Cyber Espionage

“Bitcoin Bubble” the #1 searched item on Contrarian Marketplace – the Taxi Driver’s blog

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The only thing more dangerous than “Bitcoin Bubble” being the most searched item on this Contrarian Marketplace (CM) blog this month is whether I am tempted to buy it on the basis that in doing so I will call the top. Indeed Bit-coiners should be paying me (in gold please) I never make such a move.

Note in ZeroHedge today one Chinese official, Pan Gongsheng, a deputy governor of the People’s Bank of China predicts “that bitcoin will die of a grand theft, a hack into the blockchain technology behind the cryptocurrency or a collective ban by global governments.” This is consistent to what CM has been saying.

 

Bitcoin bubble – Nothing to see here

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When it looks like a bubble, acts like a bubble it’s probably a bubble. Bitcoin up another 13% today.

 

Gold Coin vs Bitcoin – just go on a crypto blog and invite a fatwah by criticizing it

The Bitcoin debate rages again. I’ve been asked more times by friends about whether to buy Bitcoin in the last 3 months than I care to remember. This video is about as telling as it gets about understanding raw value. At the moment Bitcoin pricing is as random as a Lotto ball dispenser although only higher numbers are being drawn for now (despite the 20% flash crash yesterday, shows panic is a server outage away). My answer to them is I wouldn’t touch it with a barge pole but everyone’s risk is their own. I answered along the lines below.

As a contrarian investor, this video warms my heart. When everyone seems to love something it tends to be a sign that ‘greater fool theory’ is alive and kicking. The video shows a woman unwilling to trade a stick of gum for a 1oz gold coin. If there was ever a better example of mean reversion, this must be it. Mark Dice did a similar video with people asking if they wanted a Hershey’s chocolate bar or a silver bar. Everyone chose the Hershey’s! While I am sure the response on Wall Street would elicit a different response it shows how few people understand the value of barbarous old relics.

The biggest issue with Bitcoin or any other crypto is that it is mined in cyber space. Do you ever wonder why you need to update your Norton anti-virus software every other day? Yes because some criminals are phishing/hacking your data trying to rob you blind. That’s just the amateur cowboy stuff by the way.

Gold needs to be dug out of the ground with considerable effort. The thing that spooks me about crypto (without trying to sound conspiracy theorist) is that state actors (most top end computer science grads in China end up working in the country’s cyber warfare teams), hackers or criminal minds (did you know 70% of top end computer science grads in Russia end up working for the mob (directly or indirectly) the value of coins in the system could be instantaneously wiped out at the stroke of a key. We’ve had small hiccups ($280m) only last week. So as much as the ‘security’ of these crypto currencies is often sold as bulletproof, none of them are ‘cyberproof’. Just like your home software, crypto at every stage has to constantly update its protection to prevent vulnerabilities and it is naive to think it can keep a 100% safety record.

It only takes one serious hack to bring most if not all the crypto down as vulnerable. In order for Auric Goldfinger to crush prices in Gold he’d need to smelt lead bars and paint them, were any left over from the pail and brush used on Jill Masterson. Gold is one currency that governments often threaten to confiscate (India springs to mind). Imagine if North Korea turns Bitcoin into the state currency?

I have just been on a Bitcoin forum and the insults being hurled at disbelievers has all the hallmarks of Tesla share ownership. It is a religion. Not an investment. I was accused of having no idea on crypto to which I argued 90%+ of those that own it probably don’t either. So having owners in Bitcoin or other cryptos knowing a tiny fraction of the risks means they’ll stampede faster than the servers can process data should ‘bit hit the fan’. One crypto ‘expert’ tried to tell me that artwork has no value as it is not tradable. It is tradable, just illiquid. I argued that the latest sale of DaVinci’s artwork fetched $450mn or 45,000 bitcoin. Storage costs aside over the long run I’ll have a Leonardo thank you!

As Mark Twain said, ”It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

My assessment is that the fascination of those around me about Bitcoin suggests that many of the fan base are punters trading on the greed of others. It has no underlying core value other than those prepared to pay more for it. That indeed is the tenet of all investment but like most manias, the risk/reward ratio can turn on a dime (no pun intended). At some stage the fall out from crypto will be ugly. As financial pundits know

the market can stay irrational longer than you can stay solvent”

Full interview on Bolt Report on Japan’s regional security conundrum

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The full interview can be found on the August 30 podcast from 21:17-34:30  where I discuss Japan’s Constitution Article 9 and 96 and the changing face of Japan’s Self Defense Force moving from “static deterrence” to “dynamic deterrence”  The wheels to defend herself are already well under way

 

The concern is the risk of Kim Jong Un missing the target

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At 6am this morning North Korea conducted a missile test which flew between Hokkaido and Japan’s main island Honshu. The real question is not so much the capability of his missiles but their short comings. The reality is a reasonable failure rate (c.33% in the past 3 years alone) has a high level of risk attached to it, especially when sending them over Japanese land. While most failures have been at the launch pad stage, the risk is that should the tracking and guidance systems fail mid flight over Japan even without warheads, considerable damage could be inflicted. Japan said it would shoot down such test missiles when Trump was threatening to intervene several months back but clearly swerved first in this game of chicken.

