“Inflicting Maximum Pain and Damage”

  • Another strange wave of simultaneous power outages
  • A terrorist attack far more devastating than a shooting or bombing
  • Ill omen for the housing recovery? The number that just plunged
  • Why China and Russia are freaked out by America’s South Korean missile defense
  • Canada’s costly silver-coin fiasco
  • A reader gets shaken out of his gold stocks and writes in to The 5

Hmmm… While the world’s attention focuses this morning on the bombing in Manchester, we’re noticing another round of strangely simultaneous power outages.

The last one was just over a month ago. About 90,000 customers lost power in San Francisco when a circuit breaker at a substation suddenly quit. Smaller mishaps hit New York (electrical line failure) and Los Angeles (construction accident).

Yesterday during evening rush hour it was Portland, Oregon. An electrical vault caught fire, cutting power to a sizeable swath of downtown. About 2,200 customers still have no power this morning, and service might not be restored till tonight.

Meanwhile this morning in Nashville, someone broke into a substation and managed to cut power to more than 4,700 customers. “A witness reported seeing a man on fire,” says a thin-on-details report from the city’s CBS affiliate. As we write, his fate is unknown, but we do know power was restored within four hours.

The outages during 2017 have been isolated events — so far. But the possibility of a cyberattack on the power grid, affecting millions, has been on our minds here at The 5 for years.

The U.S. power grid is far more interconnected than most of us appreciate. As we pointed out in 2014, only three major grids span the country — the eastern, the western and the “Ercot” or 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.

Our alarm in 2014 was magnified when we learned the U.S. government had performed a computer-model stress test on the grid. Its frightening conclusion: Take out only nine of the nation’s 55,000 substations on a hot summer day and the result would be a coast-to-coast blackout for 18 months or longer.

Strictly speaking, an attack of this type isn’t on our usual financial beat. But there’s no surer way to disrupt the markets and the economy, no? And as we said last month, it’s the kind of terrorist act far more likely to affect your life than a random bombing or shooting.

“If an adversary has as its goal inflicting maximum damage and pain on the largest number of Americans, there may not be a more productive target” than the power grid, says the veteran journalist Ted Koppel.

Mr. Koppel, who presided over ABC News Nightline for a quarter century, is now 77. It’s been more than a decade since ABC executives decided they wanted to tart up the program for a younger audience; Koppel saw the writing on the wall and opted to retire.

But he hasn’t retreated from the public eye completely. And it’s one of his most recent projects that caught our eye — a book he penned called Lights Out: A Cyberattack, A Nation Unprepared, Surviving the Aftermath.

“If a highly populated area were without electricity for a period of months or even weeks,” Koppel writes, “there is no master plan for the civilian population.”

He paints a dire scenario: “Emergency generators provide pockets of light and power, but there is little running water anywhere. In cities with water towers on the roofs of high-rise buildings, gravity keeps the flow going for two, perhaps three days. When this runs out, taps go dry; toilets no longer flush.

“Emergency supplies of bottled water are too scarce to use for anything but drinking, and there is nowhere to replenish the supply. Disposal of human waste becomes a critical issue within days.

“Supermarket and pharmacy shelves are empty in a matter of hours. It is a shock to discover how quickly a city can exhaust its food supplies. Stores do not readily adapt to panic buying, and many city dwellers, accustomed to ordering out, have only scant supplies at home. There is no immediate resupply, and people become desperate.”

And that’s not even the entire first week.

This topic is so important that our Laissez Faire unit has spent $80,000 acquiring copies of Lights Out to give readers to readers like you — plus additional expense preparing special reports that will help you and your family survive a grid-down scenario. Follow this link to claim your book and reports.

The markets are quiet on this Tuesday: The major U.S. stock indexes are slightly in the green. Treasury rates are inching up. The gold price has shed $3.

The big economic number of the day, however, was a shock: New home sales tumbled 11.4% in April, according to the Census Bureau. Sales slowed even though builders cut prices.

