The South Korean won is dwon sharply against the U.S. dollar, following a speech Monday by President Lee Myung-bak suspending trade ties with the North and condemning last month's deadly attack by Pyongyang on a South Korea warship.
The South Korean currency is trading at 1212.15 won against the U.S. dollar, down 1.6% and breaching the 1,200-won mark for the first time in since October.
Lee also said North Korean ships will no longer be allowed to pass through any of the shipping lanes in the waters under South Korean control.
"The sea routes meant for inter-Korean exchanges and cooperation must never again be used for armed provocations, he said. Trade and exchanges between the North and South will also be suspended, except for assistance for infants and children.
What do investors overlook that causes them to dump stocks both on the fear of war and on the arrival of war itself, even though by the end of the war stocks have always gone much higher than lower? They forget that stock prices are quotations expressed in money. Modern war always causes governments to spend far more than they can possibly collect from their taxpayers while the war is being waged. This causes a vast increase in the amount of money, so that each individual unit of money, such as a dollar, becomes worth less than it was before. It takes lots more dollars to buy the same number of shares of stock. This, of course, is the classic form of inflation.
ReplyDelete~Philip Fisher, stock legend, "Five More Don'ts for Investors", Common Stocks and Uncommon Profits, 1958