May 19, 2014
- Hacker attacks, both ridiculous and sublime
- Russia, China and India, oh my: Will the dollar survive global leaders’ machinations?
- An oil industry insider’s bold forecast for Bakken production
- Operation Choke Point, continued: The impact on the firearms industry
- The 5’s take on the AT&T-DirecTV deal… in defense of Putin (sort of)… who you can thank for the Agriculture Department’s submachine gun purchase… and more!
“How to Hack an Electronic Road Sign,” reads the headline on a 2009 article at Jalopnik.
The same headline showed up on a 2012 article at TechEBlog. Gizmodo in 2011 came up with the ingenious variation “How to Hack the New Road Signs.”
We didn’t realize it’s been such a big thing for so long. Thus these signs in San Francisco — which were supposed to advise drivers about a detour around the annual Bay to Breakers 12K race over the weekend…
We pass this item along as an amusing prelude to an episode of The 5 in which we see real-time affirmation of theme after theme our team has been anticipating for years…
“Enough is enough,” declared Attorney General Eric Holder this morning as he announced a hacking indictment against five officers in the People’s Liberation Army (PLA) of China.
The announcement marks “the first time the United States has charged government employees with economic espionage,” says The New York Times.
According to the indictment, the PLA burrowed its way into the servers of Westinghouse, Alcoa, Allegheny Technologies, U.S. Steel, the United Steelworkers union and SolarWorld. “This case,” said Holder, “should serve as a wake-up call to the seriousness of the ongoing cyberthreat.”
Welcome to the party, Mr. Holder — we were writing about the PLA’s work 15 months ago. Of course, we’ve also been writing about how the hacking goes both ways; the NSA has done a crackerjack job of burrowing into the servers of Huawei, the Chinese telecom giant. Heh…
Regardless, we expect the flow of investment dollars into the cybersecurity realm to accelerate. Here’s how you can collect a cut of it.
Of course, the indictment begs the question: How might the Chinese respond?
Our thoughts run in a couple of different directions: First, there’s the financial warfare Jim Rickards described to us over dinner last week.
Consider China’s $3 billion investment in the private equity firm Blackstone Group in 2007. “It is naive,” Rickards writes in his new book The Death of Money, “not to consider that information on America’s most powerful deal machine’s inner workings is being channeled to the political bureaus of the Communist Party of China” — to be used in ways limited only by the scope of one’s imagination.
Or maybe China will join with Russia tomorrow to knock out one of the major props underneath the dollar’s status as the world’s reserve currency.
Russia’s President Putin pays his first call on China’s President Xi tomorrow in Shanghai; Putin is quoted as saying talks on natural gas exports from Russia to China are in “the final phase.”
He didn’t say anything about the deals being transacted in rubles and yuan instead of dollars. But then, why would he before the big photo op?
Just in case a big announcement comes tomorrow, you might want to bone up in advance and check out the essay by our executive publisher Addison Wiggin. Under the provocative title, “The U.S. Energy Boom Will End the Dollar’s World Reserve Status,” it’s in two parts at The Daily Reckoning, here and here.
Maybe India’s new prime minister will pull Washington’s chestnuts out of the fire.
“Obama has welcomed the election of Narendra Modi in India,” says the Swoop, the Monday morning briefing published by the Washington Assessment and Analysis Service. “Although Modi was once denied a U.S. visa, administration officials see his election as a chance to reinvigorate what they see as the ‘strategic relationship’ with New Delhi.”
The rap on Modi — and the reason he was denied a visa in 2005 — is that when he was governor of Gujarat state in 2002, he looked the other way as Hindus ran riot and killed at least 1,000 Muslims.
But that’s all forgiven now, says The Swoop: “Commentators are playing down Modi’s nationalist past in favor of his commitment to economic reform. There is also an underlying hope that Modi might shift India away from its traditional close relationship with Russia and leverage its long-standing differences with China.”
Exactly…
“[The U.S. shale boom] is the only real bright spot in the U.S. economy,” says Continental Resources CEO Harold Hamm.
Mr. Hamm’s firm is real-time affirmation of the “Re-Made in America” thesis our Byron King first suggested in January 2012.
In 2007, Continental produced 7,000 barrels of oil per day. Last year? 135,000 per day. No wonder he’s on the cover of the current Forbes…
Our Matt Insley was in the room as Hamm gave a presentation last week to a small group in London. “Hamm is widely known as one of the fathers of America’s energy boom — in many respects, he is the father of the frack boom.”
But Hamm said it’s not hydraulic fracturing — the “fracking” process of busting up dense formations of rock to reach tiny pockets of oil — that brought about America’s new energy bounty. Fracking’s been around a long time. No, “It’s horizontal drilling,” said Hamm, “that got us here.”
“It’s 10,000 feet of well bore touching the oil-bearing rock,” Matt elaborates — a phenomenon only possible by utilizing horizontal drilling techniques.”
Hamm says the Bakken formation in North Dakota, already yielding 1 million barrels per day, will eventually reach 2 million.
Small caps are showing a little life this morning: The Russell 2000 is leading all the major U.S. indexes into the green, up nearly 1% as we write, at 1,113.
The Dow, on the other hand, is barely positive at 16,511. The big buzz this morning is about Dow component AT&T’s $48.5 billion takeover of DirecTV.
“This is a good deal for AT&T,” says our investment director Paul Mampilly. “AT&T gets to use its highly valued stock and gets to issue debt at record-low rates to buy a great company.
