Risk on, risk off

I still have to recover from the nastiest bout of flu that laid me low over Easter. It had the advantage that I was in no state to do anything on the market so I've just sat. I've not even watched. The market is struggling to make a move up but it would appear that buying pressure is too weak. On the other hand there is no selling pressure.

It is amazing to me that the market has come this far. We have had the Cyprus banking crisis which has proved conclusively that money in the bank is no safer than money kept in the cistern behind the loo. By the skin of its teeth, the principle that the first €100,000 deposited in a regulated European bank is protected has survived.

Now a rogue state has threatened to launch a nuclear strike, and the US is taking the threat seriously. It has deployed anti-missile defenses on Guam. And still there is not a serious peep in response from the market.

There is a long standing principle in the markets that when the world order is threatened, investors take their money off the table and run for cover.  This is a risk off situation.

US Government bonds are often regarded as the safest haven for cash. Since the Chinese Government is heavily committed to this asset class it's hard to imagine a situation when either of the big powers would allow this rock of security to crumble. There is some indication that money is running for cover in the US.

The other standard safe haven, gold, is going nowhere. There is support nearby but if fear was driving the market one would expect to see much more upside. Maybe this is no longer seen as a solid asset. You will know that I have staked a small but significant part of my portfolio here and am beginning to wonder if I should bail out.

What I find incomprehensible is the strength of the stock markets in the face of these financial and political headwinds. In a normal world no-one would want to be near stocks if a nuclear stand off is a real risk. It calls for a risk off strategy. And yet there is no real sign that this will happen any time soon. Unless we wake up one morning, to the news that Pyongyang has finally lost its mind.

Today's final graph is the Korean market which, even though it is sitting in the firing line, is showing few signs of nervousness. To my mind you can only get that sanguine if you are playing with other people's money and you have no fear of the consequences of loss. What sort of investor does that describe? Risk on and blow the consequences.