| | | | | Thursday, October 22, 2015 | |
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Eric Fry, contemplating the risk of cyberattacks, reports...
At the most basic level, almost every form of cyberterrorism is a form of theft. It steals our wealth... our liberty... our sense of security.
Defending ourselves against this threat, which is both amorphous and very invasive, is no small task.
That's why companies and governments around the world are spending hundreds of billions of dollars trying to stay one step ahead of the threat.
But what is an individual supposed to do? What should average Joes and Janes like us be doing to protect ourselves?
I don't pretend to have the answer to this very challenging question. But I do have a few more questions to toss into the ring...
Here's my first question: Since cyberterrorism relies on digital data and on connectivity to the Internet, shouldn't we be able to gain some measure of security by moving some facets of our lives into nondigital and unconnected realms?
In other words, wouldn't it be possible to build a kind of cyber-moat around ourselves by going "low-tech" or "no tech"?
An email can be hacked, for example, but a written letter cannot. A bank account can be hacked; a stack of gold cannot. A computer can be hacked; a typewriter cannot. Even a modern refrigerator can be hacked; an old refrigerator cannot.
Potentially, access to municipal water supplies could be hacked; access to a well cannot. The systems that guide airline and rail travel could be hacked; a bicycle cannot. An older, pre-digital car or motorcycle cannot be hacked either.
Generally speaking, almost every digital, "smart" device or system on the planet could be hacked; every nondigital, "stupid" device cannot.
By extension, the greater the complexity of a society, the more vulnerable to hacking it becomes... and the more devastating a cyberattack could be.
New York City, for example, is far more hackable than the Amish village of Bird-in-Hand, Pennsylvania. Los Angeles is far more vulnerable than CalchaquĆ, Argentina.
This reality does not mean that we should freeze the path of progress and toss every post-2000 item we own in the trash... or that we should start going to garage sales to buy phonographs, typewriters and other old appliances.
But going low-tech selectively may provide a small dose of security. Consider your savings, for example. This is the money you call "yours," and yet you rarely see, touch or hold it in your hands.
Where does it reside? In the stock market? In a bank?
If so, your savings are just "ones and zeros." They are purely digital... and they reside in electronic structures that have been hacked already.
"Dormant malware - believed to be of Russian origin - was found hidden and awaiting activation in the software that runs the Nasdaq exchange," observes Mark O'Byrne of GoldCore. "[And] Moscow-based Kaspersky Lab showed earlier this year that an international team of hackers gained access to banks' customer accounts - with the ability to alter account balances without the banks even being aware of their presence. These examples show the highly vulnerable nature of the interconnected systems upon which people in the West have come to rely."
Your ones and zeros have survived so far. But they might not survive next time. So wouldn't it be a good idea to transfer some of your digital wealth into a tangible form? Wouldn't it be a good idea to buy a bit of gold and silver... just in case?
Wouldn't it be a good idea to have some tangible currency in your possession while you're waiting for "them," whomever "them" might be, to put all the ones and zeros back where they belong?
Here's another question: Since we Americans are probably the most likely targets of whatever large-scale cyberattacks may be brewing, wouldn't a little bit of international diversification be a good idea?
Now I'm not talking about a cyberattack that causes Armageddon, or even one that causes widespread societal chaos - merely one that creates an unpleasant bump in the road... or one that could create some level of economic hardship that is greater than nothing.
In that sort of scenario, it may be helpful to possess a few nondigital, non-U.S. assets. It might be worthwhile to hold a bit of silver or gold in a non-U.S. location and also to own a residence or two in a non-U.S. location.
To be clear, I'm not talking about going into hiding and waiting for the Cyber-Apocalypse; I'm merely suggesting that it could be worthwhile to relocate a couple important aspects of your life to a nondigital, non-U.S. locale.
But who knows? From a cyberterrorism point of view, buying precious metals and/or foreign real estate may be a big waste of time. I certainly hope so.
That's why the best way to go nondigital and non-U.S. is to do so organically - to buy foreign real estate you would love, even if the world never falls apart... and to buy precious metals or other assets that you are happy to hold, even if they "underperform" the stock market for years at a time.
No matter what path you take, keep in mind that holding 100% of your wealth in a digital format is an all-in bet that digital wealth will never face a serious cyberattack.
Go all in if you like, just realize that that's the bet you're making.
In today's issue, my friend and colleague Sean Brodrick shares a few scary thoughts about the growing threat of cyberterrorism.