“So what’s to like in DirecTV? DirecTV has a great South American business that gives AT&T international exposure it does not have at present. In the U.S., DirecTV gives AT&T a second pipe, if you will, into people’s homes. And this pipe delivers the thing that people crave the most — video content. If they can transition people from watching this content on a TV to their tablets and phones, this deal could completely change what AT&T is in a few years.”
At last check, AT&T is down nearly 2%. “Normally, people think of AT&T as the kind of company that makes dumb buying decisions,” says Paul. “But this one looks pretty good to me.”
Gold is clambering its way back to $1,300. As we write, the bid is up $3, to $1,296. Crude is up more than a buck, to $103.04.
In neither case can dollar weakness get the credit; the dollar index is flat at 80 on the nose.
“Freezing their assets will put them out of business,” warns Joe Sirochman, owner of American Spirit Arms — a maker of gun parts in Scottsdale, Ariz.
The Washington Times is only now catching on to the Justice Department’s Operation Choke Point — more than two weeks after we spilled a considerable amount of digital ink. Its story zeroes in on the gun shops who find their bank accounts being closed because banks are freaking out about any line of business that might have a link to “money laundering.”
“Just because Putin is ex-KGB does not make him a thug,” writes the first of several readers taking exception with a fellow reader whose email we shared on Friday.
“He looks positively gentlemanly compared to the American leaders, most of whom seem to be trying to incite chaos in the region. He didn’t look like a thug in Syria, where he probably averted a massive loss of life, and his takeover of Crimea was positively elegant. Ask the writer to justify his statement; as it stands, it is just casual slander not even worthy of publication (but I know — it is standard American groupthink).”
“Always amusing to hear a non-American leader termed a thug,” chimes in another, “while these same assuredly self-proclaimed patriots will wave the flag whenever a red, white and blue commander in chief sends troops out to ‘protect’ our interests, freedom or whatever it is that they are protecting today. (My assumption is that it is generally always oil.)
“Not defending Mr. Putin, but if there were a global ranking of thuggery, and said ranking was based on death and destruction, it would seem that American presidents would have a pretty strong showing on the list. Thanks for The 5.”
“When the reader was talking about the pragmatist,” writes a third, “was he talking about Putin or Obama?
“Both would do whatever was necessary in order to advance their agenda. The only difference I see between them is that those that work under Putin are afraid of him. Those that work under Obama have no fear of him but would strap a bomb around themselves in order to advance his agenda.”
“With all of the childish rhetoric going back and forth by the world’s two biggest narcissistic, spoiled, corrupt crybabies,” writes a fourth, pivoting to a meaty question…
“What is going on with the $1 BILLION -plus contract with the U.S. buying Mi-17 helicopters from Russia for more than they could have paid for the reliable Boeing Chinook helicopter made in the USA? Pennsylvania, I believe.
“Would you fly in one, trust their parts, logistics for replacement parts, our troops’ safety and certainly the GPS security of one? Is there anyone in D.C. that has the courage to put a stop to this? ‘Nuff said.”
The 5: We put the question to Military-Tech Alert editor Byron King: “Very few American troops will ever fly in the Russian helicopters.
“This is Russian equipment for up-arming the Afghans… (and Russian equipment isn’t as bad as a lot of people think…. much of it is quite good, actually).
“The Afghans already have a logistics pipeline for Russian helos. The training, parts pipelines, general understanding of employment and such — all are deeply rooted in a long-term Russian presence in Afghanistan. Even during the past 12 years of war, the Russians were there… building long-term relations.
“If the U.S. wants to throw bones to Boeing, we’ll need more than a few new helos from the Pennsylvania factory where they build Chinooks.”
“Well, pardner, I do understand there were a few terrorist Holstein cows on the Bundy ranch in Nevada,” one of our regulars writes tongue in cheek, “so I guess this makes sense.
“The U.S. Department of Agriculture — of all people!! — has solicited for the purchase of.40-caliber submachine guns with 30-round magazines capable of firing two round bursts or as semiauto.
“The USDA, according to its mission statement, exists: ‘To expand economic opportunity through innovation, helping rural America to thrive; to promote agriculture production sustainability that better nourishes Americans while also helping feed others throughout the world; and to preserve and conserve our nation’s natural resources through restored forests, improved watersheds and healthy private working lands.’
“Not sure how the machine guns fit into nourishing Americans, but maybe it has something to do with helping the police stop those 9-year-old girls on street corners from selling lemonade. And besides, maybe nourishing Americans has something to do with feeding them lead.”
The 5: And ponder this: The arm of the USDA putting in for the guns and ammo is its office of inspector general. Typically, going back to the Inspector General Act of 1978, inspectors general are in charge of investigating a department’s internal operations for the proverbial waste, fraud and abuse.
“So how did an internal government watchdog turn into an external projection of U.S. power against its own citizens?” asks Matt Welch at Reason. “Because of the Homeland Security Act of 2002, which amended the IG Act to grant inspectors ‘full law enforcement authority to carry firearms, make arrests and execute search warrants.'”
Welch reminds us the bill was sponsored — and ramrodded through the House — by that tireless advocate for limited government, Dick Armey.
Regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Even if Russia and China don’t move tomorrow to start trading oil and gas in rubles and yuan, another threat to the dollar looms.
In fact, this threat is hidden in plain sight in a U.S. Treasury document. And it points to a deliberate devaluation of the dollar within the next 12 months.
We say this not to alarm you… but to arm you with the knowledge you need so your wealth comes out intact on the other side. Begin here.