Good Afternoon,


Nuclear war.  Nothing much scarier than that right?


I am just thinking out loud here but if there were really high enough tensions to warrant concern about a nuke lifting off into the heavens, South Korea’s market would be down a tiny bit more than 4% over the last few weeks.


I am just sayin’.


The chatterboxes on-air have gotten to the point where they cannot seem to figure out which ill is going to kill us.  They can barely catch a breath between telling us about the latest vitriol-laden missteps in DC or the latest Trumpism or the latest North Korea ICBM test date.


And it’s working.  Note the sentiment.


Make No Mistake


While the three major averages are feeling some of the brunt, the internals have been stinking up the joint for the last month.  With AMZN, GOOG, FB and AAPL carrying so much of the top weight in the markets, it is easy for the public to be dismayed by the broader measures “lack of movement.”


The NYSE Composite is up 6.49% this year – and the equally weighted S&P 500 is up not much more – at 6.54% YTD – quite a clip from the headline grabbing averages.


Further, while the headlines are solid given the tech push noted above and the ETF passiveness covered previously, note this important item:  Less than 60 percent of stocks in the Russell 3000 are trading above their 200-day moving average!


What does that tell you?


First don’t under-estimate the bullish nature of this piece of data. At first, it might appear negative.  But, if we step back far enough, turn off the crap being spewed in the press and keep our wits (read – stay calm) about us, history tells us that the “correction” everyone seems to be so terrified of arriving – has already been underway in the broad market, behind the scenes, for some time now.


I repeat – that is a good thing – and perfectly normal for summer.


So What To Do?


Look, I recognize that pictures like this will bring fears to the surface for anyone:

But this is the picture you should have in the back of your mind as cooler heads prevail – and take advantage of yet another wasted panic:



Look we have been having crisis attacks since I was born.  Every one of them inevitably lead wrong-thinking, severely skewed assumptions and fear-driven, illogical panic selling. That has never proven to be a good idea for a long-term investor.


In fact, for contrarians, history tells us that 100% of the time, the panic lows set in the wake of a crisis tend to be buying opportunities.


That is the point of that quiet bar chart above – right under the missile picture.  It is from an analysis done by the really sharp guys at Ned Davis Research.  It covers the most significant geopolitical crises of the last century.


They found that far more often than not, the stock market, as measured by the Dow Jones Industrial Average strongly rebounds from its post-crisis panic low.  Indeed, so much so, that within six months it is actually higher than where it stood before that particular crisis erupted.


To be sure, they included all the obvious candidates between 1900 and 2014, such as the bombing of Pearl Harbor and the assassination of John F. Kennedy — a total of 51 events.


We May Not Remember….but


The stock market’s reaction to the Sept. 11, 2001 attacks is a good case in point.  At the market’s low – five trading sessions after those heinous attacks – the Dow was 17.5% lower than where it had closed on Sept. 10.


The shocker?  Less than two months after the attacks, it was trading higher than where it had been the day before the attacks.


It is totally understandable that the angst can be high at times like this.  As such, it can seem equally unbecoming for any of us to worry about our net worth at a time of global crisis.


Instead, just remember the chart above and think of this:  If military conflict with North Korea does erupt, no one is helped by compounding the problem through actions which tend to only harm the long-term benefits in your planning and portfolios.


That Said…


The fear still unfolds.  This morning, inflation once again came in under expectations.  Not a surprise to readers as Generation Y is one very powerful deflationary force – and they are with us for a very long time.


Even with full employment and more new records in job openings – inflation is less than perky:

And the flow into bonds has already felt the pressure from the risk of North Korea, already back to within shouting distance of 2017 lows.


You do recall that just 15 days ago, the fears were not at all related to North Korea – they were focused on higher interest rates – ha:

In Closing


One more chart for you and then we will put this to rest.  Another good one from Scott caught my attention – so here it is:

Relax a bit.  Note a few things again as highlights:


South Korea’s market is down less than 4% in the past few weeks

Gold is up only 2% or so in the past week

Bonds are getting a run as they always do on the fear trade


Take a look at the VIX spikes in Scott’s chart above and try to view them in the larger context.  Either the market is ridiculously unconcerned about these latest tensions, or the same market rates the chances of a nuclear explosion as pretty remote.


Considering all the data above, I suggest we can be comfortable with the latter.


Have an excellent weekend.  Enjoy summer….it’s slowly coming to a close.


Until we see you again, may your journey be grand and your legacy significant.