“If the North commits any additional provocations against the South, we will make sure that it pays a dear price without fail,” – South Korea President Lee Myung-bak

If you have been living on another planet, I can tell you right now that things are spinning out of control in the Korean peninsula since last week’s breakout. You can read more detailed summaries on websites like the New York Times but one thing that is easy to find out is that there is a lot of tension right now as the US and South Korea have initiated more preparation drills… preparing for what? A possible war with North Korea. Obviously, there are a lot of things to consider when thinking about what a military conflict between these countries would mean. It is a very delicate situation for quite a few reasons:

-North Korea has one of the largest militaries in the world
-It is within striking distance of Seoul and other huge Korean cities
-North Korea has some nuclear capabilities although it’s unclear how much
-The US has an alliance with South Korea and will be heavily involved if things derail
-China is very much involved for many different reasons (relationship with North Korea, physical proximity, growing world power, etc)
-Korea is one of the more important economies in the world

How bad could things get? Very bad. This is serious and unfortunately, it’s impossible to assume that North Korea’s leader Kim Jong Il is smart enough to avoid letting this conflict go too far.

Here are some of the investments that you should consider using

-South Korea ETF’s

No doubt, the South Korean ETF’s will be very volatile as the crisis goes on and there are certainly opportunities to do well. Just take a look at the chart from the past few days:

Unfortunately, there are no ETF’s on the South Korean Won at the moment as that could have been another very interesting play on the crisis.

-China ETF’s

China has been trying to establish itself as a world leader and having a crisis next to home is a threat. There is no doubt that China will want to have a major say on this crisis and if it ever exploded, it would have consequences on China and on its place in the world.

-Nuclear Energy ETF’s

It’s unclear how advanced North Korea’s capabilities are but that they have been working on nuclear technology for over a decade now and if ever this conflict did go nuclear, it would have profound impacts on the global landscape.

-Gold ETF’s

We have been discussing gold over and over in recent weeks and months but that is because it is a hedge for inflation and for uncertainty and both are scaring investors around the world at the moment. Chances are good that an escalation of a conflict in the Korean peninsula would create a spike in the price of gold. Would it be enough to bring gold to $3000?

Monday is usually one of the big days on IntelligentSpeculator as we open new trades based off of our long & short model on technology stocks. I am sad to announce that there will be no new stock picks….until the new year begins:) You see, these picks are based off of fundamentals and are medium to long term picks. Since I will be closing out the existing positions on the close of December 31st (to start off 2011 fresh), it does not make sense to open new trades with less than a month to go.

For some time Friday I had hopes of closing a trade as the Long Ebay (EBAY) & Short Yahoo (YHOO) trade was up +17% or so for most of the day but in the end, the day was not short enough which meant that it did not reach my stop which is up or down 20%. Since I do not use intraday stops, it would have needed to actually close past that point too.

I will be doing a recap of the year of trades later in December but I did want to do a small recap of what has been happening in the current live trades. As always, you can find the return of those trades in our “performance page” but usually the only commentary on those trades is found in IntelligentSpeculator Premium.

June 1st 2010: Long Google (GOOG) & Short AOL (AOL) +11,14%

It has certainly been a difficult year for Google and at some point, even the more optimistic of investors like myself started to have some doubts about where the stock was headed. It’s not been an easy stock to trade. But the stock has been showing signs of life and looks like all of the negative momentum is gone for now.

On the other hand, AOL is a company that I was very vocal against in the start of the year but a company that I do not love being short of right now. They do still have tremendous issues and are far from being out of the woods. But I do like a lot of their more recent moves and would certainly consider going long in 2011…time will tell.

September 27th 2010: Long Amazon (AMZN) & Short Blue Nile (NILE) +11,45%

This is a trade I would do over and over as Blue Nile seems to be consistently overvalued. I did get burned a couple of times last year but overall going short on Blue Nile has been a winning proposition.

October 25th 2010: Long Ebay (EBAY) & Short Yahoo (YHOO) +17,51%

I have written about Ebay and how I consider it more as an online bank than anything else and that is what drives me to be positive towards the stock. There is some competition but apart from Facebook, the threats do not worry me for now.

November 1st 2010: Long Apple (AAPL) & Short Research in Motion (RIMM) +1,29%

Research in Motion cannot compete with Apple right now in terms of product quality and sales which has translated into its stock rising this year while buying Research in Motion has been compared by this blog to catching a falling knife.

November 8th 2010: Long Baidu (BIDU) & Short The Knot (KNOT) -3,07%

This is the most recent trade and it is the first time in almost one year that we`ve gotten involved into the leading Chinese search engine but given Knot`s very expensive valuation, it certainly continues to look like a very promising trade.

I will only discuss the previous/closed trades in my year end recap but needless to say that the 33,82% return so far this year has been beyond what we were hoping to accomplish!