What does this topic have to do with non-dollar themes?
Maybe nothing. Maybe everything.
Since we do not yet know, we've decided to feature Sean's insights anyway... just because they are so thought-provoking.
Are You Ready for a Cyberattack?
Some of my subscribers and regular readers may be sick of me going on... and on and on and on... about cybersecurity. How hacking is the biggest threat facing our country. How the next world war will be in cyberspace. How low barriers to entry make cybercrime the crime of the century.
"Oh, that Sean," you probably say. "He's obsessed. He needs a Xanax and a good night's sleep."
Well, maybe so. But what if I told you that the head of the National Security Agency is also lying awake at night, worrying about the same kinds of things I am?
And if he's right: There is a tidal wave of trouble bearing down on the sleeping citizens of the U.S.A.
Admiral Michael Rogers is director of the National Security Agency (NSA) and Commander of U.S. Cyber Command. He recently spoke at a conference sponsored by The Wall Street Journal.
And he says that a big cyberattack on the U.S. is a matter of "If," not "When."
Admiral Rogers says there are three things that really worry him the most:
No. 1. Cyberattacks That Do Infrastructure Damage. By that, the admiral means the electric grid, railroad switches, traffic control systems, nuclear power plants and more.
Rogers told the conference: "It is only a matter of 'when' that someone uses cyber as a tool to do damage to the critical infrastructure of our nation."
He added: "I'm watching groups within some of that infrastructure. At the moment, it seems to be really focused on reconnaissance and attempting to understand the characteristics of the structure. But it's only a matter of time, I believe, until someone actually does something destructive."
No. 2. Data Manipulation. "What happens when suddenly our data is manipulated and you no longer can believe what you're physically seeing?" Rogers asked the conference.
Like any kid who has cited Wikipedia as a reference in school, what we "know" on the Internet may not be real. For one example, attackers could take airplanes on and off the screens used by air traffic controllers.
Rogers is especially worried that false data could cause "risk-based decisions" to go catastrophically wrong.
No. 3. Stateless Bad Guys. This could be ISIS, al-Qaida or maybe a violent fringe group we don't know about yet.
Rogers asked: "What happens when a nonstate actor, who literally has no interest in the status quo, starts viewing the Web as not just a vehicle to generate revenue, to recruit, to spread the ideology? Instead they view it as a weapon system."
And the problem in all these examples is that the barriers to entry for tomorrow's super villains are getting lower and lower as our systems get more and more complex.
Terrorists can literally put a thousand (or 10,000) computer nerds in front of keyboards and keep them plinking away until they succeed. The only cost is electricity and whatever passes for jihadi junk food.
Of course, these aren't the only problems. There are also state-sponsored cyberterrorists. The Chinese government is linked to various large data hacks on U.S. corporations and on U.S. government agencies. In fact, U.S. businesses lose $300 billion a year from Chinese intellectual property theft.
And it's not just China. Russian hackers have plagued Wall Street for years. In August, Russian and Ukrainian hackers were arrested in a scheme in which they sneaked peeks at press releases, allowing them to trade the news early. That meant they banked more than $100 million in trades on stocks, including Panera Bread, Caterpillar, Boeing and more. The losers? American investors. Maybe even you.
When we talk about state-sponsored hacking, it's a long list. At least 29 countries have military or intelligence units dedicated to offensive cyberwarfare. That includes the good ol' U.S. of A.
And Admiral Rogers isn't the only one sounding the alarm. Recently, FBI Director James Comey briefed the U.S. Senate on "current threats to the homeland." Comey said that an element of virtually every national security threat and crime problem the FBI faces is cyber-based or facilitated.
Now for the Good News
I'm not trying to depress you. And there is some good news. A new report from Gartner says that global spending on cybersecurity will hit $75.4 billion this year. That's up 4.7% from last year.
How would you like to get a piece of that money flood? Now, you can.
The PureFunds ISE Cyber Security ETF (NYSEArca: HACK) tracks a basket of 32 U.S.-listed cybersecurity companies. It has been active for not quite a year, and investors have poured $1.26 billion into it.
I'd say that's the tip of the iceberg. A lot more money should flow into this sector. And that should push PureFunds and the stocks it holds higher.
Cyberthreats are real. But so are the profits you can make from security rising to meet these threats.
All the best,
Sean Brodrick
For The Non-Dollar Report
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