Wealth That Can't Be Deleted

Posted On May 13, 2016 By Dave Gonigam

  • Hackers hit the digital equivalent of a bank vault…
  • … So what chance does your measly online bank account have?
  • Another question: Is this latest hack the work of Kim Jong Un, Sooooper Genius?
  • The truth about “good manufacturing jobs,” continued
  • Corporate chiefs scheme to shear investors: Zach Scheidt reports from Vegas
  • Senators’ “solution” to long TSA lines
  • What we don’t know about Trump… being right or being happy, gold edition… a secret coded message (!)… and more!

Wait a minute — we’re supposed to believe the North Koreans are master computer hackers and financial thieves?

“Thieves have again found their way into what was thought to be the most secure financial messaging system in the world and stolen money from a bank,” reports The New York Times. “The crime appears to be part of a broad online attack on global banking.”

The perps broke into SWIFT — the international payments system that any large institution transacting in dollars needs access to. SWIFT is issuing a notice to its clients today saying the victim was a commercial bank — whose name it will not disclose. (Nor will it disclose how much money vanished.)

The tactics appear similar to a still-unsolved theft of $81 million in February from the central bank of Bangladesh — by way of both SWIFT and the Federal Reserve Bank of New York.

Make no mistake: This is no garden-variety financial hacking, in which the thieves snag a few million credit card numbers and PINs.

The money was taken “not from a large number of customers, but from the banks themselves,” says the Times. “It is as if the thieves used their hacking skills to reach inside a bank vault.”

Researchers at BAE Systems, the big British defense contractor, say the tactics also bear the fingerprints of whoever hacked into Sony Pictures in late 2014. “The overlaps between these samples provide strong links for the same coder being behind the recent bank heist cases and a wider-known campaign stretching back almost a decade.”

BAE is being circumspect about naming a culprit. But we remember well the FBI’s attempts to pin the Sony hack on North Korea — revenge, we were told, for a craptastic Seth Rogen movie set in North Korea that no one even remembers 18 months later.

As we said at the time, many cyber-experts found the FBI’s “evidence” wanting. Some of them said an inside job by a disgruntled Sony employee was more likely.

Anyway, we’re just waiting now for some federal agency or mainstream media outlet to blame the hermit kingdom for this latest cyberheist. A government that for all its nuclear bluster still can’t pull off a missile test without screwing something up. A government that in the best of times can’t feed its own people.

Besides, remember how Kim Jong Un’s regime tried to wow us with its technological savvy in 2013? This remains one of our favorite photos in The 5’s nine-year history…

Caption when we ran it the first time: “And the left arrow takes you back to the page you just visited.”

We have no more idea who pulled off this latest hack than you do. But it does underscore a point Jim Rickards has been making for a while, most recently in his latest book, The New Case for Gold.

“As a 21st-century investor, I don’t want all my wealth in digital form. I want some of my wealth in tangible form, such as gold.

“You can’t hack gold, you can’t digitally delete or erase gold and you can’t infect it with a computer virus, because it’s physical.”

“If it can happen to SWIFT, it can happen to you,” Jim underscored to his readers this week. “The solution is to own physical gold.” As usual, Jim recommends it make up 10% of your portfolio.

[If you already have your 10% allocation: Readers of our newest service, Rickards’ Gold Speculator, are coming out of the gate fast.

Charter subscribers were told on Monday to pick up shares of a junior gold miner called Kaminak Gold. Yesterday came word that Kaminak is being bought out by one of the big boys, Goldcorp. Result — a 33% gain in three days.

That’s just a hint of the power behind the MIDAS system Jim and his team developed to identify the junior gold plays with the most explosive potential. As Jim has said all week here in The 5, opportunities like this in the junior gold space come along only every 10 years or so. And they don’t last long. Jim walks you through the MIDAS system when you click here.]

The week’s stock market action is ending with a whimper — none of the major U.S. indexes moving much. As we write, the S&P 500 is off four points, at 2,060. Gold has perked up a bit to $1,270. Crude has retreated below $46.

The big economic number of the day is retail sales — up 1.3% in April, way better than the “expert consensus” had figured. But traders aren’t impressed, not after the profit warning Macy’s put out on Wednesday. At last check, XRT, the big retail ETF, is down another 1% today.

