to disable one Syrian air base, so if things are to stay conventional, then it would take many thousands of equivalent strikes to disable North Korea. Could one task force, plus US arms in South Korea & Japan do this or would there need to be a build up of naval power and meanwhile debate in the UN etc etc.

It could be that the Pentagon have enough agents in North Korea that they believe they can precipitate a coup supported via a limited attack. Don't know, but seems unlikely to me.

Another option is that the US believes the North is planning pre-emptive strikes & they are positioning to make this a dangerous option for North Korea.

Meanwhile what is China doing?

We have got to this position quickly, first was the Syrian airbase attack, then the large bomb in Afghanistan & now this. Kind of makes me feel the chance of either side strarting something is a lot less than many media streams are suggesting, but the rub is that if anything happens it will have serious consequences for the markets & could get out of control quickly. Alternatively if nothing happens and the media get bored with the story will markets rally? The bears even with this backdrop have not been able to pull the markets down much, such that being short here looks prone to be hit by a need to cover rally.

Dunno, too many unknowns & too much media. Would like to ignore it, but suspect this will dominate all macro stuff for a while. On Thursday we had good numbers from JPM, then on news of the Afghanistan bomb, JPM gave up its gains.

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Re: Korea

#46137

Postby odysseus2000 » April 16th, 2017, 6:56 am

FredBloggs

Sitting here in Seoul right now and everything is business as usual.


Very comforting to know, good antidote to the headlines in yesterday's uk newspapers. Thank you!

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Re: Korea

#46147

Postby Snorvey » April 16th, 2017, 9:43 am

I read that one Type 45 destroyer can do the work of at least five of the destroyers that went to the Falklands.

Western technology is miles and miles ahead of N. Korean stuff. They can barely get a missile off the ground before it explodes and as for attaching a nuclear warhead to a missile (assuming they actually have such a device), well no, I don't think so.

The goose stepping marching display with all the tanks and the 'submarine launched missiles' might impress the locals, but the reality is that they are just ducks in a row.

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Re: Korea

#46200

Postby odysseus2000 » April 16th, 2017, 4:57 pm

Snorvey:

I read that one Type 45 destroyer can do the work of at least five of the destroyers that went to the Falklands.

Western technology is miles and miles ahead of N. Korean stuff. They can barely get a missile off the ground before it explodes and as for attaching a nuclear warhead to a missile (assuming they actually have such a device), well no, I don't think so.

The goose stepping marching display with all the tanks and the 'submarine launched missiles' might impress the locals, but the reality is that they are just ducks in a row.


Yes, but lets not forget that only a few years back a North Korean sub sank a South Korean navy ship & meanwhile North Korean rockets have put satellites into orbit.

Sure US technology is well ahead, but it was well ahead in the first Korean War & yet it was still a long & bloody war which was not won by the west, only a stalemate was the result of a lot of very bitter fighting.

The US might be able to win a war now, but there could still be unpleasant surprises. Given they have put satellites in orbit, the odds of them being able to launch a nuclear armed rocket are high. Whether such launches could be destroyed is a question I would rather not see answered.

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Re: Korea

#46208

Postby Snorvey » April 16th, 2017, 5:47 pm

I'm not sure that you can compare the Korean war with anything that could happen today. For a start, I doubt the US would put men on the ground in N. Korea, they'd probably leave it to local forces. What the US would supply would be wave after wave of Tomahawks, stealth bombers, carrier lauched airstrikes, attack helicopters and swarms of drones.

It would be done in less than a week - and Kim knows it. He's got nothing. Even if he launches an ICBM successfully, missile defence systems would be online to shoot it down. And then the allies would annihilate him.

His best hope might be a 'dirty bomb' terrorist type attack.....but to what purpose? He'd just be signing his own death warrant.

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Re: Korea

#46216

Postby odysseus2000 » April 16th, 2017, 6:33 pm

Snorvey
I'm not sure that you can compare the Korean war with anything that could happen today. For a start, I doubt the US would put men on the ground in N. Korea, they'd probably leave it to local forces. What the US would supply would be wave after wave of Tomahawks, stealth bombers, carrier lauched airstrikes, attack helicopters and swarms of drones.

It would be done in less than a week - and Kim knows it. He's got nothing. Even if he launches an ICBM successfully, missile defence systems would be online to shoot it down. And then the allies would annihilate him.


Yeah, could be, but I recall similar things being said when the US & Allies invaded Afghanistan.

Sure tech weapons can take out targets very accurately, but this didn't stop the Taliban & after billions of $ the Taliban is still there.

Tomahawks are slow & easy targets even for machine guns, so doubt they will be as effective as many imagine & sat guided weapons can be jammed easily. Killing troops who are well dug in is notoriously difficult from the air & armour is easy pray for hand launched rockets, land mines, even improvised explosive devices as the Taliban showed.

The Korean Peninsula could easily become a long running Vietnam type war with China and/or Russia supplying them with arms, food etc. If in the start they manage to nuke Seoul, Tokyo or similar there would be serious economic consequences plus the political instability of a potential US-China Cold War.

