“Dragonfly” hackers target U.S. energy company networks

“Dragonfly” hackers target U.S. energy company networks

From time to time, we are reminded of the growing threat of cyber attacks, one of the downsides of our increasingly Connected Society. This attack on computer networks of U.S. energy companies speaks to risks associated with the “industrialization of the internet” better known as the internet of things as part of our Safety & Security investing theme. These attacks and others like them suggest continued spending on cyber security from a widening group of companies that bode well for companies like Fortinet (FTNT), Palo Alto Networks (PAWN), Cisco Systems (CSCO) and other similar companies.

Symantec, a major cyber firm, says in a new report that hackers codenamed “Dragonfly” have been able to infiltrate energy sector computer networks with malicious emails, so-called “watering hole” attacks, and “Trojanized” software. The hackers – who according to Symantec have ties to the Russian government – may have compromised more than a dozen American companies in recent months.

“Dragonfly” has been linked to the Russian government by some cyber security experts but Symantec has not publicly blamed Russia.

The Department of Homeland Security (DHS) told CBS News that they are looking into the matter.

Source: Major cyber firm says hackers are targeting U.S. energy – CBS News

‘Trump Bump’ for Dow Industrials Is Biggest Post-Inaugural Move Since FDR – 

‘Trump Bump’ for Dow Industrials Is Biggest Post-Inaugural Move Since FDR – 

This morning I was on Varney and Company on Fox Business talking about the impressive run-up in U.S. stock indices. While we were on air, the U.S. markets opened and shortly thereafter the Dow broke to new highs at 20,700.

Only one other president in history has seen such remarkable gains since their election. After John F. Kennedy’s election, the S&P 500 gained 13.05 percent while post-Trump’s election we’ve seen a 9.7 percent gain. The post-election moves this time have been remarkably steady, as we’ve experienced 89 days without a 1 percent decline and the VIX has remained at multi-decade lows. Last Wednesday 8 percent of the S&P 500 saw new all-time highs.

An article in today’s Wall Street Journal declared,

“President Donald Trump has been doing a lot of bragging about the stock market rally lately. How does it measure up? By some measures, the rally that took place during Mr. Trump’s first 30 calendar days in office has been the largest since 1945. Since inauguration day on Jan. 20 through Friday, the Dow industrials climbed more than 4%.”

The strength in stocks hasn’t been just domestic, as the majority of the largest stock markets around the world are in overbought territory and not one of the thirty largest country-based ETFs is in oversold territory.

To put the U.S. gains in perspective, the Market Vector Russia ETF (RSX) has gained even more than the S&P 500, up 15.3 percent since the election versus 9.4 percent for the S&P 500 ETF (SPY).

Since President Trump’s inauguration, the iShares MSCI Mexico Capped ETF (EWW) has gained the most of any asset class, up 7.2 percent versus the S&P 500 (SPY) up 3.7 percent.

Pricing in the U.S., as we keep mentioning here, is at elevated levels, with the S&P 500 at the highest forward 12-month P/E/ ratio since 2004 at 17.6. This is well above historical norms as the 5-year average is 15.2, the 10-year is 14.4 and the 15-year is 15.2.

That forward P/E also assumes an exceedingly robust growth rate in EPS for the S&P 500 to be over 11% in the coming year, which is a profound change from what we’ve seen over the past 4 to 5 years. If we don’t get that kind of explosive growth, then today’s valuations are even more stretched.

Implicit in those assumptions is the impact of corporate tax and regulatory reforms on margins and the impact of individual tax reforms on spending. With the level of divisiveness in D.C. paired with 23 Democrats in the Senate up for reelection in 2018, Trump is facing an uphill battle to get his plans passed. Regardless of where one stands concerning the president, roughly half of the country is opposed to him, and those opposed are very vocal. House and Senate Democrats will be facing a lot of pressure from their constituents to not cross the isle and join the Republicans.

