Peace Breaks Out On The Korean Peninsula
news.sky.com
After 65 years of an armistice (signed July 27, 1953) the Korean War looks like it maybe heading to its conclusion with a full peace treaty … that is, of course, if the they and the other parties to the armistice, China and the United States, can come to terms. The optics of the historical meeting between South Korean President Moon Jae-In and KimJong-Un at Panmunjom in the demilitarized zone between North and South Korea give me hope, hope that this may represent the cooling of the perennial Asian geopolitical hot spot and a return to normalcy on the Korean Peninsula. This would represent a major positive and a major departure from the from the status quo.
The Market Doesn’t Care
The market’s reaction to this extraordinary thaw in relations is zero. As I sit here writing this post an hour before the close on Friday, April 27, we are virtually unchanged on the day. Several months ago the market swung violently as the Twitter war between President Trump and Supreme Leader Kim flared in the wake of renewed North Korean missile and nuclear testing. Ostensibly the reason given by North Korea for resumption of its testing was fear that the South and the United States were continuing to plan and prepare to attack the North. These new peace overtures seem to dispel that eminent threat. So I think this is a big deal, and certainly in the best interest of both Koreas and the world.
“Dirty Harry” Diplomacy
Clint Eastwood, as rogue San Francisco police inspector, “Dirty” Harry Callahan, is a very scary guy. He is steely-eyed and clearly does not mind killing people. After thwarting a robbery and killing two of the perpetrators he confronts a third wounded, still-armed robber:
“I know what you’re thinking: ‘Did he fire six shots or only five?’ Well, to tell you the truth, in all this excitement, I’ve kinda lost track myself. But being this is a .44 Magnum, the most powerful handgun in the world, and would blow your head clean off, you’ve got to ask yourself one question: ‘Do I feel lucky?’ Well, do you, punk?”
The felon decides to drop his weapon.
After the Trump Tweet barrage earlier this year (“Little Rocket Man,” “North Korea best not make any more threats to the United States, they will be met by fire and fury like the world has never seen,” or “my button [i.e. 44 magnum] is bigger than yours.”) China, North Korea’s patron saint, may have said this guy (President Trump) may actually be crazy enough to do something militarily against the Kim regime. Ergo, China may have told Kim, we don’t need this aggravation any more on our southern border … cool it! Obviously this is pure speculation on my part but it certainly seems a possibility.
Of course much can happen to unravel this new era of good feeling, including future presidential tweeting. For now it appears to be a great step in the right direction and I give credit where credit is due. President Trump may have gotten this one right. I don’t care if it was by accident or shrewd intent, things appear to be moving in the right direction on the Korean Peninsula. The media, general and otherwise met this news with great skepticism. I think it is an additional geopolitical tailwind that the markets should celebrate, and not by trading flat.
What’s your take?
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Because it doesn’t fit the media narrative with respect to the Trump Administration, ergo the media mentioned it only in passing as it continues its unrelenting and unprecedented attacks on our President. But your identifying it as a signal event and one that the market should assign more weight to is spot on.
David, thank you for your comment. I know that you are relatively new as a subscriber to kortsessions. I am not a big fan of Donald Trump. I do believe, however, that we should give credit where credit may be due. And it really does look like his approach (as reckless as I felt it was) has really moved the ball down the field. My preference would have been that his tough talk might have been delivered through diplomatic channels. Then again “Dirty Harry” diplomacy probably is better served up via tweet storms.
Where I find fault with the media, especially the financial media, is that they would go to DEFCON 1 on the fear and negativity scale when the war of rhetoric was at its peak and now that we made a major move forward in a positive direction, they don’t seem to care.
My blog tends to confront the media on it’s overreactions and misinformation as thet pertain to the financial markets and attempts to give much-needed perspective. One of the biggest problems is that these are commercial enterprises and bad news sells. They want to get your eyeballs attached to the boob tube and keep them there. It’s not so much about getting the story right. It’s about getting your attention.The greater the negativity, the greater the fear the better they like it. This is not only a feature of the financial media but every Form of media in the United States. The political media is especially dangerous because they really aren’t presenting news, but rather opinion about the news. Between the two many investors have a very tough time navigating the market. This is where I try to help out. Thank you for your readership.
Bill Kort
Both of you may be premature here. Certainly if denuclearization is achieved it doesn’t matter what the press writes. History will record this as potentially the single greatest accomplishment of Trump’s term as president. That said, I (and perhaps the media) have serious reservations about just what Un means when he suggests a willingness to to take “nukes” out of Korea. He (Un) has been alive long enough to see what happens to strongmen dictators when their power is curtailed. No proof, no data, but it seems to me far more likely that what he is suggesting is no additional weapons in N. Korea. If he has demonstrated that he already has “nukes” and technology to deliver them to the U.S. what would the U.S. be willing to do in return for no NEW “nukes”? Given the failure of all parties in this situation to keep their word in earlier negotiations, my guess is that the U.S. would be prepared to virtually nothing and certainly not enough to please Un. I’m suggesting that the lack of a stock market response is best explained as currently very premature to expect any achievement, except perhaps increased communication and travel between the two Koreas.
Marty I appreciate your skepticism based on past history. It is warranted. What I am suggesting is that an atmosphere that horrified a lot of people six months ago (and caused significant market weakness) is lifting, at least for a while. On top of that we have seen images never seen before of a north and south Korean leader embracing on the DMZ. I think this is an important marker between the north and south and may represent a real thaw in their relationship. For the market now to give it to short shrift makes absolutely no sense. Again, I see the hand of China having a significant role in this. They have a lot to lose if a nuclear or conventional war breaks out on the Korean Peninsula. I may be wrong but I do not feel you can just blow this off as a publicity stunt or diversion. At worst it represents a significant de-escalation and at best it may be a breakthrough. Just because Donald Trump may have had a hand in this process (“Do you Feel Lucky, …”) does that mean it doomed to failure.
So for now I will say a real peace is definitely not a fait accompli but I am hopeful that the de-escalation at the least may hold.
Bk