The relationship between the priorities of North Korea and Syria and the market　Mr. Hakubun Takizawa

Broadcast date: 2017/04/07 05:32

Trump's statements are
1) Should prepare to attack North Korea unilaterally.
2) Should deliver a crushing blow to Assad.
As if 1) and 2) were being carried out at the same time.

However, 1) is conditional on China not taking action,
and 2) Trump has not yet declared an attack on Syria to Congress.

In the market, will 1) and 2) occur at the same time?
Which will happen first?
Will neither happen in the end?
It's a state of complete unpredictability.

Personally,
If war with Syria occurs, buy stocks and sell bonds.
If North Korea is attacked, sell stocks and buy bonds.
If both happen at once, stocks would rise and then crash, and bonds would crash.

That's the image.

Conventionally, unilateral attacks on the North without warning are possible (under the pretext of eradicating terrorism),
but with Syria, after Iraq's withdrawal, (declaration of end of war)
In 2012 under pressure, Obama dispatched special forces (not restarting the war, but providing support)
Officially, only airstrikes were resumed.
Therefore, if you attack Syria, there should be a corresponding declaration to Congress first.

During the campaign, Trump's attack on Hillary's missteps over Syria was his true intent.
Therefore, Trump's original aim was to maintain relations with Russia (not invade Syria)
and to prioritize a deal with China first.

However, after the assassination of Kim Jong-nam, North Korea became unmanageable,
and moves to remove Kim Jong-un accelerated through some joint effort with China.
And at the moment when the possibility of attacking the North had risen, a terrorist incident occurred in Russia.
A sarin attack occurred in Iraq.

That Ron Paul, although American,
is asserting that Assad, who today holds overwhelming military superiority, does not need to spread sarin.
(He is a Republican member of the House who opposed the 2003 Iraq War as a libertarian.)

Exactly.
There are forces that desperately want to drag America into a war with Iran and Russia (Ukraine).
I personally think they acted before Trump became preoccupied with North Korea.

So what will Trump do?

Recent elevation of the Kushner couple and demotion of Bannon (outwardly),
furthermore, from Tillerson's words, the “North” should be allowed to be led by China
and even if for now severing ties with Putin, the most likely priority is Syria.

That's not his primary aim,
but given negotiations with the current congressional forces, he is compelled to compromise.

I don't think it's unrelated that the Fed hastened inflation measures.
If the US attacks Syria with a declaration of war, oil will rise.
If inflation is sparked by excess liquidity from the enormous balance sheet,
rate hikes won't be enough...

Today CNBC's Liesman said,
rate hikes in June and September as planned.
From autumn, begin balance-sheet reductions.
End the rate hikes at the same time.
And Yellen would resign as is.
He introduced one scenario.

The feasibility of the next two rate hikes and balance-sheet reduction will be determined by future markets.


However, GS's Yanghachisu and Liesman are suddenly leaning toward “Yellen's resignation” without explaining the backstory,


but for the NY Fed's bond desk,
balance-sheet reduction is news to them.

Therefore, these stories are perhaps a shift in direction within Washington's political landscape.


Richmond, where Lacker was president,
is effectively the Washington DC area. That is to say,

）Lacker's resignation
）Sudden balance-sheet reduction
）Movement toward Yellen's resignation

Are connected at the roots,
and the aforementioned sudden shifts in international affairs may be behind it.

In any case, balance-sheet reduction would normally be a long-term interest rate upward factor.
If the summit and employment statistics pass safely,
and if algos continue to welcome rate hikes as before,
the stock indices will uptick again despite the chaos.