‘Fire and Fury’ – A Take On North Korea

Does this sound familiar? It should – Un’s father Kim Jong Il made a career of making similar bold threats in order only to gain crucial concessions like oil subsidies and food aid when he backed off. Remember too, ginning up the masses against an ‘evil’ external enemy has historically  a useful artifice in taking the populace’s mind off of the pitiful standard of living that exists in NK relative to their southern neighbors; a fact that North Koreans are increasingly aware of in the age of digital information transfer.


From what we understand, North Korean land artillery situated around the DMZ could potentially inflect heavy casualties into certain parts of Northern Seoul and perhaps even Japan. Certainly, NK has one of the world’s largest standing armies, at over 1mm troops…but the technology used is incredibly outdated, in many cases going back to the Cold War. Many Western experts believe a full-on military conflict wouldn’t last more than a few weeks at the most. The US and its allies have meaningful missile defense systems – the THAAD system is a sophisticated ballistic missile defense system operating in Guam, Hawaii, and since July, in South Korea. Clearly NK has made major strides in nuclear capability in recent years. Some military experts suggest current NK nuclear technology is about the same range as France had in the 1960s – enough to be nuclearized but not necessarily reliable. One should not necessarily take NK statements as ‘fact’ with regards to military capabilities, nuclear or otherwise.


The West has many enemies…in the East, the Middle East and other areas abroad…and sadly, even a few among our ranks. Their unspeakable acts of terror have shocked and sickened the world, and understandably occupy a large amount of mindshare in the media (which, sadly, is exactly the aim of terrorism). But if you view terrorism as war (which we do), then terrorism isn’t nearly as effective at eliminating the enemy as it is in occupying mindshare. According to Statista, the number of casualties due to terrorism worldwide in 2016 was roughly 25,000 people, which is roughly the same number of people killed every year by rabid dogs. While any death due to terrorism is tragic, the figure needs to be set in the context of the West’s population of 1 billion people. Terrorism has a long history and has never succeeded in preventing global commerce.

This article was written by Chris Konstantinos, CFA, Director of International Portfolio Management at RiverFront Investment Group, a participant in the ETF Strategist Channel.

Important Disclosure Information:

The comments above refer to generally to financial markets and not RiverFront portfolios or any related performance.

RiverFront Investment Group, LLC, is an investment adviser registered with the Securities Exchange Commission under the Investment Advisers Act of 1940. The company manages a variety of portfolios utilizing stocks, bonds, and exchange-traded funds (ETFs). RiverFront also serves as sub-advisor to a series of mutual funds and ETFs. Opinions expressed are current as of the date shown and are subject to change. They are not intended as investment recommendations. (continued on the next page…)

RiverFront is owned primarily by its employees through RiverFront Investment Holding Group, LLC, the holding company for RiverFront. Baird Financial Corporation (BFC) is a minority owner of RiverFront Investment Holding Group, LLC and therefore an indirect owner of RiverFront. BFC is the parent company of Robert W. Baird & Co. Incorporated (“Baird”), a registered broker/dealer and investment adviser.

Important Disclosure Information (continued):

These materials include general information and have not been tailored for any specific recipient or recipients.  Accordingly, these materials are not intended to cause RiverFront Investment Group, LLC or an affiliate to become a fiduciary within the meaning of Section 3(21)(A)(ii) of the Employee Retirement Income Security Act of 1974, as amended or Section 4975(e)(3)(B) of the Internal Revenue Code of 1986, as amended.

Past results are no guarantee of future results and no representation is made that a client will or is likely to achieve positive returns, avoid losses, or experience returns similar to those shown or experienced in the past.

Technical analysis is based on the study of historical price movements and past trend patterns.  There are no assurances that movements or trends can or will be duplicated in the future.

Investing in foreign companies poses additional risks since political and economic events unique to a country or region may affect those markets and their issuers. In addition to such general international risks, the portfolio may also be exposed to currency fluctuation risks and emerging markets risks as described further below.

Changes in the value of foreign currencies compared to the U.S. dollar may affect (positively or negatively) the value of the portfolio’s investments. Such currency movements may occur separately from, and/or in response to, events that do not otherwise affect the value of the security in the issuer’s home country. Also, the value of the portfolio may be influenced by currency exchange control regulations. The currencies of emerging market countries may experience significant declines against the U.S. dollar, and devaluation may occur subsequent to investments in these currencies by the portfolio.

Foreign investments, especially investments in emerging markets, can be riskier and more volatile than investments in the U.S. and are considered speculative and subject to heightened risks in addition to the general risks of investing in non-U.S. securities.  Also, inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries.

Index Definitions:

Standard & Poor’s 500 Index (S&P 500) measures the performance of 500 large cap stocks, which together represent about 75% of the total US equities market.

The MSCI ACWI Index captures large and mid-cap representation across 23 Developed Markets and 23 Emerging Markets countries. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.

The MSCI World Index captures large and mid-cap representation across 23 Developed Markets countries. With 1,650 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. (2017.112)