March 13, 2014
- Hush-hush federal report confirms Live Free or Die Hard scenario
- Another day, another cybersecurity buyout: Don’t miss out on the action
- The official reason oil slipped below $100… and a more likely one
- How the Russia-Ukraine standoff looms large over one precious metal
- Name a crater on Mars (or not)… Denmark’s plan for America… an earnest query on expatriation… and more!
“Ooh, the talk about power grids reminds me of Live Free or Die Hard,” writes an apocalyptic-minded reader after yesterday’s episode.
“That’s the one with Bruce Willis and Timothy Olyphant. The story line follows some angry computer guys that start taking over and shutting down all the utility systems, creating huge chaos, but Bruce saves the day.
“Maybe your audience should watch it again, since it’s possible.”
Hmmm… Your editor hasn’t even watched it the first time.
Then again, this morning’s Wall Street Journal demonstrates truth can be scarier than fiction… with a headline that undersells the magnitude of its scoop.
“The U.S. could suffer a coast-to-coast blackout,” says the paper, “if saboteurs knocked out just nine of the country’s 55,000 electric-transmission substations on a scorching summer day, according to a previously unreported federal analysis.”
Last summer, the Federal Energy Regulatory Commission performed a computer-model stress test of the national power grid. The findings were summarized in a memo prepared for the FERC’s commissioner: “Destroy nine interconnection substations and a transformer manufacturer and the entire United States grid would be down for at least 18 months, probably longer.”
The FERC report — or the Journal’s summary of it, anyway, the report is still under wraps — appears to focus on low-tech attacks. That is, shootings and bombings. There’s also the cyber variety. Both varieties, as you’ll recall from yesterday’s episode, figured into a drill conducted by the power industry last November.
This morning, the results from that drill are in — “a one-two punch between cyber and physical security avenues,” as described by Bill Lawrence of the North American Electric Reliability Corp.
Once again, the report is for official eyes only, lest the details give potential bad actors any ideas. But The New York Times gives us the gist: “Nearly all the utilities that participated… said that their planning was not good enough.”
And in some cases, even the best laid plans would been for naught: “For example, planners stress conference calls to keep all participants informed about attacks on their neighbors, but the conference system did not have enough telephone lines.”
Among the many utilities that took part in the exercise, 92% said the findings will help them make better plans for physical attacks… and fully 98% said the report will help them fortify their cyberdefenses.
Another front in the cyberwars is heating up overseas. Mother Jones magazine has logged no fewer than 11 high-profile cyberattacks playing out amid the standoff between Russia and Ukraine.
That’s on top of the “Snake” computer worm we documented on Monday, infecting dozens of Ukrainian computer networks.
“Ukraine,” says MoJo, “is situated in a region of the world known for breeding some of the most talented cybercriminals. Several Russian universities offer top-notch hacking training, and a Ukrainian hacker is suspected in December’s theft of 40 million credit card numbers from Target.”
Experts give the edge to Russia, by a mile. “Russia is a Tier 1 cyberpower,” says Dmitri Alperovich of California-based cyber security firm CrowdStrike. “Ukraine isn’t even in Tier 3.” Thus, on Saturday was the National Security and Defense Council of Ukraine — the country’s top security agency — hit with one of those “DDoS” attacks that bombard its servers with traffic.
Back stateside, the cybersecurity sector has seen yet another juicy buyout. Yesterday, Lockheed Martin announced it’s acquiring a privately held firm in New England called Industrial Defender.
Its specialty — protecting infrastructure like oil and gas pipelines… and electrical grids.
The deal comes hot on the heels of the Blackstone Group picking up another privately held cyber security player called Accuvant the day before.
Meanwhile, several similar tiny firms — publicly held — also look like buyout bait. And even if they aren’t snapped up right away, they stand to collect the lion’s share of the Pentagon’s “black budget” — as we’ve been pointing out since the beginning of the year.
But with so much investor money flowing into this sector now — early-stage funding shot up 60% last year, to $244 million worldwide, says yesterday’s Financial Times — your opportunity for quick, explosive gains is at risk of slipping away.
With that in mind, we’ve set a firm cutoff of midnight tonight: Only a few hours remain in which you can seize on Byron King’s lucrative cybersecurity research, gleaned from declassified documents and his extensive contacts in industry and government. Here’s your last chance to seize the moment.
Stocks are pulling back this morning. The S&P 500 is down about a quarter percent, to 1,863. That’s off about 15 points from Friday’s all-time closing high of 1,878.
Congratulations to Jonas Elmerraji’s STORM Signals readers who played Jonas’ early February call on the S&P aggressively. Yesterday, he urged them to close out their options on the SPY ETF for 99% gains in a mere five weeks.
Oil is stabilizing this morning at $98.35, after getting knocked down below $100 the day before.
The clear catalyst yesterday was an announcement that Washington will tap the Strategic Petroleum Reserve in a “test” run — releasing 5 million barrels in a move intended “to appropriately assess the system’s capabilities in the event of a disruption.”
The White House said the move had been long planned. The fact that the oil to be released is the high-sulfur “sour” variety that comes from Russia? The Financial Times, giving the official story the benefit of the doubt, infers “that the test will assess the system’s readiness to cope with a disruption of Russian supplies.”
The fact gasoline has jumped an average 20 cents a gallon in the last month and it’s a midterm election year? That has nothing to do with it at all — nothing. Any more than it did with the last such “test” release after Iraq invaded Kuwait in 1990 and gas prices soared right before Labor Day as midterm elections loomed. Heh…
Gold is putting $1,350 further in the rearview this morning. At last check, the bid was up another five-spot, to $1,372.
