September 26, 2013
- Yes, you’re being watched: The feds’ latest Minority Report scheme
- Spotting cyber profits as hackers probe the Pentagon “thousands of times a day”
- Beware the Dow’s “rounded top”? Not so fast, Elmerraji says
- Strange brew of stuff: Kickbacks discussed openly in email… plotting the demise of credit unions… silver manipulation swept under the rug…
- “Hey, Stella!” Awesome gold coin that’s an object of desire
Your editor had a flashback this morning…
Not to worry, it was quick and, we believe, harmless. Here’s what happened:
[FLASHBACK BEGINS]
WITWER: “He can’t avoid iris identification. Every door he opens, every ATM he uses, or taxi or transport he boards — he’ll get scanned.
(quietly)
“It won’t take long to find him.”
[BACK TO REALITY]
The flash came in the form of, you might have guessed, a scene from the hit sci-fi thriller Minority Report…
The catalyst? A piece of news that slid across our desk this morning…
“The U.S. Department of Homeland Security,” the article from the Biometric Update blog begins predictably enough, “will test its crowd-scanning facial recognition system, known as the Biometric Optical Surveillance System, or BOSS, at a junior hockey game this weekend.”
With the help of their friends at the Pacific Northwest National Laboratory in Richland, Wash., the DHS will test BOSS at a packed hockey game in the Evergreen State.
“The test will determine,” the blog goes on, “whether the system can distinguish the faces of 20 volunteers out of a crowd of nearly 6,000 hockey fans, to evaluate how successfully BOSS can locate a person of interest.”
Oh, boy.
And that’s only the start to today’s barrage of unsettling news…
“I believe this is the largest campaign we’ve seen that has been focused on drone technology,” Darien Kindlund, manager of threat intelligence at cybersecurity company FireEye, tells The New York Times.
“It seems to align pretty well,” Kindlund goes on, “with the focus of the Chinese government to build up their own drone capabilities.”
China’s drone capabilities are vast. They’ve also gone largely unheralded until now.
“China is now dispatching its own drones into potential combat arenas,” the Times writes. “Every major arms manufacturer in China has a research center devoted to drones, according to Chinese and foreign military analysts. Those companies have shown off dozens of models to potential foreign buyers at international air shows.”
So where does the cybersecurity company FireEye fit in?
For that, we scroll back to the beginning of the Times article…lun
“For almost two years,” begins the rag, “hackers based in Shanghai went after one foreign defense contractor after another, at least 20 in all.”
Their target? According to FireEye, the technology behind U.S. drones.
It appears the hacking was conducted by the alleged cyberwarfare unit of the Chinese military, the “Comment Crew.”
It was last February when the hacker group made nearly all major Western front pages. Keep in mind, this is a full three months before Edward Snowden’s disclosures… so the Bloomberg cover below might’ve caused a bit more shock and awe than if it were published today…
Just the Chinese Army? Oh, those were the days…
At the end of our trail of cybersecurity breadcrumbs is a recent Christian Science Monitor piece on “The New Arms Race for a New Front Line”…
The article, weighing in at over a monstrous 3,000 words, offered up some interesting insights.
Take, for example, one of the U.S. military’s “premier cyberwar simulators,” the tabletop-sized CyberCity, built by cyberoffense company Counter Hack…
“Situated in a surprisingly unassuming suburban enclave,” the Monitor reports, “it is built with hobby shop-supplied model trains, miniature cellphone towers and streetlights — all attached to a miniature power grid.”
But the city is in trouble: A mini Nerf rocket launcher sits on the outskirts… pointed directly at the hospital. The trainee’s mission? To reverse-engineer the rocket launcher to make sure it fires away from the hospital.
Yes. They take their jobs seriously.
“If you can hack a computer and use it to launch a Nerf rocket launcher,” says Ed Skoudis, founder of Counter Hack, “you have some interesting skills, no?”
Skills that are, for good reason, in extremely high demand…
A recent study conducted by the independent security policy research group the Ponemon Institute surveyed 56 multinational companies and found the average annual cybertheft losses were $8.9 million per company, up from $8.4 million in 2011.
