Last Thursday, North Korea fired a missile over Japan. Three days later, its leaders claimed it successfully detonated a hydrogen bomb.
The media went into full-panic mode with headlines like:
“North Korea a ‘Global Threat,’ Says IAEA Chief After Latest Test” (CNN)
“U.S. Says North Korea is ‘Begging for War'” (NPR)
But the stock market doesn’t seem to share the media’s alarm about the threat of nuclear war.
As test missiles fly and rhetoric heats up between President Trump and North Korean leader Kim Jong Un, the U.S. stock market continues to march upward.
History shows us this isn’t unique…
During the Cuban Missile Crisis, the stock market went down a little after Kennedy’s public announcement of the standoff… but quickly recovered, then rose sharply after its resolution.
And the Cold War that ran from the 1950s through the 1980s saw some of the greatest bull markets of all time…
Looking at the North Korean situation, we’re increasingly confident that we’re at the peak of tensions… not the beginning of a global war.
Some Western news stories portrayed Kim as a madman. But his activities over the past few months have been coldly rational – a near-perfect path to ensure the survival of his regime.
Kim saw the removal of leaders like Saddam Hussein in Iraq and Muammar Gaddafi in Libya and decided that he needed nuclear weapons as a deterrent. He ignored threats from the U.S., thanks to backing from China and the ability to attack South Korea’s capital with conventional weapons.
Then he pushed the U.S. right up to the line to see how far he could go – threatening an attack outside Guam. But he backed off before actually launching missiles. That would have come too close to a possible retaliation from the U.S. and would damage North Korea’s relationship with China.
He’s toed the line further with his launch of a test missile that soared over Japan and a recent test of what’s believed to be a hydrogen bomb.
This isn’t a suicidal pursuit toward world domination… It’s realist politics. Kim used the levers of power he had to protect his regime and ensure his survival… and likely stimulated his own country’s internal economy to produce weaponry.
We don’t think we’re on the brink of nuclear war. Kim’s likely to continue to act rational. If he knew his hydrogen bomb was only weeks away, he’d probably complete that for maximum negotiating power. Basically, he’s going to prove he’s got an American city in its sights before coming to the table.
He’ll want more leverage for negotiating when we get to that point.
According to the wisdom of the financial market, the risks of nuclear war are extraordinarily remote… and not worth financially planning for, especially given the likely state of the world if it happens.
I recently detailed the chances of nuclear war – and how to profit from the fear – in a recent issue of my trading service, Retirement Trader. Click here to learn more.
What We’re Reading…
- Something different: Where do all those books come from in restaurant libraries?
Here’s to our health, wealth, and a great retirement,
Dr. David Eifrig and the Retirement Millionaire Daily Research Team
September 6, 2017