Only one way to play market in missile test


Without overreacting, concern about North Korea is rational for any investor. Just ask Warren Buffett. Last week the world’s second-richest man said, “We have increased the ability of perhaps even an individual, perhaps a group, perhaps a nation … to kill millions, millions, millions of people in a single stroke.” Buffett added, “We got a fellow in North Korea [with a] very poor country, spending a way disproportionate amount of its GDP working on missiles that can hit California. That’s crazy,” he said. “Wish I had a solution for it, but I don’t.”

It’s the “lack of solution” part that should bring investors backs to their senses, because especially in a markets’ sense, there isn’t anything investors can do about weapons of mass destruction. Do you really want to try and master game theory as an investor? The Wells Fargo Investment Institute has done some of that work for investors already, anyway.

“When you start assessing what the different outcomes might be and assign probability to each one, we still believe its biggest ally and biggest adversary, China and the United States, will together partner in order to put enough diplomatic pressure on North Korea to bring them back to table,” said Sameer Samana, global quantitative strategist at the Wells Fargo Investment Institute, which recently sent some of its team on an Asia tour and trip to South Korea.

Other Asian investing specialists agree. Michael Oh, portfolio manager at Matthews Asia — the largest Asia-only investment manager based in the United States, with more than $31 billion in assets under management — wrote to the firm’s clients at the height of summer tensions: “A positive outcome out of this complicated situation is that this may force China, Russia, South Korea, North Korea and the U.S. to finally engage in some kind of multilateral dialogue.”

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