The companies also reported a total of 102 successful attacks per week.
“By way of comparison,” the Monitor writes, “there are more than 15,000 DOD computers in 100 countries, which are probed ‘thousands of times a day,’ according to a top Pentagon official who briefed reporters in February. ‘And we have not always been successful in stopping intrusions.'”
Plans leaked this year revealed that the U.S. military, in response, is working to grow the forces in its US Cyber Command defense arm from 900 to 4,900 over the next two years.
These troops will be split into thirds. One-third will be “national mission forces,” assigned to protect critical infrastructure and will be ready to roll by the end of the month. Another third will be “cyberprotection forces” recruited to defend the Pentagon’s networks. The final third will be the “combat mission forces,” responsible for counterattacks and offense, to be completed by September 2015.
[Ed. Note: At Snowden’s former employer Booz Allen, half of the $5.8 billion in annual revenue comes from U.S. military and intelligence agency contracts. Our Byron King, drawing upon declassified documents, has spotted seven companies that stand to pull in as much, if not more. These companies are in position to lead the global cybersecurity boom for years to come. Click here for access to his research.]
Major U.S. stock indexes are all in the green this morning, but not by much. The S&P sits five points below 1,700.
Yesterday was another down day, and one of the major drags was news that Wal-Mart is cutting the orders it places with suppliers. Seems unsold inventory is piling up. “Consumers have been spending less freely than Wal-Mart projected,” says Bloomberg. Imagine that…
This morning, traders are weighing the Commerce Department’s latest guess at second-quarter GDP — up an annualized 2.5%, same as the first guess.
“I wouldn’t go short that chart right now,” says Jonas Elmerraji — “not by a long shot.”
Jonas and Greg Guenthner are in Toronto for a technician’s conference. But yesterday, Jonas made time to answer a reader’s question: “What does this chart of the Dow industrials tell us? Seems like a classic rounded top.”
“It all looks pretty textbook at first glance,” says Jonas — indicating the Dow’s uptrend is petering out. But that’s not the whole story. “The Dow is still showing traders a series of higher highs and higher lows. It’s still in an uptrend, even if it’s a slowing one.”
Then there’s the fact the Dow has only 30 component stocks, and those stocks keep changing; three of them were swapped out on Monday.
“I just wouldn’t call it a top just yet, and I wouldn’t use it as a proxy for ‘the market’ as a whole,” Jonas concludes. “Instead, a breakdown below 14,800 is more likely a good signal to bet against Dow ETFs in the very short term.”
If this sort of charting talk whets your appetite for trading, you’re in luck: On Monday, Jonas opened the “100-100-100 Trading Challenge.” For the last 100 days of the year, Jonas is looking for 100 people to use his guidance to pull in an extra $100 a day in trading income.
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“As for kickbacks, etc.,” read the email, “we can discuss that at lunch.”
That’s the most amusing thing we see this morning in a tangle of stories all at least tangentially related. Let’s follow the breadcrumbs, 5-style…
U.S. and British regulators have fined a brokerage called Icap $87 million. Three ex-employees face criminal charges; none is yet in custody. Icap is the fourth major institution fined for rigging Libor.
Libor is the “London interbank offered rate” — the rate banks charge each other, and not only in London. American, Canadian and Swiss banks also use Libor as a yardstick. Scads of interest rates, including your mortgage, are linked to Libor.
In filing its complaint yesterday, the Justice Department divulged several, um, brazen emails ricocheting among Icap terminals. The one above came from the head of a trading desk.
Another from a derivatives broker, presumably in London, read: “Morning Lad, on the scrounge again, if possible keep 3 [months rate] the same and get 6 [months] as high as you can. My guy… will want it has high possible. Waiting for my credit card to get returned to me from a drunken night out bowling but will be supplying you with copious amounts of curry on it’s imminent return. [sic]”
JPMorgan Chase CEO Jamie Dimon was spotted this morning walking into the Justice Department. Presumably, he’s not turning himself in, although one can always dream…
JPM “is in talks with government officials to settle federal and state mortgage probes for $11 billion,” according to a Reuters story citing two anonymous sources.
