Archive for August, 2017

North Korea- considerations

Posted: August 10, 2017 in Uncategorized

The market started to be shaky and gold rallied on the war of words – but overall the reaction has been quite muted.

An example South Korea markets lost 1% (it is the best market this year with a +17%) – and if the war really ensued there will be devastation or ashes – depending on the weapons used.

The market is so forgiving as it thinks that the casualties would be too high and the pressure from South Korea and Japan will stop the US (interestingly enough South Korean are more worried by the US than North Korea).

I am more worried than others as I know history

  • North Korea will never give up its nuclear assets and President Trump will have to attack or lose face – something that he cannot allow right now.
  • Feeling still the scar of Pearl Harbor in Hawaii, Kim announcement that is considering attacking Guam strikes a particular chord with Americans. It would take just 8 minutes for a ballistic missile to reach it.
  • In the Second World War General Macarthur wanted to teach a lesson to the Japanese as he was kicked out. It costed 750,000 lives while it could have been easily bypassed.
  • Both the 1st World War and the Vietnam war escalation were due to misjudgment.


Hopefully I am wrong.

In case of war there are a few things that are different and need to be taken into consideration.

South Korea is the first nation fully integrated in the world system to be attacked – South Korea contributes to 2% of the world GDP and produces 40%  of liquid crystal displays and 17% of semiconductors. As production is now Just in Time – major disruptions will be felt all over the world.

The US Debt is already 75% of GDP – on average a war increases spend by at least 5% (like the second Gulf War).

The North Korean submarine fleet is composed by about 70 subs which could disrupt the Chinese commerce.

Cyber weapons could be used in large scale.

The widespread use of Exchange Traded Funds and AI algorithms would make any initial move exaggerated.

The positive things is that, relative to previous war, the Federal Reserve and various Reserve Banks knows the situation and are fully involved to save the world again if they must.

North Korea; above all fears

Posted: August 9, 2017 in Uncategorized

As my readers knows, North Korea never went away and the most scary US date is after the 1 September – when there is an executive order which vetoes all American to be in North Korea.

But already this week things started to ramp up leading to war.

All started with the UN sanctions, supported by China, that really hit North Korea and could see the North Korean economy collapse within 6 month.

In answer Kim promised revenge.

Then President Trump ordered North Korea to stop threatening the US, otherwise he will unleash powers that the world have never seen before.

A few seconds ago, North Korea issued a statement that is considering a preemptive missile strike on Guam, the US base from where the US nuclear bombers are stationed.

Unfortunately war look more and more unavoidable a pre emptive strike is actually a real choice as after a US strike is hard to respond. Strangely Kim is trying to avoid confrontation (you do not warn others of a pre emptive strike) – but President Trump draw a red line and definitely he does not want to look like President Obama in Syria.

Hopefully North Korea will not have prepared for asymmetric warfare* like the Russians otherwise the sea of fire will become really a sea of fire.

And also Kim said that his issue with the US only – so he will not attack any country unless they support the US. Please Australia don’t go in another mad US war.

*Asymmetric is where you adopt deceiving tactics to confront a superior military enemy – in case of North Korea can be cyberwar, sleepers terrorist cells in the US or even a nuclear bomb packed in a container ship or a submarine in a suicide mission.


Iron Ore rally

Posted: August 8, 2017 in Uncategorized

Iron ore is smashing expectations. Are we in a new Bull Market?

Unfortunately not.

There are two factors now driving the prices

  • There is quite a lot of rebar future trading activity – mainly speculative.
  • A lot of Chinese mills are filling their stock ahead of the winter capacity – curbs sanctioned by the government

In technical terms the range should be collared and capped between $55-$75

China rising

Posted: August 4, 2017 in Uncategorized


Since 2015 President Xi started a revolution in the Chinese army. From a large, but cumbersome and obsolete army he started the transformation into a fit fighting machine.

It started creating a next generation of war machines (aircraft carriers and stealth jet fighter), but mainly he reshaped the army in more nimble and efficient units.

In April 2016, President Xi presented himself with a military uniform and with the “commander in chief” title.

He started the weaponization of the South China islands and created an exclusive zone that “conflicts” with the Japanese own zones.

This year, as the US with Trump is becoming more isolationist, it is stepping up the pressure. He started to build a faraway base in Dijbouti (Somalia).

Also, the new One Belt Road (train railway from China to Europe) initiative is a sort of a “US Marshal Plan” for China (US Marshall plan was meant to reconstrue Europe after the 2 World War, but in reality it meant to stop the USSR influence in Europe). This is provoking quite a bit of backlash.

In India, this is provoking a low intensity conflict (between to nuclear countries!). Unknown to most, in a pattern similar to the US, China is building a ring of fire of military bases around India using Sri Lanka and Pakistan to surround it.

In Vietnam China asked to stop drilling threatening maritime attack. Mongolia and Laos have their own issues with China.

Even Australia noted several spy vessels in the Australian exclusive economic zone.

But it is not limited to Asia, China is expanding its ties with Iran, Turkey and Russia (Russia and China just held the first joint war exercise in the Baltic Sea).

This, unfortunately, is nothing new. In this context, even the Second World War was a war between an old and weakening British Empire and a new rising power Hitler’s Germany. The ensuing war was so devastating that, from the ashes, a third party rose, the USA.

Hopefully this will not happen again as the weapon systems we have are much more sophisticated than in 1939.

Steve Bannon, Principal Security Advisor to President Trump, said, in March 2016, “there is no doubt we will go to war with China in the next 10 years”.

There are even theories that the pressure on North Korea is none the else a way to put pressure on China.

If a real war would explode – hopefully it will be contained to the South Pacific. If not a scenario like the Second World War where the two-main contended got destroyed and a third rose would be likely.

Conventionally I would say Europe or Russia, but you cannot discount a scenario in which there is a real rise of the AI machines (some of the new weapon system are classified as “deep mission” – a new military jargon that means that they can continue the mission even if they lose contact with the human operator).

It is not so farfetched as you might think. In June 2016, an AI cybersecurity software of a multinational company repelled an attack of an AI malware attack. It was the first time that an attack between two AI was registered with no human intervention (Font: Darktrace cybersecurity company).

I am quite studious of Artificial Intelligence and military application and it is quite scary. Without going in deep dive in the military hardware, just look at your phone and think that the military applications are 5 to 10 year more advanced than what you have.