March 12, 2014
- Threats to your electricity supply, both low-tech and high
- Cybersecurity reaches the mainstream spotlight… The investing window starts to close
- With copper in a slump, Guenthner eyes a lucrative “pair trade”
- Will Obama and “Yats” talk about Ukraine’s gold today?
- Gold breaches a key level (on the way up)… a peaceful denouement to Flaky Attraction… readers argue over what brought down the Soviet Union… and more!
Twice a month on average, someone tries to knock out electricity in the state of New Jersey.
Or so we can conclude from a white paper issued by the state’s Regional Operations Intelligence Center. Between October of last and January of this year, the paper documents eight “reports of intrusions at electrical grid facilities in New Jersey.”
One example: On Jan. 26, “employees found a hole, approximately 3 feet high by 2 feet wide, in the perimeter fence of an electric switching and substation in East Rutherford.”
“Many of the grid’s important components sit out in the open,” the paper says, “often in remote locations, protected by little more than cameras and chain-link fences.”
Thus could saboteurs shoot up a substation in San Jose, Calif., last April, damaging several transformers — a baffling case brought to light only recently in The Wall Street Journal.
The Washington Free Beacon, which obtained the New Jersey white paper, says such attacks have the potential to “wipe out power across large swaths of the country.”
That’s not hyperbole. The U.S. power system is far more interconnected than many of us appreciate. Indeed, there are only three major grids spanning the country — the eastern, the western and — true to its independent roots — the Texas grid.
So intertwined is the system that a software bug at an Ohio power plant knocked out electricity to 55 million Americans and Canadians during the Northeast blackout of August 2003.
And get this: In Clovis, N.M., construction is underway on a “superstation” that would unite the three grids — ostensibly, the experts try to assure us, to make them more reliable.
You can be forgiven for not feeling very assured…
So far, we’ve chronicled only the low-tech attacks on substations, transformers and the like. As you can well imagine, the grid is also vulnerable via the cyber route.
During a drill last November, attacks of both the low-tech and high-tech variety knocked out power to tens of millions.
“In windowless rooms from [Washington] to California,” says a New York Times account, “nearly 10,000 electrical engineers, cybersecurity specialists, utility executives and FBI agents furiously grappled over 48 hours with an unseen ‘enemy’ who tried to turn out the lights across America.”
In the simulation, “active shooters” killed seven cops, firefighters and utility workers checking out transformers and power lines. Meanwhile, “hackers” clogged the computers that keep the system humming. The National Cybersecurity and Communications Integration Center — a division of Homeland Security — responded to reports of 40 simulated cyberattacks.
Result of the drill? “There were certainly surprises for us,” said Venita McCellon-Allen, COO of a power utility that serves parts of Louisiana, Arkansas and Texas. “I sat up straight in my chair.”
Once again, you can be forgiven for feeling a bit insecure.
Undoubtedly, utilities will pour millions into shoring up their cyberdefenses in the months and years to come.
Indeed, cybersecurity’s “moment” has arrived — more than a year after we began covering it earnest in our virtual pages.
Blackstone — the world’s biggest private equity firm — announced yesterday it’s buying a majority stake in a privately held cybersecurity player called Accuvant. Another private equity firm called Sverica is also investing, as is Accuvant management.
“The investors are betting that the time is right for Accuvant to expand and try to win new customers,” says The New York Times. “Hacking attacks like the recent one at Target are weighing on the minds of many corporate executives.”
The Target breach is also cited in a CNBC story recounting a flurry of cybersecurity deals. “During the past year, venture capital firms invested a record-high $1.4 billion in 239 cybersecurity companies… Nearly 80 cybersecurity startups have exited, either through acquisition or IPO, with an average tenfold return on investment.”
Some of your fellow readers are already cashing in on this bounty, reading Byron King’s Military-Tech Alert. We’ll allow Byron to toot his own horn for a moment: “In just the past eight months, our model portfolio of specific ‘Black Budget’ recommendations has cumulative gains of 151%.”
But don’t take his word for it…
- “Since January,” writes a satisfied reader from Kansas, “I’ve already banked returns of 15.3%, 10.88%, 10.73%, 20.83%, 28.75% and 25.37%”
- “As it stands today, I am ahead $1,163,” says another reader. “I enjoy everything I have read so far. Keep up the good work”
- “I bought every company you recommended,” says a third, “and I’m up over 50% since the first of October…”
As we said, though, the story’s quickly going mainstream. And as you know, once mainstream awareness picks up, the “easy money” has a funny way of evaporating.