Elsewhere in the precious metals complex, silver’s off slightly, to $21.27… platinum is up slightly to $1,473… and platinum’s kissing cousin palladium is unchanged at $772.
We continue to be struck by the movement in palladium — up 8% in 30 days. Here too Russia is a factor in play — it’s the world’s biggest producer of the metal. Any Western sanctions on Russia would put a major crimp in global auto production, which needs palladium in addition to platinum to make catalytic converters.
Sure, you can invest in a palladium ETF… but as with all precious metals, there’s nothing like the real thing. And you can get the real thing with an EverBank Metals Select Account — offering 1-ounce bars and Canadian Maple Leaf coins. Storage or delivery, it’s your choice. If you prefer the cost savings of an “unallocated” account, that’s available too. Learn about all the Metals Select offerings at this link. As a reminder, we have a marketing relationship with EverBank, but we wouldn’t tell you about their products if we didn’t believe in them.
Just in case the thought crossed your mind, you might run into some resistance if you try to launch a business selling names of the craters on Mars.
That’s the business model for an outfit called Uwingu. Think of it as an Internet-era version of the old late-night “Name a star after a loved one!” TV commercials.
The Paris-based International Astronomical Union does not approve. “Such initiatives go against the spirit of free and equal access to space, as well as against internationally recognized standards.”
The fact Uwingu says it will donate much of its proceeds in the form of “grants for space researchers, educators and entrepreneurs in this time of government cutbacks”?
No dice. “Hence no purchased names can ever be used on official maps and globes,” sayeth the IAU.
Near as we can tell, the IAU lacks authority over unofficial maps and globes.
“Why is Barack Obama trying to tell the Ukrainians or the Russians what they should be doing?” a reader muses.
“Or the Afghans, Iranians or Syrians, for that matter? Does he think he is ‘Emperor of the World’? He can’t even get things working correctly in his own bailiwick.”
The 5: From a random Facebook post that came to our attention: “Does Denmark have a plan for the U.S.? Does France? Why should we have a plan for Ukraine? Who made us world arbiters, world cops? Who made us a one-man U.N.?”
“David Stockman discusses the myth of Reagan’s military spending bankrupting the Soviets in his book The Great Deformation,” writes a reader.
This thread on what triggered the demise of the Soviet Union has a lot more life than we ever figured…
“Stockman instead claims that most of the military spending went into conventional forces that allow us now to intervene all over the globe. Of course, the real reason the Soviets went broke was that socialism doesn’t work.”
“The guy who claimed cheap oil caused the savings and loan crisis of the ’90s must have been smoking gigi in Colorado.
“I was investing in oil in Texas at that time. Oil at the wellhead had been unregulated, and a boom in drilling took place because OPEC had squeezed us with several embargos. Booms in drilling tend to produce more oil (imagine that), and the price dropped substantially. If OPEC did anything, it was trying to keep their revenues up by producing more barrels. This did cause prices to lower, and we laid down rigs as a result.
“But what caused the S&L failures was not oil loans. It was lending into an economy that fell apart. They were busy lending to a booming housing industry since the late ’70s. Being deregulated, the S&L didn’t underwrite their book (sound familiar?), and when things went south in the economy, their book value of those homes were underwater (sound familiar?).
“In steps the government and forms the Resolution Trust Corp. to buy them off the S&L books so more S&Ls don’t go broke because the Federal Savings and Loan Insurance Corp. was broke (sound familiar?).”
The 5: It does sound familiar, except for the people-going-to-jail part. Somehow, the feds never got around to that this time…
“I’m not sure which reader said telling most people to not overwithhold should carry a criminal penalty, but it made me scream.”
Oh, yeah, that guy…
“We can’t, nor should we feel obligated to, protect people from their own ignorance. Readers of the 5 Min. Forecast are not ‘most people,’ and the reader should, please, give us the benefit of the doubt. I’m a little embarrassed to be reading the same thing this guy/gal is…
“Just goes to show you can’t fix stupid. Always enjoy your 5 Min. Forecast.”
“Your newsletters are an interesting read!” writes another reader with praise. “With all the comments, ideas on how to get Big Government’s hands off of everything in your life, isn’t there anything written up on expatriation? What are the pros and cons to this?”
The 5: There’s a topic that could take up 5 Mins. all by itself.
We’re all for international diversification… whether it’s as modest as a chunk or two of gold kept overseas or all-out surrendering U.S. citizenship, as has been in the headlines recently.
Our leader of the pack Addison Wiggin has written about expatriation periodically in Apogee Advisory for nearly three years. The funny thing he’s noticed is that so many of the people giving up their U.S. passports are not “the rich” trying to hide their assets… but ordinary folks living overseas who don’t feel like spending $2,000 a year just to comply with Uncle Sam’s onerous paperwork requirements… or disclosing the assets of a spouse who never had U.S. citizenship to begin with.
“It may be lower-income Americans leading the charge through the exits,” he said last fall. “Under an ‘exit tax’ enacted in 2008, expatriating Americans must pay capital gains taxes on the appreciated value of everything they own — as if they sold it. But the exit tax does not apply if you have a net worth of less than $2 million.”
So there…
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. Final we-really-mean-it-this-time reminder: Byron King’s expose on profit opportunities from the Pentagon’s “black budget” goes offline at midnight tonight.