One month never tells the whole story — and it’s worth pointing out the March and February numbers were revised upward — but the trend will be something to watch as we ease into peak home-buying season.

The United Nations Security Council meets behind closed doors this evening to thrash out a new response to the seemingly intractable situation on the Korean Peninsula.

We’re not expecting anything substantive… in large part because three of the Security Council’s five permanent members are at loggerheads over a recent development that’s caught the eye of Kevin Massengill from Rickards’ and Massengill’s Defense Technology Alert.

“Last month,” he explains, “the U.S. started to deploy what’s known as ‘THAAD,’ the Terminal High Altitude Area Defense system, in South Korea.”

The system is designed to intercept missiles fired by North Korea. “However,” Kevin tells us, “Russia and China both view the development and deployment of THAAD as a strategic threat. Some fear that the deployment of this new defensive technology will escalate tension and even create an all-out arms race in the region.”

A THAAD exercise in 2013…

THAAD’s radar-detection system reaches well into China — and thus could easily monitor Chinese missiles. Chinese leaders fear that’s by design: “It provides the U.S. with a slight edge on China in the event of a future war,” Kevin explains. “The U.S. will be able to detect incoming missiles from China early enough to stop them. The Chinese military is unable to place a radar anywhere as close to the United States to detect incoming missiles, giving the advantage to the United States.”

The Russians, meanwhile, have watched the United States install THAAD systems in Eastern Europe, Alaska, Japan and now South Korea. “According to Russian military analysts,” says Kevin, “this pattern of deployment signifies that the U.S. is attempting to develop a missile defense system that will make it impervious to potential Russian airstrikes.”

Even many South Koreans don’t care for THAAD…


Protesters fought with police last month as the U.S. Army completed installation of the system. And the new president, Moon Jae-in, campaigned on a platform that included a reversal of the THAAD deployment.

But the Russians and the Chinese aren’t waiting on political developments in South Korea. “Both China and Russia are developing hypersonic missiles designed to frustrate U.S. anti-ballistic missile defenses, including THAAD,” says Kevin. He’ll be staying on top of the investment implications in the defense sector in the months to come…

In the annals of government stupidity, the story of Canada’s “Face Value” collectible coins is truly epic.

As you might know, many gold and silver coins minted by governments these days have a face value far below their actual metal value. You could hypothetically buy $50 worth of goods with a one-ounce U.S. Gold Eagle, but you wouldn’t want to because the metal is worth $1,253.

But the Royal Canadian Mint miscalculated badly when it issued a series of commemorative silver coins in 2011 with images of Superman, Bugs Bunny, the starship Enterprise, etc.

The coins were a quarter ounce. The face value was C$20. They were sold to the public for C$20 (tax-free, to boot). More than 4.2 million of them have been struck since then.

As it happens, 2011 was the year silver prices peaked and then began to collapse. That quarter ounce of silver is worth less than C$6. But… under Mint policy, owners of the coins can sell them back and collect C$20. Which is exactly what many owners are doing.

Maybe they should have minted one depicting the Three Stooges…

The accounting nightmare was so bad that the Mint delayed its 2016 annual report for months. The Mint still turned a profit of $24.5 million… but that’s well short of its $41.3 million target. Employees won’t be getting the bonuses they’re accustomed to.

As for the coins, “It’ll take a long time before these have really any significant collector value,” Henry Nienhuis of the Royal Canadian Numismatic Association tells the CBC. “You’re going to be hard-pressed to recover your investment.”

“As a relatively new member and follower of Agora Financial, I have been learning so much!” a reader enthuses.

“I jumped into some gold miner stocks and ETFs two weeks ago on the low and was riding happy until Thursday morning with a sharp sell-off.

“I understand markets rise and fall but I was puzzled because I didn’t understand the reason for the fall. Early in the day the S&P and Dow were falling, so I expected the miners to rise (not so). Gold wasn’t falling considerably, so I expected the miners to hold (not so). Finally, the U.S. dollar wasn’t rising, so I didn’t see a currency influence.

