Circus in the Pacific Drives up ‘Digital Gold’

More tensions in the Pacific this week. Bitcoin up, gold up, US dollar down.

US, South Korean and Japanese aircraft have carried out a show of force. This comes in response to North Korea’s most recent ballistic missile test. The test missile passed directly over Japan’s north island, Hokkaido.

It must have been terrifying for the 5 million-plus residents of Hokkaido. The test launch came without warning. Citizens received alerts to take shelter from their government, only seconds before the missile arrived. They had no way of knowing it was only a test until it was over.

The test is likely intended as a response to a recent US–Japanese joint military exercise. That exercise took place on Hokkaido.

US Marines and Japanese Self-Defence Force personnel 200 02-09-17
US Marines and Japanese Self-Defence Force personnel
in joint exercises on Hokkaido, 18 August 2017
Source: US Pacific Command Twitter

[Click to open new window]

Of course, that exercise was arguably a response to even earlier North Korean acts of aggression… And so on, all the way back to 1953.

Not that I’m claiming an equivalency between the two sides. However you may feel about the current US administration (or the Japanese or South Korean ones), there’s no comparing them to a brutal military dictatorship. One that would rather see its own people starve than relinquish an iota of control.

But it has to be said. This never-ending cycle is a handy distraction from social and economic troubles at home. For both sides.

The North Korean dictatorship uses the menace of foreign invasion heavily in its domestic propaganda. And US President Trump has certainly seen a bump in support from his tough stance on North Korea. After his awkward fumbling of the white supremacist demonstration in Charlottesville, and with a coherent economic policy from the White House yet to appear, he needs it.

The people of Hokkaido might argue it isn’t worth it.

Governments on both sides are playing a dangerous game, here. Even if the threats are empty, and both sides continue to back down at the last moment, accidents can happen. Put enough bleeding-edge military technology in the sky, flying past one another, and you’re courting disaster.

Imagine what could have happened if Kim Jong-Un’s latest toy had malfunctioned, and hit Japanese soil?

The possibilities are ugly enough that we prefer to avoid listing them. And, ultimately, there’s little you can do if the worst does happen. There’s little we can say to drag the world’s leaders back from this dangerous brinksmanship.

Control what you can

You can’t end this cycle. You can’t stop it escalating. You can, however, try to control how it affects you and your investments.

As markets react to the oscillating tensions in the Pacific, there are both opportunities and dangers, and plenty of them.

Gold bugs and cryptocurrency investors both benefited this week. Jason Stevenson, resources analyst over at Resource Speculator, analysed the tensions and what they mean for gold for his subscribers. Meanwhile, followers of Sam Volkering’s Secret Crypto Network will have seen gains this week as ‘digital gold’ also rose.

Let’s take a look at some more of the dangers and opportunities from this week in Money Morning.

We live in the era of ‘big events’, Ryan explained on Monday. TV has long allowed the whole world to tune into the same event. The internet, and especially social media, have revolutionised how those events are marketed and how hype is built. We saw the result last weekend, with the McGregor–Mayweather fight watched around the world.

Billions of eyeballs watching the same thing add up to a lot of marketing dollars. In Monday’s Money Morning, Ryan looked at some of the companies involved, and discussed what the era of global events could mean for investors. You can read the details here.

Contention about the US debt ceiling has returned to the headlines. And the politics around it could get nasty again. On Tuesday, Ryan discussed the potential fallout if faith in the US economy takes a hit.

The US dollar is central to global trade. But as Ryan explained, that position is built on nothing but faith. Faith in the dollar’s value. Faith in the US economy. Faith in US institutions. All of that could easily be shaken. Some of it already has been, recently.

Ryan looked at the possible alternative currencies, which could usurp the US dollar’s place. Would it be another nation’s currency? Gold? Crypto? For Ryan’s take on the possibilities, click here.

Just how safe are Australia’s big four banks? Faith in our nation’s favourite four dividend payers took a rare hit this year, with the Commonwealth Bank’s recent scandal and subsequent share price fall. (If you missed the story, check out my article from two weeks back, here.)

But in Wednesday’s Money Morning, Ryan looked at an entirely different threat looming over the banks. If these early danger signs are what they seem, it could shake the big four banks, to the core. And the Aussie economy with them. To read the details, you can find Wednesday’s article here.

Hurricane Harvey ripped through the southeast US this week, with a horrific human toll. As people begin to pick up the pieces and count the cost, your Thursday Money Morning looked at the effects it will have on the US economy.

One industry in particular could be a long time in recovering. And we’re already seeing the immediate effects on prices, America-wide. Click here to read what those effects are, and how bad it could get.

With so many dangers apparent in the market, on Friday Ryan looked at a way that you can profit when shares fall, rather than rise. ‘Short selling’ is often seen as a controversial idea in the mainstream. And many retail investors refuse to touch it. But for the professionals, it’s a common tool. For Ryan’s explanation of how it could work for you, take a look at Friday’s Money Morning.

That was all from Money Morning this week. It was a hectic one. Debt levels, real estate bubbles, the threat of war, and natural disaster. Danger flags flying everywhere, and markets struggling to push upward. We’ll be back on Monday, with more of our best ideas on how to protect your investments.


Tyler Jefferson,
Editor, Money Weekend

Tyler Jefferson joined Fat Tail Investment Research in 2012. With a background in publishing, he started out as part of the team working behind the scenes with your Editors to bring you Money Morning each day.

When he joined, Tyler was Fat Tail Investment Research’s 12th employee. Today that number has grown to over 50, as more and more readers turn to Money Morning as their source for independent financial analysis and ideas.

Today as Managing Editor, Tyler still edits the articles you read each day. Along with that, he occasionally contributes to Money Morning with his own irreverent take on the most interesting news and opportunities for you.

Money Morning Australia