Who?s really reading Your email? I bet you?d like to know!
Another day, another hack attack.
Today we learned that 5.6 million fingerprint records kept by the Office of Personal Management were recently stolen.
This is the agency that functions as the US government?s human resources department, maintaining records on 21.5 million current and former employees.
The timing couldn?t be more inauspicious, as the announcement was made during a visit by Chinese President Xi Jinping, whose military was almost certainly the origin of the attack.
Great! Now the enemy has the fingerprints of every FBI and CIA agent!
There must be a way to make money out of this.
Wait! There is!
Palo Alto Networks (PANW) is a San Francisco Bay area cyber security company that offers companies and governments an innovative firewall platform solution for big, network wide security problems.
In the P&L sweet spot they are.
I know the company well, and have been recommending to my followers that they buy the shares for the past year, during which time it tripled.
What? You want me to buy a stock that has just tripled?
No, I have not just started smoking California's largest agricultural product (no, it?s not almonds or grapes).
By chance, I happened across a senior officer of the Palo Alto Networks at a dinner party last week. Prospects for the firm are booming, with sale growth running at a torrid 30% YOY rate.
Yet, (PANW) has only 10% market share of an industry that is currently exploding. This is an aggressive, extremely well managed $15 billion company that is about to become a $150 billion company.
Keeping in contact with the Joint Chiefs of Staff on a weekly basis, I am constantly concerned at how serious the cyber security threat has become, yet how little understood it is by the public.
You don?t have to go any further than the management of Sony (SNE), one of the world?s largest multinationals, which was almost wiped out last November by hackers from one of the poorest and most backward countries in the world.
Upset by the take down of their leader, Kim Jong-un, in a low budget comedy, The Interview, North Korean hackers were able to bring the firm to its knees.
They downloaded the entire contents of Sony?s hard drives, leaking the juicy parts to online journalists (Angelina Jolie?s pay, etc.), and then wiped them clean, destroying some 3,000 computers and 8000 servers. It was the hacking equivalent of a full-scale nuclear attack.
Sony had to revert to snail mail, couriers, and landline telephone calls to survive. They couldn?t even pay their employees. Some $6 billion in market capitalization was wiped out.
Now here is the scary part.
The FBI has confided in me that if the S&P 500 were subjected to a Sony level attack, 90% are unlikely to survive. And the Sony attack was actually a primitive, simplistic, low-level attack.
A lot of countries don?t like the United States for any number of reasons. Now they can do something about it. That is a problem. And a market.
Palo Alto maintains the world?s largest database of viruses and malware. That enabled it to trace the Sony attack to the Hermit Kingdom within hours.
It contained several lines of code that were identical to the ?Dark Soul? attack against South Korean banks in 2013, which incinerated 40,000 bank computers and caused $700 million worth of damages.
What the Sony attack revealed was a long history of massive under investment in cyber security by corporations and governments in the US, Europe, and Asia.
The potential future market for cyber security products and services is being wildly underestimated.
The great irony here is that the attack is not against systems, which are usually pretty secure. It is their human users that have become the problem.
Unfortunately, we are have become familiar with ?spoofing? emails where an innocuous email asks the user to ?click here? for an Adobe upgrade, a notice from Yahoo, or a request from PayPal to update your password.
Do so, and you invite lines of code that will eventually make it to your system administrator. Once they have his password, they can access or do anything.
Don?t think only dummies fall for this.
My friend, retired FBI chief Robert Mueller, had his personal account at the Bank of America cleaned out in a similar fashion. What was unusual in his case, they caught the transgressor, after a huge expenditure of bureau resources.
(Hint: if an incoming email appears the slightest bit suspicious, hover your mouse over the sender?s name, and the sending email address will appear. If it looks anything but belt and braces safe, don?t open it and mark it as SPAM. Especial watch for the last three letter of the address, which are always a tip off).
The FBI estimates that there are up to 10,000 hackers in the world with the capability of a Sony level attack, many operating from China, Russia, Eastern Europe, or other locations beyond the reach of US extradition treaties.
The global cyber war has been going on for about 15 years now, and the public hears very little of it.