That being said, the level of momentum we see in this market is irrefutable, so shorting it is a dangerous business. Those who hop in now need to understand that they are going in for momentum, as the likelihood that all these hopes and dreams don’t come through promptly is pretty high, which means better buying opportunities are likely in store later on.

Source: ‘Trump Bump’ for Dow Industrials Is Biggest Post-Inaugural Move Since FDR – MoneyBeat – WSJ

Freeze in Oil Production? Not buying it.

While on Mornings with Maria, we talked about the agreement between members of OPEC and Saudi Arabia to freeze oil production at January 2016 levels.

First off, I am highly skeptical that this freeze will stick. Historically any cuts, and this isn’t even a cut, have been rather notoriously violated, with quite a few such “cut” announcements necessary to get anywhere near stability in oil prices.

With the proxy war between Saudi Arabia and Russian ongoing in Syria and OPEC’s understandable desire to significantly knock back production by frackers, coupled with Iran’s new ability to sell on the global markets, there are entirely too many reason to keep pumping. I suspect we won’t see much stability in prices until a materially amount of production capacity is taken offline with the associated defaults and bankruptcies.

 

http://video.foxbusiness.com/v/4757949185001/?#sp=show-clips

Ukraine – Why and What’s Next

Ukraine – Why and What’s Next

As if things in Europe aren’t complicated enough, the situation in Ukraine is getting more troubling by the day. The turmoil there is having vast geopolitical impacts that are keeping the investing world as nervous as a long-tailed cat in a room full of rocking chairs. Here’s the quick, errrrhhh, fair enough, as quick as a verbose Irish lass can get, version of how we got to today.

 

In late 2013, Ukrainian President Viktor Yanukovich was expected to sign some agreements that could eventually integrate Ukraine with the European Union economically. Ultimately, he refused to sign the agreements, a decision thousands of his countrymen immediately protested. Demonstrations eventually broke out with protesters calling for political change. When Yanukovich resisted their calls, they demanded new elections. Eventually the protestors won, Yanukovich was forced to flee the country and now we have a nation in flux.

 

So why does anyone outside of Ukraine, population 44.6m and with 233k square miles, care? Ukraine is central to Russian defenses, sharing a long border with the former Soviet Union and more importantly, Moscow sits all of 300 flat and easily traversed miles from Ukraine. Therefore, from a Russian perspective a tighter Ukrainian-EU integration represents a threat to Russian national security. Putin appears to be disinterested in actually governing Ukraine, but rather his goal seems to be to effectively have negative control, the ability to prevent Ukraine from doing anything Russia dislikes. With that in mind, it appears that even the very idea of further EU integration was provocation enough for Putin. The European Union’s and the Germans’ public support for opponents of Yanukovich crossed his red line.

 

From a European perspective, Ukraine isn’t quite as interesting. Economically the Eurozone wasn’t enamored with having the nation join the EU, it just liked the possibility of such. Adding a country as weak and disheveled as Ukraine to an already strained union didn’t make much sense, but the idea of the possibility someday is attractive. The talk about joining was really more about inviting Ukraine to make a cultural shift towards Europeanism, with a constitutional democracy and a more liberalized economy. Germany found itself between the proverbial rock and a hard place as it continues to work with Russia on its mutual energy and investment interests while trying to manage coalitions within the European Union, particularly attempting to appease the Baltic States and Poland who would like to see Ukraine closer to them and further from the Russian camp, giving them an additional buffer.

 

The U.S. strongly supported the Orange (anti-Yanukovich) Revolution, siding with the Germans and the Eurozone, which was no doubt going to get under Putin’s skin; but then the U.S. owed him one after the Snowden situation. Throughout history, many of the global conflicts, and for that matter noteworthy familial brawls, have been catalyzed by the little things.