One other economic number of note — producer prices. The Bureau of Labor Statistics says they rose 0.2% last month, a bit weaker than expected in view of rising oil prices. Year over year shows no change. If the Federal Reserve is looking for signs of inflation to justify a June interest rate increase, they’re not here.

Elsewhere, we see International Monetary Fund chief Christine Lagarde — the “enforcer” of the “Shanghai Accord — is in London lecturing Britons about the “pretty bad to very, very bad consequences” if they vote next month to leave the European Union. Did the thought occur to her that someone in her position saying something like that might, you know, backfire?

Confirmation that “good manufacturing jobs” aren’t all they’re cracked up to be: One in three U.S. manufacturing workers is on the dole, says a new report from the University of California. Wages, it says, just aren’t up to snuff.

“Historically, blue-collar jobs in manufacturing provided opportunities for workers without a college education to earn a decent living,” say the researchers. “For many manufacturing jobs, this is no longer true.”

In five states, more than 40% of manufacturing workers are collecting food stamps or Medicaid or some similar program — Arkansas, Texas, California, Georgia and Mississippi. “The reality is the production jobs are increasingly coming to resemble fast-food or Wal-Mart jobs,” says Ken Jacobs, one of the study’s co-authors.

The numbers reinforce another study we spotted 18 months ago — which found the inflation-adjusted wages of U.S. factory workers had fallen 4.4% in the previous decade, three times faster than the overall workforce.

“I’m noticing a significant increase in the number of speakers focusing on strategies and opportunities for investors to generate income,” writes our Zach Scheidt from the annual MoneyShow in Las Vegas.

“That makes sense considering the exceptionally low interest rates around the world and the negative interest rates that have been introduced in Japan, Europe and a few other economies. So income is a hot topic for investors who need to generate cash to cover life expenses.

“But it’s also a hot topic for corporate executives who ultimately make the decision of whether to pay dividends to investors or not.”

Indeed, the number of companies cutting their dividends in 2015 grew 39% from the year before. And the first quarter of this year was the worst for dividends since the “Great Recession.”

That said, “Corporate executives have the money to pay dividends,” Zach tells us.

“But instead of paying cash to us as investors, these corporate executives are spending the company’s money to buy back shares of stock.”

Sometimes buybacks are a good thing. Zach likes Apple’s recent moves to buy back shares while their price is in a momentary slump. “But unlike Apple, many blue chip companies are paying premium prices to buy back shares of stock,” he says. “This is incredibly wasteful, and it is a slap in the face to income investors like us who count on dividend payments to generate cash in our accounts.

“It’s a challenging time for income investors,” Zach tells his Lifetime Income Report subscribers, “but our positions are holding up very well and there are still plenty of great opportunities for us to invest in.”

Proof that government solves every problem by creating a new one: Members of Congress want to speed up the airport security lines by… having the airlines drop their baggage fees.

We see there were hellish security lines last night at Chicago Midway. As we mentioned last week, they’re the consequence of a bad bet by the TSA. The agency cut staff, figuring legions of travelers would sign up for its PreCheck get-past-security-faster program. They didn’t.

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Now Sens. Richard Blumenthal (D-Connecticut) and Ed Markey (D-Massachusetts) have written a letter to the airlines asking them to waive their fees for checked baggage this summer. The way they figure it, baggage fees inspire people to bulk up their carry-ons, and that’s slowing down the lines.

Oy… We’re no fans of the airline industry, but the response from Jean Medina of the trade group Airlines for America strikes us as logical. “The majority of customers who check a bag do not pay to do so. Further, the model of charging customers for services they use and value, like checking a bag, dates back to 2008; this is not a new phenomenon.”

Anyway, if the senators’ harebrained “solution” turns into law, count on higher airfares…

“If you knew anything about Trump, you’d know he hires the people who can do the job,” writes a reader after we noted last Saturday that Trump hired a Goldman Sachs alum to oversee his fundraising. “The likelihood that there’s a political element to this choice is vanishingly small.

“Commenting on politics is necessary for those of us in the financial world today, unfortunately. However, like all comments, the first requirement is to have a clue.”

The 5: Ah, but it’s what we don’t know with certainty that has us most concerned. Yes, Trump has styled himself as the “outsider” — which is a very good place to be relative to Hillary Clinton.

“But,” Agora founder Bill Bonner wrote two months ago, “we find it hard to imagine that The Donald hasn’t already made a deal with the ‘powers that be.’

“His career was forged in the white heat of the building trade — with mafia-run unions, along with banks and regulators in Las Vegas and New York hammering him.

“He denies it. But he depends on all of them — the government, the banks and the system of bubble finance — to keep his fortune intact.

“He knows how important they are. And he knows how they operate.

“Donald claims to be one of the greatest deal-makers in history. It is hard to imagine that he hasn’t made the most important deal of his life.”

“The rallies are being capped,” writes one of our crankiest readers after our latest exploration of the gold market yesterday.

“All you have to do is look at the ‘commercial’ short positions to see they’re selling naked short in big volume to keep the price suppressed every time there’s a big spike in price. RECORD short levels. Not worthy of mention?

“How anyone presumes to opine on the gold market without even mentioning the COT [Commitments of Traders] report is incredible to me. Are you stupid or just lazy? Do you just want to defend the validity of your chart signals at all costs? Do you simply not want to acknowledge the manipulation and the dominant effect it has on price … if not trend?

“Charts don’t lie? The hell they don’t. Why do you think every breakout gets sold instead of bought?

“Absent the suppression, prices would be screaming higher.”

The 5: Every breakout gets sold instead of bought? You’re saying gold is destined to crash back to the $1,050 levels of late last year? Gee, we’re confused…

More to our point: Jim Rickards opines all the time about the gold market without ever mentioning the COT reports. And he takes a back seat to no one when it comes to dissecting gold market manipulation.

The COTs are a touchstone of people who are perpetually angry that gold hasn’t already reached the stratosphere. And to justify their fury, they pore over these weekly figures from the Commodity Futures Trading Commission — many, we suspect, while sitting in their boxers in mom’s basement. Some, we bet, still don’t own any bullion.

Meanwhile, people following the guidance of Jim Rickards and his team bagged a 33% gain in three days on a junior gold stock that’s getting bought out.

It comes back to a question we pose now and then, probably not enough: Do you want to be right, or do you want to be happy? (And make money?) You can choose happiness (and money) right here.

Really? Those were ellipses??” a reader writes as our punctuation thread improbably stretches into a third day. “DAMNIT!!

“I thought it was a secret Morse code puzzle to a new stock pick that would make me millions of dollars before the beginning of next week.

“I have been correlating the location of the signals (ellipses) in your publication for the last month or so.

“Here is how it reads so far:

T E DEEP S ATE GO ERNM NT IS A READ IN YO R

SH RTS. G T L TS F TO LET P P R AN R N FO TH

HILLS .

“Not sure what it means yet… three or four letters more should do it.”

The 5: It means be sure to drink your Ovaltine.

“Sobriquets”… “Ellipses”… Love The 5,” writes our final correspondent.

“I don’t read 5% of what comes through my inbox but always at least TRY to read The 5. Even when the content is dull, the vocabulary and grammar are impeccable and the diatribe (is that the right word?) is clever, sarcastic and witty. Usually agree with your viewpoint, and get news and financial info here too, often first. Usually get a smile or two as well.”

The 5: We’re flattered that we cut through the clutter for you. But we do wonder sometimes about anyone who appreciates our peculiar stream of consciousness…

Have a good weekend,

Dave Gonigam
The 5 Min. Forecast

P.S. Alas, the SWIFT hacking got in the way of our plans today for a deeper explanation of how Jim Rickards sees gold growing eightfold, to $10,000 an ounce. (Eventually, anyway. Not soon enough for the cranky reader above.)

That’s how it goes when we react to breaking news, as is our wont. We promise, we’ll get to the $10,000 gold discussion sometime next week. Jim goes into it a little bit right here… but only by way of spotlighting a short-term opening in the gold market that allows for much more than eightfold gains.

Indeed, a $10,000 stake following Jim’s strategy has the potential to grow to $1,​680,​384. But only if you hold off on bullion purchases for now. Jim explains at this link.


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