In recent years, Iran attacked Saudi Arabia?s Aramco, destroying 30,000 computers, and briefly shutting down a portion of the country?s oil production.
A major attack was launched against the Venetian Hotel in Las Vegas, which is owned by prominent Israel supporter and major Republican Party contributor, Sheldon Adelson.
There is a happy ending to this piece. You don?t need to place your entire wealth into gold bricks and bury them in the backyard to keep it safe.
If North Korea is a bicycle in the hacking arms race, the US is the F-35 Lightening next generation stealth fighter.
We are winning the cyber war hands down, but you?d never know it. This is a war fought silently, online, and in dark shadows.
President Obama in fact authorized a measured counter attack on North Korea?s information infrastructure, which proved devastating. But it was only a pinprick relative to what we could have done.
Our real cyber weapons are reserved for an actual shooting war sometime in the future. That?s to prevent the enemy from learning our true capabilities and preparing for them.
Imagine a country trying to defend itself with snail mail, couriers, and landline telephone calls from an American assault. Think the Sony attack times 10,000. Nothing would work.
It couldn?t be done.
Congress has so far refused to fund a substantial increase in America?s cyber warfare arsenal, preferring instead to spend money on old heavy metal weapons systems, like aircraft carriers, tanks, and the above mentioned F-35.
It?s all about sucking money out of Washington to create local jobs in red states to win elections. A stepped up cyber program would focus money almost entirely in Silicon Valley.
Don?t want to do that!
This is how General George Armstrong Custer was sent to the Battle of the Little Big Horn with antiquated 16 year old Civil War trapdoor Springfield carbines, while the Sioux had state of the art Winchester ?yellow boy? repeaters.
And we know how that one turned out!
But don?t get mad. Get even. Take another look at Palo Alto Networks, FireEye (FEYE), and the Pure Funds ISE Cyber Security ETF (HACK).
https://www.madhedgefundtrader.com/wp-content/uploads/2015/09/Kim-Jong-un-e1443128747953.jpg264400Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-09-25 01:06:012015-09-25 01:06:01Cashing In On Cyber Security
?You can reduce discretionary spending down to zero and it won?t have much impact on our fiscal problems because it?s such a small proportion of the total,? said Ben Bernanke, chairman of the Federal Reserve.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/02/scale.jpg238239Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-09-24 01:05:342015-09-24 01:05:34September 24, 2015 - Quote of the Day
Global Market Comments September 22, 2015 Fiat Lux
Featured Trade: (SEPTEMBER 23 GLOBAL STRATEGY WEBINAR) (WILL THE MARKET CRASH IN OCTOBER?), (SPY), (HD), (SIGN UP NOW FOR TEXT MESSAGING OF TRADE ALERTS)
I think the bull market has at least three more years to run, but I?ll tell you why later.
In the meantime, we have to survive October first.
That is easier said than done.
October has long earned a notorious reputation as a wealth confiscation month for both professional traders and long-term investors.
If you go broke during this always challenging month, you won?t have any money left to play the coming price rises.
Over the weekend, I did my usual scan of the 200 most important charts for the global financial markets. The technical picture that leapt out at me was nothing less than atrocious.
Failure to break the old support/new resistance level in the (SPY) at $203 means we now have to retest the August 24 lows at $186, or $182 in the intraday futures.
If $182 doesn?t hold, then we?re breaking to new lows, and entering a new bear market.
Every technical service I subscribe to was repeating the identical pattern. This is rare enough that when it does occur, I stand to attention.
Look out below!
This year, October will be particularly vexing.
The newly elevated level of volatility has scared the daylights out of a lot of stockholders.
Look no further than last Friday, September 18. Just when everyone thought it was safe to nibble on some new longs, the Dow Averaged came out of the blue and whacked them with a 300-point loss.
I don?t even recall the reason. But it is irrelevant. Traders were gun-shy. No one wanted to hold a position over the weekend, and risk that China would have a bad Monday (it did).
It get?s worse.
Congress is now threatening another shutdown. Be it over Planned Parenthood funding or the Iran Treaty, it makes no difference. Closed is closed.
This is exactly what the market doesn?t want to hear.