So before the window of opportunity closes any further, we want to make it as simple as possible for you to access the lucrative gains made possible from the research you find in Military-Tech Alert.
Through midnight tomorrow only, you can get seven months of this premium advisory absolutely free. Gratis. On the house. It’s an offer we’ve never made before. And after another 18 hours goes by, we’ll never make it again.
Major U.S. stock indexes are extending yesterday’s losses. Blue chips are holding up better than the small caps, with the Dow down to 16,320 and the Russell 2000 knocked back to 1,181.
Crude slipped below $100 yesterday afternoon, and at last check is down to $98.58.
“This $1,350 break is looking more solid by the hour,” says Greg Guenthner of our trading desk.
Gold breached that key level last night shortly after the open in Hong Kong. As we write, the bid is up to $1,365 — a six-month high.
No, it’s too soon for Greg to declare the bear market in gold is over. But if he does, pay heed — he’s the one who called gold’s mega-drop last year. We’ll keep you posted…
The bleeding in copper has stopped — for now. After a dip to $2.90 a pound overnight, the bid is back to $2.945.
“Sell copper,” says Greg Guenthner in today’s Rude Awakening. “It could easily move lower from here.”
And if you buy palladium — a metals “pair trade” — you’ll make out like a bandit. “Palladium is useful (it’s a key component in catalytic converters for the auto industry). And even more importantly, this forgotten precious metal has even managed to buck the downtrend that punished gold and silver in 2013.
“Palladium is up more than 7% so far in 2014. Compare that with the paltry 1% gains offered by the broad market so far this year and you’ll understand why I like this trade so much.”
What’s on the agenda when the POTUS meets with Yats today in Washington?
“Yats,” you might recall, is the nickname given to Arseniy Yatseniuk, handpicked by the State Department to be acting prime minister in post-putsch Ukraine.
Last week, a pro-Russian newspaper in Ukraine reported that the country’s gold reserves had been airlifted to the United States. The report has not been confirmed anywhere else; the folks from the Gold Anti-Trust Action Committee submitted an inquiry to the New York Fed, which replied, essentially, “Go ask the Ukrainian central bank.”
Of which Yats was once a senior official… heh.
“Maybe this will help the Fed get gold back to Germany,” muses economics blogger Robert Wenzel — reminding us of the glacial pace at which the New York Fed is fulfilling the Bundesbank’s request to repatriate Germany’s gold.
Elsewhere, we see for the first time Russia has cited the “Kosovo precedent” of 2008 in justifying Crimea’s secession from Ukraine. The aforementioned Byron King told us this was coming at the end of February…
Say this much for Heleen Mees — she made out better than Glenn Close in Fatal Attraction.
Mees, as we recounted last July, is the Dutch economist, columnist and one-time NYU professor accused of stalking her former colleague and lover, Citigroup chief economist Willem Buiter.
According to the criminal complaint, Mees alternately “sexted” Buiter with lewd pictures of herself… and sent messages like, “Hope your plane falls out of the sky,” followed up with photos of dead birds. Buiter for his part said the messages caused “severe annoyance and alarm” for him, his wife and children.
Heleen “I’m not gonna be ignored” Mees
Monday, Mees struck a plea bargain in a Manhattan courtroom: The charges will be dropped if she stays away from Buiter, undergoes counseling and avoids arrest.
But the story’s not over: She plans to sue Buiter for defamation in the Netherlands… and her lawyers want the feds to subpoena Citi for Buiter’s expense reports to build her case. Good times…
“The watchers are even watching the U.S. Senate now?” a reader writes after our mention yesterday of the CIA spying on staffers of the Senate Intelligence Committee.
“Of course, come to think of it, Feinstein and her ilk just might be worthy of that, after AP-gate, IRS-gate, tea party witch hunts, ad nauseam (just kidding — that is not what ANY free country is about). But just one question: As Roman satirist Juvenal wrote 2,000 years ago, ‘Quis custodiet ipsos custodes?’ Who will guard the guards themselves?
“Karma’s a bee-otch, ain’t it, Dianne!”
