Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Can North Korean Nukes Rattle Global Stock & Financial Markets?

Stock-Markets / North Korea May 27, 2009 - 02:44 PM GMT

By: Gary_Dorsch

Stock-Markets

Diamond Rated - Best Financial Markets Analysis ArticleNews that North Korea’s mercurial leader Kim Jong Il authorized the detonation of a nuclear bomb on May 25th, comparable to those that obliterated Hiroshima and Nagasaki, barely caused a ripple in the global financial markets. Japanese and South Korean stocks initially fell in a knee-jerk reaction, but soon recouped most of their losses, as traders shrugged off the nuclear fallout, - figuring it was just a harmless display of Kim Jong Il’s temper tantrums that erupts once every few years.


When foreign markets failed to take Pyongyang seriously, Kim Jong Il upped the ante by firing the Musudan-Ri missile, on which N-Korea could ultimately place a nuclear warhead, with a range of 2,500-miles. Pyongyang then fired three shorter-range missiles into the Sea of Japan. But global stock markets are so intoxicated with super-cheap money injected by the G-20 central banks each day, that even nuclear bomb blasts didn’t rattle the post March 10th “green-shoots” rally.

Pyongyang vowed on May 27th, to attack South Korea if its ships participate in a US-led effort to interdict vessels carrying missiles or weapons of mass destruction. Pyongyang also declared that the truce that ended the Korean War was no longer valid. “Those who provoke North Korea will not be able to escape its unimaginable and merciless punishment,” the North’s official news agency said. Calling South Korea’s government a “group of traitors,” “our revolutionary forces will consider the interdiction of ships as a declaration of war against us.”

North Korea threatened military action against American and South Korean warships in the waters near Korea’s' disputed maritime border, raising the specter of a naval clash just days after Pyongyang’s underground nuclear test. “Now that the South Korean puppets were so ridiculous as to join in the said racket and dare declare a war against compatriots, North Korea is compelled to take a decisive measure. Seoul’s decision comes at a time when the state of military confrontation is growing acute and there is constant danger of military conflict,” the statement warned.

Still, what global traders failed to recognize, is that North Korea and Iran are closely and secretly coordinating their nuclear weapons programs. Most of the missile guidance technology in Iran’s long-range Seijl-2 surface missile, tested by Tehran on May 20th, with its bull’s-eye accuracy, came from Pyongyang. Iran’s Seijl-2 missile test was carried out less than a month after North Korea’s internationally condemned missile test launch on April 5th, and the reopening of its plutonium reactors

Tehran might not be far behind in conducting its own nuclear test. Iranian scientists are regularly invited to attend Pyongyang’s missile and nuclear systems experiments and performance tests in recent years. Not surprisingly, therefore, Iran’s President Mahmoud Ahmadinejad ruled out negotiations with the West on its nuclear program on May 25th, and instead challenged President Barack Obama to a friendly debate at UN headquarters in New York, but added: “Iran’s nuclear issue is closed.”

For Iran’s neighbors in the Middle East, the atomic fireworks display in North Korea proves the West cannot afford to wait much longer, until intelligence agencies confirms Iran’s nuclear capability, because Tehran can surprise the world with an underground atomic test of its own. When that day arrives, crude oil futures could soar above $100 per barrel, lifting grains and precious metals higher for the ride.

Saudi Arabia’s ruling family fears the growing regional power of non-Arab, Shi’ite Iran, which backs Hezbollah guerrillas in Lebanon and Palestinian Islamist factions such as Hamas in Gaza, and has considerable influence in southern Iraq. On May 11th, Israeli PM Benjamin Netanyahu met with Egyptian president Hosni Mubarak at Sharm el Sheikh, to discuss the formation of a united Egyptian-Saudi-Israeli military front, against Iran, blunting Obama’s détente with Tehran.

America’s top military official, Mike Mullen, thinks a nuclear-armed Iran “is one to three years away, depending on where they are right now. But they are moving closer,” he said on May 24th. “The consequences of Iran’s regime acquiring a nuclear weapon would be calamitous for the Middle East region and the entire world. Major Powers must act together to prevent it,” Mullen warned. “It then, in my view, generates neighbors who feel exposed, deficient and then develop or buy the capability themselves. The downside, potentially, is absolutely disastrous,” referring to the likelihood of a nuclear arms-race in the Middle East.