Then we have three more months of Fed torture to endure. Failure to move on September 17 means that uncertainty surrounding the first interest rate reversal in nine years has been given another fresh three months of life.
As if we didn?t have enough to worry about!
It all adds up to a nightmare for neophyte traders. No one has the slightest idea of what the market will do next. If they pretend to, they?re lying.
That is, unless you happen to have a half-century of trading experience, as I do. Then it?s a piece of cake.
Just hit the mute button on the TV and close your eyes. Then buy every big dip and sell every substantial rally. Don?t try to rationalize this in any way. This is trading and investment totally devoid of the thought process.
Overthinking your trades right now can be hazardous to your wealth. Just let your primordial brain stem take over for now.
And it works like a charm.
Just look at my trades of the last few days. When the market opened high, I bought the October (SPY) $204-$207 vertical bear put spread.
When it then dove 300 points I bought the Home Depot (HD) October $105-$110 vertical bull call spread as a hedge.
When the market popped 200 points on the following Monday morning opening (and 300 points if you count the overnight Asia low), I kicked out Home Depot for a nice little 6.2% one day profit.
I then rolled down and purchased the (SPY) October $203-$206 vertical bear put spread to double up my short exposure.
I ended up +0.91% on the day on my total portfolio, just 1.23% short of a new all time high, and ahead 37.14% so far in 2015.
I don?t normally trade this fast. But they?re running the movie on triple fast forward now. A month?s worth of price movement is occurring in a day.
Bob and weave, bob and weave. We have to trade the market we have, not the one we want.
While a technical breakdown is looming, and the fundamentals seem to be backing it up, I don?t think a real bear market will appear.
Historically, stock markets continue rising an average of 30 months after the first Federal Reserve interest rate hike. That hourglass won?t even get turned over until December, or maybe even not until 2016.
The longest data point on this chart is 73 months. That means the Fed inaction means THE BULL MARKET COULD HAVE ANOTHER SIX YEARS TO RUN!
Yikes!
Beyond the hysterical, oops, I mean the historical analogies, the economy is just too darn strong to grease the skids for a true bear market.
I had to call three restaurants to get a dinner reservation in San Francisco this weekend, and finally got one only because it was a dive. I can?t get a plumber to unblock my toilet because he is too busy. And these were the guys who were collecting unemployment checks only four years ago.
For more glorious detail on the current state of the economy, please click here for ?The Bear Market That Isn?t?.
The dreaded October effect traces back to the 19th century, when agriculture accounted for 50% of the US GDP. Right before crops were harvested in the fall, farmer outlays to pay for the inputs of seed, fertilizer, and labor were the greatest.
Yet, the crops hadn?t been sold yet, so farmer borrowing also hit a peak. The aggregate of all this hit the financial markets with an enormous cash call, which led to the inevitable crashes.
Once the trend was established, it became a self-fulfilling prophecy, even though agriculture presently accounts only for 2% of the American economy now.
It is traders that sweat October now, not farmers.
https://www.madhedgefundtrader.com/wp-content/uploads/2015/09/Black-Tuesday-Newspaper-e1442932274731.jpg400331Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-09-22 01:07:392015-09-22 01:07:39Will the Market Crash in October?
https://www.madhedgefundtrader.com/wp-content/uploads/2015/09/James-Bullard.jpg295264Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-09-22 01:05:362015-09-22 01:05:36September 22, 2015 - Quote of the Day
One of the most impressive moves in the wake of the Fed?s Thursday move to maintain ultra low interest rates was to be found in gold.
In the run up to the flash headline on the Fed non-announcement, the yellow metal rocketed $40. The action was even more impressive in silver (SLV), which tacked on 90 cents, or 6.6%.
Now, here is the really bad new.
The fundamentals for the barbarous relic are about to turn from bad to worse. The prospect is sending perma bulls rushing to update their life insurance policies.
This is the dilemma. To sell, or not to sell?
Gold does well when interest rates are low or falling. That reduces the opportunity cost of owning the barbarous relic, which doesn?t pay any interest or dividends. It just sits there, shines, and collects dust.
It also runs up storage and insurance fees, effectively hampering it with a real negative yield.
So what happens when the fundamentals flip from good to bad?