“I wrote my New Mexico senator, Tom Udall,” writes an earnest reader tilting at windmills, “and asked him two simple questions:
1. Why will it take seven years for us to deliver Germany their gold?
2. Can you assure me that there really is gold in Fort Knox?
“Now, I know in advance that I will get no response, as the Beltway culture is consumed with only one thing: getting re-elected. The world has $100 trillion of debt floating around, and the Senate Democrats have an all-night filibuster about climate change. There is only one word for that crowd.”
The 5: The reader refers to the amount of outstanding debt globally — government debt, corporate bonds, mortgages, everything — as reckoned by the Bank for International Settlements and Bloomberg.
That’s a 40% increase since the start of the financial crisis in mid-2007. But hey, who wouldn’t leverage up at near-zero rates? Assuming you can convince someone to lend to you, of course.
“In a lot of ways, I blame globalist investors like y’all for geopolitical conflicts,” writes one of our regular critics, “because you’re blithe to national interests and will go anywhere, however nasty, brutish or short, to make a profit, even at the expense of your countrymen.
“That lowers cultural standards and civility. In the old days, nation-states practiced something called protectionism, and it worked well enough for nearly everyone. At least the Russians remember who they are.”
The 5: We’ll meet you halfway.
True, we’re no fans of protectionism. We recall the late Jack Pugsley’s fable about a guy living on a desert island, trying to build a cabin, and one day a perfectly formed plank washes ashore. His economist friend tells him not to use it — because it would put him out of work sooner.
On the other hand, we have no love for phony-baloney “free trade” deals like the Trans-Pacific Partnership — which the president will no doubt try to revive next month when he travels to Asia.
“About yesterday’s final reader and Reagan bankrupting the Soviets,” writes one of our regulars. “The Strategic Defense Initiative, aka ‘Star Wars,’ wasn’t doable with the technology of the 1980s and is only partly doable with today’s technology.
“But that wasn’t the objective of Star Wars; forcing the Soviets to match our R&D expenditures was. The Soviets didn’t know that we couldn’t do it and couldn’t take a chance that we would leapfrog them by light-years. With an already depleted economy, they thankfully chose perestroika, detente — the demise of the Soviet Union.
“Unlike your reader, I don’t consider the money Reagan ‘blew’ on SDI as wasted. It ended the Cold War. Perhaps he isn’t old enough to remember what it was like to live in a primary target city and have to wonder each night if you would wake up the next morning — or worse, whether you would want to. Best money we ever wasted. The obscenity of today’s waste is in no way similar or related to the SDI expenditure situation.”
“It wasn’t the arms race that Reagan brought down the USSR with, but the price of oil,” another reader counters.
“In 1986, OPEC countries were cheating on their allocations so bad (and Saudi Arabia was compensating by only producing 2 million barrels per day of their 10 mmb/d capacity). To teach the ‘cheaters’ a lesson and to eliminate the only source of cash flow the USSR had, Reagan, in cahoots with the Saudis, had Saudi Arabia increase their production from 2 mmb/d to 8 mmb/d. This flooded the world oil market with oil, with the eventual bottom being $6 per barrel for Saudi sweet crude in 1987.
“The unintended consequences was the savings and loan crisis, because every S&L in Texas, Louisiana, Arkansas, New Mexico and Oklahoma had loans to oil companies using $3 per barrel as a price for their borrowing base calculations. The S&Ls foreclosed, the S&Ls collapsed, the government liquidated… Aw, you know the story!
“However, in 1989, unable to fund their politburo with oil price at $12 per barrel, the Wall fell. Besides, it wasn’t much of a race anyway.”
The 5: Your account jibes with that of Peter Schweizer in his 1994 book Victory… and that of our acquaintance Jim Norman, the veteran oil industry journalist, in The Oil Card.
Norman’s flip side thesis is that the feds now drive oil prices artificially high to squeeze the Chinese. Considering the $80 floor on oil the last 3½ years, we think he’s on to something…
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. From our lips to a senator’s ears?
“Republican Sen. Marco Rubio says Democrats are ‘secretly and not so secretly’ hoping to use Obamacare’s missteps as leverage in seeking a single-payer system of government-run health insurance,” according to today’s Washington Times.
Gee, we’ve been saying the same thing for… how many months now? At least seven…
There’s still time to protect yourself from Obamacare’s onslaught. Click here for the first practical step you can take today.