No idea what would happen. North Korea could fold like the Iraq army did and China might not get involved which would be the easiest scenario, but if it was expected to be so easy would not the Obama or earlier US administrations simply have taken them out. Maybe the Pentagon don't think it will be a piece of cake.

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Re: Korea

#46219

Postby tjh290633 » April 16th, 2017, 6:40 pm

The first Korean War my not be a good guide to what might happen, but don't forget that the North had the upper hand in conventional warfare for a long time, although admittedly the Chinese were helping them at that time. Guerilla warfare may be the outcome, and as we know from Mosul, for example, this is not easily handled.

Having done my National Service at that time, when the RAF was training as many pilots as it could manage, I recall the main air combat was between Chinese MIG15s and US and RAF Sabres, with the odd Meteor thrown in. Things are a lot different now, with a lot of ordnance that can be delivered from some distance, rather than the close combat of yore.

Kim is talking about a pre-emptive strike, but what would his target be? Seoul, Tokyo, Beijing? His missile technology is obviously a bit iffy. to say the least. He has a good chance of attacking himself by accident. Is there a chance of a coup? Would anybody in North Korea be able to mount one? Maybe an internal dispute is the best possible option, but how to foment it? Indeed, should anyone from outside even try?

I'm afraid that all we can do is watch and hope.

TJH

Moderator Message:
Can we bring this back to the topic of effect on Global Markets not on who will win a war if there is one. Thanks. Raptor.

odysseus2000
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Re: Korea

#48366

Postby odysseus2000 » April 24th, 2017, 11:37 pm

Interesting how investors and traders forgot all about North Korea.

After the US dropped its biggest conventional bomb in Afghanistan and had a carrier battle group apparently steaming towards Korea things looked a little dangerous. Then it turned out the carrier battle group was heading towards Australia and nothing was being done on Korea and in the meantime a Korean missile test went wrong.

Having cried wolf it will be harder to do it again, although we have no idea what China is doing and if it really had a lot of troops heading towards the North Korean border.

The were many lesson from the first Korean war, one being that the Mig 15 was a lot more capable than expected as many Rolls Royce ideas had been incorporated, but the better training of the US and UK pilots still won out, although TGH who was involved may have a different perspective. The situation now is yet more asymmetric in terms of capabilities to the West and who would win a shooting war will always focus investors minds.

For the markets though Korea is still one of the things that could bring serious falls, although I wonder if the Trump Sabre rattling was designed to have them think twice before doing anything or saying anything.

Gold and cash didn't work out and now the Vix has gone back in a full contango, helped by the election result in France.

So till the next time, Korea has been put away and forgotten about.

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Re: Korea

#48393

Postby odysseus2000 » April 25th, 2017, 9:06 am

It is amazing how fear has gone out of the market as measured by the Vix:

https://mobile.twitter.com/charliebilel ... 4197806081

Hat tip to Scott Redler t3live for link.

Still we had the information from FredBloggs that all was well in Korea well before the Vix collapsed giving plenty of time to short the Vix. Should have put on more size, but I did hold through the spike and I did ok, so Thank You!

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odysseus2000
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Re: Korea

#48429

Postby odysseus2000 » April 25th, 2017, 10:32 am

Most brokers will let you buy the inverse Vix etf, ticker svxy, trading in the US markets, and there are various other etf, or one can directly short the Vix, a lot depends on what your broker allows/provides.

The Vix is often used as an hedge for day trades, but anyone long the Vix going into last weekend got creamed.

Regards,

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Re: Korea

#73468

Postby odysseus2000 » August 10th, 2017, 10:19 am

Kind of bemused & distressed by North Korea.

It is almost like they want to be destroyed.

Who announces they will have a weapon in a few weeks time? Shouldn't they have waited & said we have a weapon when they think they have & anyhow sabre rattling against a much more powerful opponent seems daft.

Dunno, can't quite decide if the markets have decided this isn't real & will ignore it, or will panic. History suggests panic is more likely in the short term, followed by more calculated recovery.

So I have raised cash. Better to be over cautious & feel a fool if markets rally than stay invested & miss the opportunity to buy on a dip in my view.

Regards,

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Re: Korea

#73473

Postby PeterGray » August 10th, 2017, 10:49 am

I haven't done anything myself, but I agree that your move to more cash makes sense.

The situation does seem very worrying and potentially volatile. On one side an apparently paranoid dictator facing someone who, verbally (and tweetily) at least seems to be in the shoot first and think afterwards camp. With any luck there is the chance in the US at least for wiser minds to calm things - though what happens to you in N Korea if you try that? But most certainly worrying. I'm very glad I don't live in or near Korea (N or S).

Peter

odysseus2000
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Re: Korea

#73685

Postby odysseus2000 » August 11th, 2017, 11:54 am

Trying to think about what happens now leaves me with 3 potential scenarios, but open to other ideas:

1 Nothing happens, there is plenty of chatter, but nothing of substance, this suggests weak markets till the realty sinks in followed by a recovery.

2 US follows Gulf War 2 playbook & builds a coalition for military action, suggesting markets sink & shorts are the winners, till eventually investors buy on the start of hostilities.

