- The biggest disappointment from the debate
- As we expected, Hillary pulls the Putin card: We offer a reality check
- Putin’s next move, certain to blindside both Clinton and Trump — but not you
- Watch lists, due process and gun stocks
- When the people waging currency wars forget what they’re fighting about
- Sellers take over the gold market… questioning the government’s income numbers… readers make the case for driverless cars… and more!
The much-ballyhooed, uber-hyped, showdown-of-the-century debate is now over… and it didn’t have the outcome your editor was hoping for.
But our expectations on that score weren’t very high to begin with, heh.
Failing that… as we said when signing off at the end of yesterday’s episode, we were watching most closely for whether Hillary Clinton would play the Putin card.
Took more than an hour, but she did the instant the “Securing America” portion of the debate began. (Why couldn’t there be a “Liberating America” portion? But we digress.)
“There’s no doubt now that Russia has used cyberattacks against all kinds of organizations in our country and I am deeply concerned about this,” she said. “I know Donald’s very praiseworthy of Vladimir Putin, but Putin is playing a really… (CROSSTALK)… tough, long game here. And one of the things he’s done is to let loose cyberattackers to hack into government files, to hack into personal files, hack into the Democratic National Committee.”
If you’re a longtime reader of The 5, you know we’re skeptical about claims that “everyone knows” the Russians or the Chinese or the North Koreans are behind one or another cyberattack. Usually, these claims come from self-interested parties in the cybersecurity industry who know they can get fat contracts from the federal government by blaming “state-based actors.”
Here’s the problem: For laymen like you and me, it’s tempting to think that “attribution” of a cyberattack is an easy thing to track down using the right tools and the scientific method.
The reality is far more squishy. “Claims of attribution aren’t testable or repeatable because the hypothesis is never proven right or wrong,” says Jeffrey Carr, author of the book Inside Cyber Warfare.
“There’s no way to prove whether the assignment of attribution is true or false unless (1) there is a criminal conviction, (2) the hacker is caught in the act or (3) a government employee leaked the evidence.”
Thus, Carr says blaming the Russians for hacking the Democratic Party because the Russian alphabet turned up in some of the computer code makes as much sense as saying the perps in a bank robbery must be Japanese because the getaway car was a Toyota.
A hacker identifying himself as “Guccifer 2.0” has claimed responsibility for the hack, and for leaking the Democrats’ emails to WikiLeaks. But Carr says it’s a major stretch to link him to the Russkies. “Even if he’s a native Russian speaker,” he wrote at Medium this month, “that tells us nothing about who he is, where he is or who he works for.”
We take up this exercise in myth-busting today with a couple of purposes in mind: First, and at the risk of sounding too flippant, we’d hate to see World War III stirred up over false pretenses.
But of more immediate concern is that the Putin-hacking-the-election nonsense is a diversion from Putin’s very real plans to launch a “sneak attack” on the U.S. dollar. Maybe even before Election Day.
This is a situation Jim Rickards has been watching closely for months as he’s gathered information from his extensive contacts within the U.S. intelligence community. It’s not that Putin is seeking any sort of revenge on Washington; he’s just looking out for his nation’s interests, and those interests don’t coincide with Washington’s plans.
What Putin has up his sleeve, says Jim, will amount to the third great currency shock of the last two years — on the heels of Switzerland breaking the franc’s peg to the euro and China devaluing the yuan.
It’s sure to rock markets worldwide. But Jim’s convinced you can be on the right side of the trade for a gain of perhaps 400% or more. He’ll show you how during a live online briefing tomorrow at 7:00 p.m. EDT.
You can watch it live as it happens, or catch a replay later if you have plans tomorrow night. Either way, it’s FREE to watch. Just shoot us your email address at this link and we’ll save you a spot.
To the markets, which the establishment tells us are rallying because Hillary Clinton “won” the debate and she’s more of a known quantity than Donald Trump.
For all we know, that might even be true. But we also recall Mitt Romney and John Kerry “won” their debates back in the day, for all the good it did.
Around here, we know better than to attribute day-to-day market moves to a single catalyst. So we simply note that as we write, the major U.S. stock indexes are up — but not enough to erase yesterday’s losses. The Dow rests at 18,184.
Treasury yields keep falling, the 10-year now at 1.56%. Gold is giving up ground, down more than $10 at $1,326… and it’s not exclusively a function of dollar strength, the dollar index up only a bit at 95.6.
Crude is down nearly 3.5% as yet another OPEC production-cut rumor has gone by the boards; a barrel of West Texas Intermediate now fetches $44.36.
Gun stocks are looking resilient this morning either because of — or despite — gun-grabbing unanimity on the debate stage last night.
Typically after mass shootings, gun stocks go up. The thinking is that public sentiment will turn more favorable toward gun control, so sales increase temporarily before lawmakers can act. Usually, they don’t act, and it’s all good for gun stocks.