WARNING: if you have been carefully salting away one ounce American gold eagle coins in your safe deposit box for the past several years, you are not going to want to read this.
If I am right, and we have put in a generational high in bond prices and a low in yields, interest rates are going to rise. Initially, for the first couple of years, they may not do it a lot. But eventually they will.
That is terrible news for gold owners.
The market clearly thinks this is happening. Take a look at the charts below. Gold is making its third run at support at $1,100 over the past 18 months. Break this and cascading, stop loss selling will ensue, taking gold down to $1,000.
That, by the way, is my jeweler?s downside.
Caution: My jeweler is always right. There he plans to load the boat with bullion, which his business consumes in creating baubles for clients, like me.
It wasn?t supposed to be like this, as the arguments in favor of buying the yellow metal were so clear five years ago.
The exploding national debt was about to force the US government to default on its debt. It almost did, thanks to congressional gamesmanship.
Massive trade deficits with China and the Middle East were supposed to collapse the value of the US dollar.
The election of Barack Obama was predicted to lead to the creation of a socialist paradise. We were all going to need gold coins to bribe the border guards in order to get out of the country with only what we could carry.
The problem is that none of this happened.
The US budget deficit is falling at the fastest rate in history, from a $1.5 trillion peak to as low as $400 billion this year. Foreign capital pouring into the US has pushed the greenback to multiyear highs, and loftier altitudes beckon.
Since the 2009 inauguration, the S&P 500 has tripled off its intraday low. This has enriched the 1% more than any other group, who have seen their wealth increase at the fastest pace on record.
The trade deficit with China is now balancing out with America?s own burgeoning surpluses in services and education. As for the Middle East, we make our own oil now, thanks to fracking, so why bother.
To see such dismal price action in the barbarous relic now is particularly disturbing. Traditionally, the Indian ?Diwali? gift giving season heralded the beginning of a multi month bull run in gold. It ain?t happening.
In fact the dumping of speculative long positions by long-term traders used to this is accelerating the melt down. That?s because gold, silver, or any other inflation hedges have no place in a deflationary, reach for yield world.
Mind you, I don?t think gold is going down forever.
Eventually, emerging central banks will bid it back up, as they have to buy an enormous amount just to bring their reserve ownership up to western levels. Inflation is likely to return in the 2020?s, as my ?Golden Age? scenario picks up speed.
In the meantime, you might want to give those gold eagles to your grand kids. By the time they go to college, they might be worth something.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/07/John-Thomas-Gold-e1455831491219.jpg297400Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-09-21 01:07:422015-09-21 01:07:42The Death of Gold
Legal Disclaimer
There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.
We may request cookies to be set on your device. We use cookies to let us know when you visit our websites, how you interact with us, to enrich your user experience, and to customize your relationship with our website.
Click on the different category headings to find out more. You can also change some of your preferences. Note that blocking some types of cookies may impact your experience on our websites and the services we are able to offer.
Essential Website Cookies
These cookies are strictly necessary to provide you with services available through our website and to use some of its features.
Because these cookies are strictly necessary to deliver the website, refuseing them will have impact how our site functions. You always can block or delete cookies by changing your browser settings and force blocking all cookies on this website. But this will always prompt you to accept/refuse cookies when revisiting our site.
We fully respect if you want to refuse cookies but to avoid asking you again and again kindly allow us to store a cookie for that. You are free to opt out any time or opt in for other cookies to get a better experience. If you refuse cookies we will remove all set cookies in our domain.
We provide you with a list of stored cookies on your computer in our domain so you can check what we stored. Due to security reasons we are not able to show or modify cookies from other domains. You can check these in your browser security settings.
Google Analytics Cookies
These cookies collect information that is used either in aggregate form to help us understand how our website is being used or how effective our marketing campaigns are, or to help us customize our website and application for you in order to enhance your experience.
If you do not want that we track your visist to our site you can disable tracking in your browser here:
Other external services
We also use different external services like Google Webfonts, Google Maps, and external Video providers. Since these providers may collect personal data like your IP address we allow you to block them here. Please be aware that this might heavily reduce the functionality and appearance of our site. Changes will take effect once you reload the page.