3 US launches, pre-emptive strike not bothering with UN claiming it has intelligence that North Korea is about to launch. If goes well markets rally strongly, if goes badly markets crater.

Ascribing probabilities to these is not easy & changing by the moment.

1 is the recent playbook, the problem being that appeasing North Korea & sanctions, has made them stronger. Suspect Trump not keen.

2 Suspect Trump rhetoric makes him unwilling to depend on other nations, he is forever talking about putting US first & he now has a direct threat against US base as justification.

3 A scaled up version of how he attacked Syria after nerve gas use. The question here being how long would it take him to establish the necessary force in theatre & whether Pentagon believes North Korea regime change can be done quickly without ground troops. If he is relying on large missile strike this could be done by submarines, navy forces relatively quickly. The problem being that if he tries it & fails this could drag out for a very long time & require a lot of ground troops which would take a while to build.

None of these options look certain to give results the US wants & that likely means weak markets till some clarity emerges. But as things now stand it seems likely that Trump will not want to leave North Korea as a problem for future administrations.

If there is to be a build up of ground forces we should start to see this on the media with ammunition ships putting to sea etc.

Given these scenarios, it seems longs will be under pressure, shorts will do well & likely we will see gold & oil rally.

It is a miserable situation, the culmination of a long term build of North Korean capability despite every attempt to choke it off & alas it seems likely that at some point this is going to end up killing a lot of people.

Regards,

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Re: Korea

#73803

Postby youfoolishboy » August 11th, 2017, 5:34 pm

My reading of the situation is that if NK fires on Guam the US will fire back. They will not invade as China has already signalled they do not want regime change via their newspapers but have said nothing of an attack on NK being off limits, if done in retaliation I would assume not first strike, therefore they would appear to be happy for America to retaliate but not take over the country. China seems to be getting tired of KJU's stupid provocations and total refusal to listen to them and would probably be happy for a bit of bombing to make him realise where his friends are so some bombing by the USA would be win/win for China and the US.
I do not expect however for the NK to fire missiles as I see it all as bluster, before Trump nobody from the US has actually shouted back at them like this and I suspect they will back down as they cannot gain anything by firing missiles at Guam, and probably missing, then being heavily, conventionally, bombed by the US.

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Re: Korea

#73816

Postby odysseus2000 » August 11th, 2017, 7:06 pm

youfoolishboy
My reading of the situation is that if NK fires on Guam the US will fire back. They will not invade as China has already signalled they do not want regime change via their newspapers but have said nothing of an attack on NK being off limits, if done in retaliation I would assume not first strike, therefore they would appear to be happy for America to retaliate but not take over the country. China seems to be getting tired of KJU's stupid provocations and total refusal to listen to them and would probably be happy for a bit of bombing to make him realise where his friends are so some bombing by the USA would be win/win for China and the US.
I do not expect however for the NK to fire missiles as I see it all as bluster, before Trump nobody from the US has actually shouted back at them like this and I suspect they will back down as they cannot gain anything by firing missiles at Guam, and probably missing, then being heavily, conventionally, bombed by the US.



The question that keeps coming back to me is what will South Korea do?

If the US bombs North Korea either pre-emptive or in retaliation would the South then try and re-unite the peninsula, attacking a badly weakened North or would they let North Korea continue on its own way making its own decisions?

Dunno, its all a tinder box waiting to go off. E.g. North Korea decides to do another test, US doesn't believe its a test and/or the test goes wrong and suddenly North Korea is being battered. What does China do? What does South Korea do? What does Putin do?

I begin to wonder if the North feels that after yet more sanctions they will be so weakened as to be easily invaded. If they are thinking like that, do they decide that they have to go now.

Meanwhile there is the history of these kind of situations petering out and markets deciding nothing will happen and rallying strongly. No idea but I am staying light over the weekend as many things could happen and I can't see there is any advantage to taking on risk either long or short here.

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Re: Korea

#73832

Postby youfoolishboy » August 11th, 2017, 8:13 pm

I am doing nothing regards my shares. I am not buying more though and keeping my 10% or so cash ready for an opportunity but then I always have a bit spare for that.
Regards the south they will do nothing. Their current leader is an appeaser he will not turn warlike and invade especially against a well dug in enemy who despite bombing will be too tough to dislodge. If it goes nuclear by mistake then it will be a very limited war China and Russia will not want to start world war over a state that even they keep at arms length.

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Re: Korea

#73837

Postby gryffron » August 11th, 2017, 8:29 pm

odysseus2000 wrote:would the South then try and re-unite the peninsula

No.

It is hard to know whether the forces of a dictator will fight for them or not. They could collapse like Iraq. Or they could fight like fury like Vietnam.

DRK has a vast military. Vast reserves of militarily trained population through past conscription. It could end up a bloodbath, which the South will never actually "win". Eventually dissolving into endless occupation and "terrorist" resistance.
OR
Even if the DRK forces welcome the South with open arms, they then have a rebuilding job on their hands that will make WW2 reconstruction look like an afternoon job. It took the West Germans 10 years to absorb the East. South Korea is nowhere near as rich as Germany, and DRK nowhere near as developed as was DDR.

I doubt either scenario looks very attractive to the people of the South.

Gryff


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