 

The situation has evolved into a tense standoff between the G7 nations and Russia. On March 12th, the U.S. Department of Energy announced that it would draw down from the U.S. Strategic Petroleum Reserve in what it claimed was a “test sale to check the operational capabilities of system infrastructure.” In reality, this was a warning shot fired at Putin. Later that same day Bloomberg reported that the U.S. has escalated the situation even further, with General Martin Dempsey, the Chairman of the Joint Chiefs of Staff, claiming that “in the case of an escalation of unrest in Crimea, the U.S. Army is ready to back up Ukraine and its allies in Europe with military action.” The G7 has threatened sanctions against Russia if it continues, with the U.S. Congress passing a resolution on March 11th to work with European allies and others to “impose visa, financial, trade and other sanctions” against key Russian officials, banks, businesses and state agencies. In a quick tit-for-tat, Russia responded on March 13th that it is prepared to retaliate with sanctions of its own against the west. Germany responded to this by announced that Angela Merkel is prepared to cancel a summit with Russia if Moscow does not help to defuse the situation.

 

To add a little extra flame to the fire, Iranian Oil Minister  arrived in Moscow late March 13th to meet with Russian Energy Minister Alexander Novak and Deputy Prime Minister Igor Shuvalov, IRNA reported. Namdar-Zanganeh will discuss ways to deepen economic cooperation between the countries, because there weren’t nearly enough strained relationships!

 

Militarily things are also nail-biter as around midnight on March 5th the Russian navy used tugboats to maneuver a 9,000-ton hulk of a mothballed anti-submarine cruiser into the inlet to Crimea’s Donuzlav Lake, effectively blocking access to the sea from Ukraine’s primary naval installation on the peninsula. Reportedly seven of the Ukrainian’s twenty five ships are trapped, picture at left.

 

According to the Ukrainian Defense Ministry, on Saturday March 15th, Ukrainian forces repelled an attempt by Russian troops to land in the southern Ukrainian region of Kherson Oblast. The landing reportedly occurred on Arbatskaya Strelka, a long spit of land running parallel to the east of Crimea. Earlier, it was reported that four Russian military helicopters deployed around 60 Russian troops near the town of Strilkove, forcing around 20 Ukrainian border guards and servicemen to retreat from their positions. Later in the day Ukrainian and Russian defense ministries announced a truce in Crimea until March 21st. Anyone else feel like renting Red Dawn (the original of course)?

On Sunday March 16th, the people in the Crimean region reportedly voted to have Russia annex Crimea by an overwhelming majority of some 95%+. On Monday the EU announced that it would impose travel bans and asset freezes on 21 Russian and Ukrainian officials that are considered central to Crimea’s move to separate from the Ukraine. The U.S. issued sanctions as well, via an executive order signed by the President, to freeze the assets of and ban visas for seven Russian officials and four Ukrainians.

 

Tuesday the Kremlin announced that it had officially annexed Crimea, which could be the most dangerous geopolitical event of the post-Cold World era. The two most likely outcomes are:

  1. Russia will quickly prevail, gaining the power to redraw its borders and set the precedent for exercising veto powers over the governments of its neighbors or,
  2. Western-backed Ukrainian government will push back and the second-largest country by area in Europe will descend into a Yugoslav-style civil war that will likely pull into its turmoil, Poland, NATO and eventually the U.S.

 

An alternative outcome is unlikely as Putin cannot at this point give up Crimea. It would mean a publicly shaming on a global level that could destroy his presidency.

 

Bottom Line: This situation has the potential to rock the markets, which are for now keeping a wary eye. Europe desperately needs Russian fuel. London and much of Europe is greatly beholden to the nouveau riche Russians for their highly demonstrative consumption of luxury goods and services, which only adds more pressure. There’s even a reality TV show called “Meet the Russians” which follows the lives of some ultra-bling Russians who are buying up Britain and “setting a new benchmark for extravagant living.” Europe can’t afford to push too hard back against Russia, but they also cannot ignore a precedent for unfettered Russian aggression. It is impossible to predict exactly how this will play out, but close attention is warranted.