The South Korean Kospi Index is recovering from the global financial crisis, up +40% above its March 3rd lows, while the US-dollar has skidded -30% lower against the Korean-won. The South Korean economy managed to squeak-out a scant +0.1% increase in the January-March period, bucking a -4% plunge in Japan’s economy, and -3.8% plunge in Germany, (if one can trust Seoul’s statistics), after shrinking -5.1% in the previous three months. The Korean Kospi Index is piggybacking the Shanghai red-chip market, which in turn, is inflated by Beijing’s massive fiscal and monetary policies, equal to a combined 32% of China’s entire GDP.

If the Korean Kospi rally should suddenly stumble, and its “green-shoots” begin to wither, it could be due to Pyongyang’s declaration of war. Or warnings by China’s central bank chief Zhou Xiaochuan on May 15th, could take some of the steam out the closely linked markets. “China may fine-tune monetary and fiscal policies as it seeks to minimize the risk of bad loans and fallout from asset bubbles,” Zhou said. On May 26th, China’s central bank drained 80-billion yuan ($11.7-billion) from the money market through repo operations, and a total of 160-billion yuan in central bank bills and repos are due to mature this week.

Nuclear bomb blasts in North Korea, an unrelenting slide in home prices, a record number of home foreclosures, rising gasoline prices, bankruptcy at General Motors, and the growing ranks of the unemployed, couldn’t dampen the bullish enthusiasm on Wall Street, where traders returned from their Memorial Day holiday in a mood to bid-up stocks. On May 26th, the Dow Jones Industrials jumped 196-points to finish at 8,473, keeping its “green-shoots” hopes alive awhile longer.

For a market that prides itself on anticipating the future, six-months ahead, traders were bidding-up stocks on a lagging indicator. A US-consumer confidence index, compiled from a survey of 5,000-households, surged to a reading of 54.9 in May, the biggest monthly jump since April 2003, from as low as 25.0 in March. However, the consumer confidence survey’s results are at odds with economic reality, and instead, are simply tracking the market values of household’s 201k’s. The consumer confidence survey is misleading, and might only lead to trading losses.

Home prices in the top-20 major metropolitan US-cities, (the most critical economic indicator), fell -2.2% on average in March, to stand -32% lower from their peak in August 2006, with no bottom in sight. In April, the inventory of existing homes for sale rose 8.8% to 3.97-million. The housing market could be swamped by a second massive wave of residential foreclosures, and the next big shoe to drop, - widespread defaults in commercial real-estate across the country. Meanwhile, the US-jobless rate is expected to climb to 9.2% of the workforce in May, up from 8.9%, as companies lay off more workers.

The post March 10th “green-shoots” rally on Wall Street has been largely fueled by accounting gimmickry, allowing banks to value their non-performing assets, at vastly inflated prices, and massive money printing by the Fed. The sharp slide in the value of the US-dollar can also boost multi-national income earned in foreign currencies. Furthermore, the sharp slide in US Treasury notes, lifting 10-year yields to as high as 3.52% today, has been downplayed as unwinding of safe-haven bets.

The US Treasury is flooding the market with $162-billion worth of bonds this week, and ultimately, about $2-trillion of fresh debt, or 14% of GDP, will be auctioned-off for the entire fiscal year. For fiscal 2010, the Obama team forecasts the deficit at $1.2-trillion. The Fed intends to monetize at least $300-billion of this year’s debt sales, and might bump that number upwards in the months ahead.

However, a coordinated slide of the US-dollar and slumping US-Treasury notes is now apparent, indicating that a significant exodus of foreign money from the US-debt markets is underway, (contrary to Fed and Treasury propaganda). Earlier today, the Fed bought $6-billion of T-Notes to stabilize the sliding bond market, but at the same time, it’s weakening the US-dollar, and preparing the groundwork for the next big wave of inflation. Within an hour of the Fed’s $6-billion money printing operation, the US Treasury bond market resumed its downward spiral, plunging in a free-fall.

In reaction to the Fed’s QE scheme, Brazil and China are working towards bypassing the US-dollar in bi-lateral trade transactions, challenging the status of the greenback as the world’s leading international currency. “We don’t need dollars,” said Brazilian President Luiz Inacio Lula da Silva. “It’s crazy that the dollar is the reference, and that you give a single country the power to print that currency.”

(An analysis of the longer-term impact on the Dow Jones Industrials and other global stock markets, from a sliding US-dollar and higher Treasury bond yields was presented in the latest edition of Global Money Trends).

While Chinese leaders are disturbed by the Fed’s monetization of the US-Treasury’s debt, Beijing is also playing the same mischievous game, - inflating the Chinese M2 money supply at a 26% annualized rate. All central banks are participating in the money printing orgy, in order to prevent their currencies from rapidly increasing in value against the US-dollar. Saudi Arabia’s M3 money supply is +18.3% higher than a year ago, after the central bank slashed an interest rate to a half-percent.