Hmmm… That’s more than the total fines JPM has racked up since April 2011. The firm has been fined on 12 occasions since for a total of $8 billion.
“Fortress Dimon,” quips Big Picture blogger Barry Ritholtz, playing off Dimon’s infamous assertion that JPM possessed a “fortress balance sheet.”
“Its walls are made of lawyers, and its moat is made of burning money. Something is wrong with a board of directors that tolerates this sort of egregious incompetency and/or rampant illegality.”
Remarkably, none of the fines entails Libor shenanigans.
But wait: A lawsuit claims JPMorgan did indeed have a hand in rigging Libor.
The National Credit Union Administration — the federal agency that regulates credit unions — sued JPM and 12 other lenders this week. The NCUA claims the banks’ manipulation “resulted in a loss of income from investments and other assets held by five failed corporate credit unions.”
The NCUA’s lawyers have been busy: In a separate lawsuit filed this week, the agency is going after eight banks — including JPM, natch — for selling fraudulent mortgage-backed securities (MBS) to credit unions.
The suit claims the rotten MBSs had a hand in bringing down two of the five aforementioned corporate credit unions.
If the banks can’t bring down credit unions with worthless MBSs, maybe they can use Congress.
“The banking industry is aggressively lobbying Congress to strip credit unions of [their] nonprofit status,” according to a story at the lively lefty site TruthDig.
Under the law, credit unions cannot raise capital through public stock offerings the way banks can. But they do enjoy a tax exemption. Without it, “they’ll have to convert to banks, which is what the banks want,” Fred Becker of the National Association of Federal Credit Unions told the Los Angeles Times last summer. “Then they’d have, for lack of a better term, a monopoly.”
Hmmm…
One thing is certain: JPM is off the hook for any alleged manipulation of silver futures.
Yesterday, the Commodity Futures Trading Commission wrapped up a five-year investigation and concluded, essentially, “Nothing to see here, move along.”
“Based upon the law and evidence as they exist at this time, there is not a viable basis to bring an enforcement action with respect to any firm or its employees related to our investigation of silver markets,” read a CFTC statement.
“It was a cop-out move by a weak agency designed to deceive the public and pander to the crooks at JPMorgan,” says Ted Butler, high priest of the cottage industry that finds silver manipulation somehow more outrageous than all the other market manipulations out there…
Precious metals are losing some of the ground gained yesterday. Silver’s off a nickel, to $21.75, gold down $7, to $1,326.
And now a gold coin so unusual many hard-core collectors might not even know it exists.
An 1880 $4 Coiled Hair Stella, made with six grams of pure gold, was sold at auction on Monday in Los Angeles for $2.75 million.
Never heard of it? It was never released in circulation. U.S. Mint Engraver George Morgan — of Morgan silver dollar fame — designed it at a time there was a move afoot for the U.S. to issue international coinage to make trade with Europe easier. “Congress rejected the initiative,” says a Fox News account. “But not before a handful were produced” — no more than 10 or 15.
“They are so rare, they come on the market maybe once or twice, at most, every decade,” Paul Song of the Bonhams auction house tells Reuters. “That particular gold coin, there’s only 10 or 12 now, and most of these are in public institutions or private collections.”
The $2.75 million price puts this particular Stella in the top 10 most valuable U.S. coins sold at auction.
“How amazing,” a reader writes after our account yesterday of the “Generational Equity” tour, “that people try to justify cutting Social Security with the excuse that recipients will receive more than they paid in.
“Well, duh, I guess that’s the way it’s supposed to work. How happy would you be with your private retirement fund if, upon your retirement, you found out that all you were going to get back was what you put in? Would you sue for totally incompetent management of your retirement funds? Totally incompetent management?
“Oh yeah, that’s what we got when Congress laid their hands on the Social Security Trust Fund…or was it just a blatant screw job?”
The 5: What makes you think the two propositions are mutually exclusive?
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. Assuming the government and the banks are manipulating the silver price down, there’s an even more powerful force destined to pull it back up.
It’s one of the most compelling — and strange — stories Byron King has unearthed in his years of research into the natural resource market. And it could start making you money as early as tomorrow morning… as you can see at this link.