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In Michael Lewis's Liar's Poker, there is a salesperson/trader named Alexander, not his real name, who Lewis uses to demonstrate how somebody who had a complete mastery of the markets thought about investing and trading. To show how quickly Alexander could interpret market news, Lewis describes Alexander's reaction to Chernobyl:

When news broke that the Soviet nuclear reactor had exploded, Alexander called. Only minutes before, confirmation of the disaster had blipped accross our Quotron machines, yet Alexander had already bought the equivalent of two supertankers of crude oil. The focus of investor attention was on the New York Stock Exchange, he said. In particular it was on any company involved in nuclear power. The stocks of those companies were plummeting. Never mind that, he said. He had just purchased, on behalf of his clients, oil futures. Instantly in his mind less supply of nuclear power equaled more demand for oil. [...] "Buy potatoes," he said. "Gotta hop." Then he hung up. Of course. A cloud of fallout would threaten European food and water supplies, including the potato crop, placing a premium on uncontaminated American substitutes. - Liar's Poker

I believe that this paragraph can make almost anyone a better investor, just by reading it several times. It shows you how a master of the markets, would avoid a crowded trade (shorting nuclear power stocks) and think about what a big event will cause (oil to go up because of a drop in nuclear power). It also shows that oftentimes the best opportunities are the last you would ever think about. Buying potatoes is brilliant, and not too many people can say they would have thought about that.

The reason I have been thinking about that part of Liar's Poker recently is the increased tensions surrounding North Korea and nuclear weapons. Given that recently we have seen increased posturing by North Korea as to the use of nuclear weapons I think it is a good time to think about what would happen in the case of a nuclear event in North Korea.

So what would be the effect of a nuclear event in North Korea (I use the term nuclear event because I believe that it would be a very short term thing, also it is probably very, very unlikely to happen). Well it would obviously do several things right off the bat.

  1. It would send the Asian markets, particularly the main South Korean index, the Kospi, into a tailspin. It has already been trading near a four-month low due to fears about the a potential conflict with North Korea.
  2. It would send the VIX skyrocketing. The Vix is a measure of fear, or technically the implied volatility on S&P 500 index options.
  3. North Korea, which essentially has no economy, would not be financially harmed any more than it already is. While there would most likely be a high death toll, South Korea would see the brunt of the financial impact.

So what are some potential effects that we would see in the financial and stock markets in the case of a nuclear event between North Korea and South Korea? Well thinking abstractly, it would adversely effect Apple's (NASDAQ:AAPL) supply chain. Any conflict would force China to act, and it could lead to further disarray in Apple's supply chain, which has a heavy presence in Southeast Asia. You might also consider shorting Monsanto (NYSE:MON). Monsanto supplies soybean seeds to many farmers in South Korea and a nuclear event could severely disrupt the crop in South Korea, hurting Monsanto profits if farmers are unable to pay. Another big South Korean company that you should watch is Samsung (OTC:SSNLF), as any sort of conflict would disrupt Samsung's business and could lead to it losing the ability to get its products to the United States. One might also think that carmakers like Kia (OTC:KIMTF) and Hyundai (OTC:HYMLF) would be adversely effected, and they would, but since they both have large manufacturing plants in the United States, their business would be less adversely effected than companies like Apple and Samsung that rely heavily on Southeast Asia for low-cost production of their products.

Source: Liar's Poker And North Korea's Nukes