The Saudi kingdom is now signaling a willingness to see crude oil prices at $80 per barrel, in order to compensate the oil producing kingdoms, for the US-dollar’s loss of purchasing power in Asia and Europe. Oil has already climbed from a low of $32.40 last December to a six-month high above $63 /barrel today. “The price rise is a function of optimism that better things are coming in the future. We see offshoots of recovery,” said Saudi oil chief Ali-al Naimi on May 27th. “There are a lot of positives in what I say, because I am seeing a recovery. Demand is picking up, especially in Asia, Latin America and the Middle East,” he added.

The G-20 central banks are sowing the seeds of double-digit inflation in the years to come, and long-term minded investors are buying precious metals, including gold and silver as a hedge, and other commodities that can’t be printed by central banks. There is no exit strategy from the hallucinogenic drug of QE that can overcome the opposition of the ruling political elite, which are hooked on super-easy money.

However, what would happen if the QE addiction leads to a collapse in G-7 bond prices? “The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” Ernest Hemingway, “Notes on the Next War: A Serious Topical Letter”, 1935.

Moody's Investors Service affirmed its top AAA credit rating for the United States on May 27th, despite mounting debts and the eventual loss of the US-dollar’s reserve status. “The way rating agencies worked, is that they were paid by the people they rated. I saw that from the inside,” said Dallas Fed chief Richard Fischer on May 25th. “I never paid attention to the rating agencies. If you relied on them you got the gory details. Do your own analysis. What is clear is that rating agencies always change something after it is obvious to everyone else,” Fischer concluded.

This article is just the Tip-of-the-Iceberg of what's available in the Global Money Trends newsletter, for insightful analysis and predictions of (1) top stock markets around the world, (2) Commodities such as crude oil, copper, gold, silver, and grains, (3) Foreign currencies (4) Libor interest rates and global bond markets (5) Central banker "Jawboning" and Intervention techniques that move markets.

By Gary Dorsch,
Editor, Global Money Trends newsletter
http://www.sirchartsalot.com

GMT filters important news and information into (1) bullet-point, easy to understand analysis, (2) featuring "Inter-Market Technical Analysis" that visually displays the dynamic inter-relationships between foreign currencies, commodities, interest rates and the stock markets from a dozen key countries around the world. Also included are (3) charts of key economic statistics of foreign countries that move markets.

Subscribers can also listen to bi-weekly Audio Broadcasts, with the latest news on global markets, and view our updated model portfolio 2008. To order a subscription to Global Money Trends, click on the hyperlink below, http://www.sirchartsalot.com/newsletters.php or call toll free to order, Sunday thru Thursday, 8 am to 9 pm EST, and on Friday 8 am to 5 pm, at 866-553-1007. Outside the call 561-367-1007.

Mr Dorsch worked on the trading floor of the Chicago Mercantile Exchange for nine years as the chief Financial Futures Analyst for three clearing firms, Oppenheimer Rouse Futures Inc, GH Miller and Company, and a commodity fund at the LNS Financial Group.
As a transactional broker for Charles Schwab's Global Investment Services department, Mr Dorsch handled thousands of customer trades in 45 stock exchanges around the world, including Australia, Canada, Japan, Hong Kong, the Euro zone, London, Toronto, South Africa, Mexico, and New Zealand, and Canadian oil trusts, ADR's and Exchange Traded Funds.

He wrote a weekly newsletter from 2000 thru September 2005 called, "Foreign Currency Trends" for Charles Schwab's Global Investment department, featuring inter-market technical analysis, to understand the dynamic inter-relationships between the foreign exchange, global bond and stock markets, and key industrial commodities.

Copyright © 2005-2009 SirChartsAlot, Inc. All rights reserved.
Disclaimer: SirChartsAlot.com's analysis and insights are based upon data gathered by it from various sources believed to be reliable, complete and accurate. However, no guarantee is made by SirChartsAlot.com as to the reliability, completeness and accuracy of the data so analyzed. SirChartsAlot.com is in the business of gathering information, analyzing it and disseminating the analysis for informational and educational purposes only. SirChartsAlot.com attempts to analyze trends, not make recommendations. All statements and expressions are the opinion of SirChartsAlot.com and are not meant to be investment advice or solicitation or recommendation to establish market positions. Our opinions are subject to change without notice. SirChartsAlot.com strongly advises readers to conduct thorough research relevant to decisions and verify facts from various independent sources.

Gary Dorsch Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules