The Feds Don’t Care About Cyber-Defense [PROOF]

Posted On Mar 30, 2017 By Dave Gonigam

  • Feds spend nine times as much on cyberoffense as cyberdefense
  • The real scandal behind this month’s WikiLeaks revelations
  • Trump abandons the one consistent plank of his campaign
  • Rickards on Trump and “a buzz saw of opposition from the Deep State”
  • When will the pot trade run its course?
  • Fourth-quarter mediocrity… unpacking a cryptic tweet… McCain threatens to shut down the government… and more!

Suddenly it’s become much clearer why we see almost weekly headlines about massive hack attacks — Yahoo, Apple, Target, Home Depot and so on.

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The Reuters newswire quotes “senior intelligence officials” as saying 90% of federal cyber spending is “dedicated to offensive efforts, including penetrating the computer systems of adversaries, listening to communications and developing the means to disable or degrade infrastructure.”

At least one of those officials — NSA Deputy Director Rick Ledgett — was willing to go on the record to confirm the percentage. “It’s actually something we’re trying to address,” he said gamely. Ledgett is retiring soon, so he’s taking minimal career risk by speaking up.

We’re hard-pressed to think of a better example to demolish the civics-class mythology that says the government exists to protect you. No, it exists to wield its own might. It places far greater priority on burrowing into Chinese servers than it does on protecting your data from Chinese hackers.

Actually, it’s worse than that — as we learned from the CIA documents WikiLeaks spilled earlier this month.

In a nutshell, the CIA found vulnerabilities in the hardware and software produced by American high-tech companies. But rather than say to those companies, “Hey, we found this stuff — you might want to patch it,” they said to themselves, “Hey, what if we use this stuff to jack around with the Chinese and the Russkies and the Iranians?”

The fact that hackers might discover the same vulnerabilities and use them to jack around with you? The CIA couldn’t care less.

The Reuters story describes how as soon as WikiLeaks published the documents, engineers at Cisco were pulled off other projects to “analyze the means of attack, create fixes and craft a stopgap warning about a security risk affecting more than 300 different products…

“That a major U.S. company had to rely on WikiLeaks to learn about security problems well-known to U.S. intelligence agencies underscores concerns expressed by dozens of current and former U.S. intelligence and security officials about the government’s approach to cybersecurity.”

As far as we know, Reuters did not consult with our new colleague Kevin Massengill… but he was telling his readers much the same thing as soon as WikiLeaks revealed  the CIA documents.

Kevin joined the Agora Financial team late last year. During a 20-year Army career, he was a trusted aide to Brig. Gen. Keith Alexander — who went on to become director of the NSA. Kevin also has the financial chops to scout out names in the defense technology sector. He’s worked in investment banking and private equity — to say nothing of a stint as a vice president at Raytheon, one of the “Big Five” defense contractors. After Trump’s election, Jim Rickards was looking to build out his suite of services to include one focusing exclusively on defense; Kevin was a natural choice to do the company-level research.

Here’s what Kevin wrote readers of Rickards’ and Massengill’s Defense Technology Alert earlier this month: “As with the NSA revelations by whistleblower Edward Snowden, the largest technology companies are once again embarrassed by revelations about the level of their cooperation with intelligence agencies against their own consumers.

“And, with no end of irony, they are angered to see evidence of additional government attacks on their products despite their support.

“Equally angered are the U.S. and international companies dismayed to find out that the CIA did not disclose to the manufacturers their findings. Instead, they deliberately left identified vulnerabilities and malware and placed huge swathes of the U.S. population and critical infrastructure at risk to foreign intelligence or cybercriminals.”

These developments come at a time, Kevin reminds us, when “the Trump administration is finalizing their executive order on the cybersecurity sector. We know that he will be spending defense money in the cybersecurity sector.

“But now we have worldwide attention being focused on cyber vulnerabilities in the aftermath of the WikiLeaks and the CIA’s failure to maintain control of their cyber arsenal.”

That confluence of developments led him to recommend a cybersecurity name earlier this month.

We launched Rickards’ and Massengill’s Defense Technology Alert barely three months ago. Already readers have closed out gains of 168% and 289%. Other names still in the portfolio are already up as much as a staggering 1,107%.

But it’s not too late to act; Kevin’s still on the hunt, and Jim Rickards says there’s no better time to jump into the defense sector… as he explains when you follow this link.

To the markets, where Wall Street has moved on from the Obamacare-repeal fiasco.

The major U.S. indexes are all in the green as we write; the Dow has crossed the 20,700 mark again. The 10-year Treasury yield has bounced off the 2.4% level; gold hovers a bit below $1,250.

The big economic number of the day is the Commerce Department’s third and final guess at GDP for the fourth quarter of last year. It comes out to an annualized 2.1% — on par with the mediocrity of the last decade.

Even if Trump isn’t faced with impeachment or resignation, the Deep State has already achieved a top objective as the Senate Intelligence Committee performs a round of Russia showboating today.

The hearing is every bit the spectacle we were counting on: Republican Marco Rubio is reciting tweets that supposedly came from Russian trolls. A Democrat we don’t recognize says the Russians were behind the Occupy Wall Street movement a few years back.

With the help of Jim Rickards, let’s briefly rewind: “Trump came into office with a clear campaign track record of favoring improved relations with Russia. In concrete terms, this would involve alleviating some of the economic sanctions imposed on Russia after Russia’s annexation of Crimea and interference in eastern Ukraine in 2014.

“This was strategically important because of Trump’s desire to confront China on a wide range of issues including trade, currency wars, Taiwan, North Korea and the South China Sea.

“There are only three true superpowers in the world — the U.S., Russia and China. When confronting one (China), it pays to be on good terms with the other (Russia).”

We already saw that agenda being subverted with the appointment of various Russia hawks to the Trump administration. This morning’s Wall Street Journal affirms it.

“In Washington, probes by the Federal Bureau of Investigation and Congress into possible connections between Mr. Trump’s associates and Russia have restricted the new administration’s ability to cut deals seen as conciliatory to the Kremlin in the near term without provoking an outcry from both Democrats and Republicans on Capitol Hill.”

If anything, contacts between Washington and Moscow are even more limited than under the Obama administration; at least Secretary of State John Kerry would hop on the phone regularly with Russia’s foreign minister, Sergei Lavrov.

“Trump’s plans ran into a buzz saw of opposition from the Deep State,” Jim elaborates.

The Deep State agenda involved incorporating Ukraine into NATO, destabilizing Russia and forcing regime change to topple Putin. Their motives included covering up their own failures in Ukraine in 2012–2015, underestimating Putin’s staying power and denying Trump the opportunity to roll back their efforts.

“The media played along by publishing leaks of conversations involving Trump’s first national security advisor, retired Lt. Gen. Michael T. Flynn, and other Trump associates, including Paul Manafort and Roger Stone. The media deliberately blurred distinctions about who was or was not a Russian ‘intelligence’ asset versus mere business contacts and actual government officials. As a result, Flynn resigned, numerous investigations commenced and Trump’s Russia agenda was sidelined.”

Oh, yeah, Flynn. Which brings us to a cryptic tweet from one of the capital’s most fearless reporters (we don’t mean that sarcastically, for once) — Harper’s Washington editor, Andrew Cockburn…

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A few days ago, that was unhinged speculation from a CNN panelist. From Cockburn, we take it much more seriously.

What’s any of this have to do with the markets? Everything, says Jim. “This is not just business as usual in the push-and-pull of politics. This is war.

“Markets detest uncertainty, and we now have policy uncertainty in abundance. That will be a major head wind to equities and an impediment to capital spending…

“You can protect yourself against government dysfunction with our permanent portfolio of gold, silver, fine art, land, cash, intermediate-term Treasury notes and private equity, especially in technology and natural resources.”

For access to Jim’s safe-haven recommendations — and a free copy of his latest book, The Road to Ruinlook here.

“When do we short the pot trade?” says a reader’s provocative inquiry, after we spent the last several days touting it.

“It occurs to me that never has a brand-new industry appeared that was at the same time so old.

“There is nothing new here, although it is an outstanding example of the sharing economy.

“No patentable technology, since the underground pot farmer can’t really file a patent on how to grow an illegal plant.

“These guys have had limitless opportunity to refine the plants strains over the years — tough luck, Monsanto.

“Growing techniques are some of the most sophisticated in agriculture.

“The average ‘amateur’ operation can ship out a new crop every four months from underground bunkers with no sunlight. Supply will not be a problem. There is a reason they call it a weed – it grows like one.

“Automated irrigation systems are old hat to these guys, since you don’t want to be visiting your stash very often, lest you draw attention.

“For drug creation — their cost of the base product would basically be $0, but that is seldom a driver for the end price anyway.

“I would question if growers are an investible target when it all depends on government licensing. It is basically a lottery, or who can execute the best bribes to determine the winners. (OK… call me a cynic.)

“There has been some talk about the strains that could be an interesting opportunity for government control. Some strains are extremely potent. In a story I saw here in Canada a few weeks ago, some strains have had the natural compounds that protect the brain removed to deliver a better high. The study of the chemistry and what is a great drug trip versus harmful may be interesting area for the government to approve or disapprove certain strains. And dare I say it… that may be a good thing.

“Perhaps the best opportunity is equipment for roadside checking. They would need to put one in every cop car in North America.”

The 5: You raise some interesting points.

In the first place, there will be a time when the pot trade runs its course. We can’t say when that will be, other than “not in the immediate future.”

Yes, it’s a commodity that can be produced cheaply without a lot of “differentiation.” But you could say the same about corn or wheat or soybeans… and that didn’t stop Archer Daniels Midland from becoming a company with a [checking our screens] $26.5 billion market cap.

More specifically, most of the companies on Ray Blanco’s radar happen to be in the biotech sphere — looking to harness the properties of cannabis for specific drugs. So that offers a level of protection from the concerns you raise. But they’re valid concerns. We’ll stay on top of them…

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. One more thing on the topic of defense spending…

We see Sen. John McCain is threatening a government shutdown unless military spending is increased.

Congress is under the gun to pass a “continuing resolution” to keep the government funded past April 28. (This is something different from the debt ceiling, by the way. Yeah, it’s complicated.)

McCain says he won’t vote for a “CR” that doesn’t include more military spending than currently planned: “If that’s the only option. I will not vote for a CR no matter what the consequences because passing a CR destroys the ability of the military to defend this nation, and it puts the lives of the men and women in the military at risk.”

This is one matter where McCain is on the same page as Trump, who wants to raise defense spending $30 billion during the current fiscal year.

At this stage, we wouldn’t bet against the combination of those two — which once again makes the defense sector so attractive. Don’t pass up your chance for exposure to one of the most lucrative sectors of the next four years. Get started right here.


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