But after the Orlando nightclub massacre last summer, we noticed the bump in gun stocks didn’t last long — perhaps because both Clinton and Trump had taken a stand hostile to gun rights. Each came out in favor of forbidding firearms sales to people on the “no-fly” list.
Both candidates reaffirmed that position last night. Never mind that the feds say it requires neither “concrete facts” nor “irrefutable evidence” to be put on that list. And once you’re there, good luck finding out why, much less going through official channels to seek redress — they don’t exist. So much for the Fifth Amendment’s guarantees of due process.
In any event, Sturm, Ruger (RGR) is down only a bit as we write. And Smith & Wesson (SWHC) is up 1%, although that looks like a rebound rally after shares tumbled 6% yesterday; the company was turned down for a big Army contract.
Nearly seven years into the global currency wars and the generals don’t even know what they’re fighting for anymore.
Our friend Chuck Butler at EverBank Global Markets spotted a Bloomberg article that begins thus: “A weaker currency, once the cure-all for ailing economies around the world, isn’t the panacea it once was.”
The article cited the experience of Japan from 2012–14: The yen dove 28%, but exports to the United States fell 10%. And Britain from 2007–09: The pound fell 19%, but exports to the United States fell 26%. Goldman Sachs did the research — they’re good for something once in a while — and found exchange-rate movements have less than half the effect now compared with 15 years ago.
For Chuck, the news affirms something he’s been saying for a long time: “There will always be a currency that has bad fundamentals and shouldn’t be strong, but they can’t all be in the same boat at the same time.”
Conspicuous by its absence in Goldman’s research is the American experience.
As Jim Rickards is wont to remind us, it was Barack Obama who launched the current round of currency wars in early 2010. In his State of the Union address, he promised to double U.S. exports over the following five years.
“Of course,” Jim told us earlier this year, “the U.S. could not become twice as productive or twice as populous in five years. The only way to double exports was to trash the currency, and that’s exactly what happened. The dollar plunged over the next 18 months to an all-time low in August 2011.”
And U.S. exports grew only 50% from 2010–2015, meeting the president’s goal only halfway.
“I can’t believe that 5%-plus increase in household income from 2014–15,” a reader writes, following up on topic from last week.
“That is really illogical especially when the GDP is growing at less than 2%. Companies have all of a sudden become Santa Claus. How are the feds defining income these days? Do Obamacare credits go on the top line?
“But this change on how ‘rural’ Americans are defined is really out there in left field. It is noteworthy that the Census Bureau speaks of 6 million ‘people’ and not how many households were reclassified from nonmetro to metro. BTW, where is exurbia now?
“Regardless, let’s look at the numbers. If 2014, if the income index is 100, then the initial reported income index for 2015 would be 98, or a 2% drop. In that report, there were 18,204,000 households in rural America. When this number of households is multiplied by the income index of 98, this yields an income product of 1,783,992,000. After the move of 6 million ‘people’ to metro in its revision, let’s equate this number to 2 million households (three people per household — might be high, but we use what we have). Now, there are 16,204,000 households in rural/nonmetro America that have an index of 103.4, per the Census Bureau. This group has an income product of 1,675,493,600.
“Therefore, the 2 million households caused a reduction of 108,498,400 in income product, or the equivalent of a 54.25% drop in income for these households. Is that logical that the reclassified households ‘lost’ that much income? Is there another revision coming?
“I have never believed any of the Census or Labor bureau numbers of the Clinton, Bush II or Obama administrations, and it is the gerrymandering of any and all figures to fit the specific needs of each administration that has always made me leery of the numbers released. Liars are they all!”
“Didn’t computers fly the space shuttle? And computers fly airplanes today. Driving a car should be doable,” a reader writes on the topic of driverless cars.
“And I am quite sure there will be less road rage and DUIs.”
“We need driverless cars,” chimes in another. “I’m 70, so I foresee a time approaching when the state will say I can’t drive anymore. Right now, I am good. I’ve got more than 1.5 million lifetime miles logged, am a pilot (plane and boat), have driven a race car and now volunteer driving an ambulance. So I can handle a vehicle. But it will not always be so.
“All those folks who disparage them are evidently not thinking about their future. I don’t want to be dependent on someone else to drive me, i.e., lose my freedom. I see it too often with the folks we pick up in the ambulance. I plan to be at the front of the line when those cars come out, and they need to hurry.”
The 5: As we said last month when our science-and-wealth team was out in Silicon Valley, it’s in progress. More to come in the weeks and months ahead…
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. “If Putin’s sneak currency attack hits financial markets in the next few weeks, stocks could flash-crash by over 10% in a matter of minutes,” says Jim Rickards, “and oil prices could rise by $10–20 per barrel.”
Legions of investors will be blindsided… but you can seize on the turmoil for gains of 400% or more as Russia fires the next shot in the global currency wars.
Jim’s leading a live web briefing tomorrow at 7:00 p.m. EDT with all the details. It won’t cost you a thing to look in. Just send us your email address and we’ll send you a link where you can watch.