“I can only think of two other possibilities for the sell-off. One, that the gold miner traders are a smart bunch and read the fallacy of a Trump impeachment (they follow Jim Rickards!) and were early to see the market turn to risk-on (so they did some early profit taking). This implies gold miners are a sharp crowd and ahead of the curve!

“Or… and this is the one that scared me… that everyone was so overstretched that they were selling gold miners to cover positions in other sectors.

“To conclude, I guess I have a fear that any light recession will hurt the miners. Can you alleviate that concern?

“The latter gave me a scare and I bailed out (with some small gains) of GDX, GDXJ, ABX, SAND and GOEX (regretfully), but I’d like to jump back in somewhat educated. I’m also interested if I’m missing a dynamic.

“Thank you once again for helping us be wise managers of what we’ve been blessed with.”

The 5: There’s an old saw about how sometimes gold stocks act more like gold, and other times they act more like stocks. And how they act can vary from week to week or even day to day.

About the miners and a recession: That’s undeniably a possibility and one we’re always watching for. The HUI index of gold stocks peaked and then fell hard during the Panic of 2008… but they also bottomed before the rest of the stock market and roared back as the Federal Reserve cranked up the printing press. In the end, they recovered their 2008 highs in less than two years and soared still higher after that.

At this time, none of our editors looks at gold stocks as something to trade in and out of. Maybe we’ll launch a short-term gold stock trading service if we sense the demand for it in the future. But the majors recommended in RickardsStrategic Intelligence are long-term holds. Ditto for the juniors recommended in Rickards’ Gold Speculator With Byron King.

If you’re going to get shaken out of your positions after only a few days because of changing headlines hour to hour, you might be better off sticking with the metal and avoiding the stocks…

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. “Make no mistake: The threat is real,” says the aforementioned Ted Koppel — bringing this episode of The 5 full circle.

“If hackers, be they nation-states or nonstate actors, were to successfully take down our electric grid, we would be thrust back into something approximating the mid-19th century.”

That’s why Laissez Faire is offering you a free copy of Mr. Koppel’s book — the dead-tree kind, not dependent on an electronic device for your reading pleasure. Plus a series of special reports prepared by Jason Hanson — a retired CIA officer who these days uses the knowledge he acquired at the agency to empower everyday Americans with the skills to survive any calamity. Here’s where to go.

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

Recent Alerts

Here Comes the AI Cartel

Maybe you saw the news earlier this week: An outfit called the Center for AI Safety issued a 22-word statement — as dire as it is terse. Read More

A Deal in D.C., a Wipeout on Wall Street

Debt ceiling deal, U.S. Treasury auctions, Wall Street liquidity, Fed policy reversal, BlackRock recession call, gross domestic income, GDI, Maryland license plate snafu Read More

Climate, Carbon… and Control

“The climate change agenda is not about climate change,” says Jim Rickards. “It’s about total political and economic control of the population.” Read More

White House’s New Witch Hunt

Go figure: The stock market is at nine-month highs, but the Biden administration is amping up its jihad against short sellers Read More

The Biden Bleed

Presidents have meddled with the SPR for political purposes. But Biden is really leveling up. Read More

Natural Gas Gets Blacklisted

The EPA — with Team Biden’s blessing — proposes an overhaul of U.S. power plants by 2042. Read More

Green Smokescreen

Ray Blanco is on the lookout for presumed do-gooders… blowing “Green Smoke” up our collective rear ends. Read More

“No Blood for Chips!”

Fair warning: This edition of The 5 might be the most controversial issue we’ve ever published. Read More

The Dollar’s Death March

Nine years after The 5 started writing about “de-dollarization,” you can’t get away from headlines about it now. Read More

The “F” Word

No sooner did G7 leaders sit down yesterday than they declared they’re doubling down on sanctions targeting Russia. Read More