While Kim Jong Un’s technology is undoubtedly improving, the risk is that eventually it will reach a stage where he can be a belligerent imp with real capability. Up til now his armaments have been relatively crude. The sanctions put on the $12bn economy, mostly China, are biting. These missile tests would undoubtedly be costing Kim a relative bomb (no pun intended) to conduct. Still allowing his people to suffer isn’t a priority. The saber rattling is no different to his father and grandfather before him. Fire a few missiles, threaten others and get a cash injection to shut up and then go away.

Unfortunately this game of geopolitical chess gets worse as his capability gets better. He has nothing to lose whereas his neighbours stand to suffer relatively catastrophic downside. Tokyo is 125x larger in GDP terms than NK. Seoul 68x.

Does he intend to point one at Tokyo, Seoul, Guam or even Washington DC when he has the capability? This argument that a pre-emotive strike on North Korea won’t happen is getting weaker. China knows its strategic value as a buffer to the US. Bribing Pyongyang by buying its ginseng and coal is a cheap form of diplomacy. Beijing’s stance last month was telling. If the US preemptively strikes China will defend Kim. If Kim does anything stupid then he’s on his own.

Still if you know your enemy will eventually get to the stage it can physically harm you and threatens to do so it makes perfect sense militarily to eliminate the threat before it eventuates. After the capability is reached  the risks are factorfold higher. So for every argument that says conflict won’t happen (odds favor it not) the smarter bets will begin to ponder the growing chance something does.

Korean 5yr CDS have jumped 4bps to 62 today, still below the 70 during last month and well below Kim Jong Un’s first missile test at 120bps. GFC was around 700bps. So markets aren’t panicked just yet but gold back over $1300/oz is pricing it gets worse.

Don’t rule out a modern day Gulf of Tonkin incident. With each of these tests, electronic interference (cyber attack) could be a factor. To justify a retaliatory attack, guiding these missiles to hit a remote paddyfield in Aomori or inside Japan’s territorial waters is possible. China must be concerned about this. Electronic warfare is getting seriously capable. Remember when the Iranian centrifuges mysteriously blew up due to the Stuxnet virus? The virus told the centrifuge computers to spin the motors well above design tolerance such that they exploded.

Conspiracy theory maybe but geopolitics is a dirty game with huge long term implications and the rules are that there are none. Kim’s preemptive strike might not start with his finger on the button.

Is there any dignity at CNN?

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Is CNN channeling the Gestapo? Threatening to release the name of an individual who made fun of the network’s own self inflicted stupidity. While it seems ratings haven’t suffered so badly post the Russiagate saga, surely the “we reserve the right to publish his identity” is an unbridled threat. How does taking down a video that has gone viral and been shared eliminate the problem? All that trying to ban soemthing does is exacerbate the problem.

One has to wonder whether the person that posted the video lampooning the network is “truly remorseful” or whether he was intimidated under a spotlight, pumped full of sodium Pentothal while staring at CNN’s legal goons in tight leather gloves. Talk about drawing bad attention to itself.

Perhaps if CNN really wanted to avoid such ridicule, it might decide to focus on quality journalism not stir up a hornet’s nest of lies for ratings. Doesn’t the satisfaction of winning from hard work and dedication trump free riding? Like drug cheats in sport perhaps if one lies to oneself enough they are every bit the winner as those legitimate athletes.

There can be no sympathy for a network that gets pilloried for engaging in what amounts to doxxing individuals. The Trump video in its initial form has been around for ages yet no complaints were had because everyone knows WWF is stage cast. The majority of those that saw the CNN spoof version would see it for what it is – ridicule.

For CNN to turn it into a “inciting violence against journalists” is plain nonsense. Should Trump have sent it on Twitter? No. Was it presidential? No. Was CNN in the wrong for inventing stories to try to remove him? Yes. Are journalists’ lives in danger from the President when they line up at a White House press conference? No.

As the ancient Chinese proverb states, “before setting out on revenge, first dig two graves.”

Comey canned

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Well the inevitable has happened. Trump fired FBI Director Comey. Some might say this is a Nixonian ‘Saturday night massacre’ when the president removed the special Watergate prosecutor, Archibald Cox, leading to the the resignation of Elliot Richardson, then Attorney General. Now for a can of worms. Note how Trump made the explicit remark in his termination letter to Comey that the FBI Director confirmed “three times” that he was not under investigation. That remark in and of itself will get the conspiracy theorists on overdrive.

PA Democrat Senator Bob Casey said,

“This is Nixonian. Deputy Attorney General Rod Rosenstein must immediately appoint a special counsel to continue the Trump/Russia investigation. On March 20th Director Comey said, ‘I have been authorized by the Department of Justice to confirm that the FBI, as part of our counterintelligence mission, is investigating the Russian government’s efforts to interfere in the 2016 presidential election and that includes investigating the nature of any links between individuals associated with the Trump campaign and the Russian government and whether there was any coordination between the campaign and Russia’s efforts…This investigation must be independent and thorough in order to uphold our nation’s system of justice.”

Prepare for the barrage of ‘Fake News’ claims for anyone wanting to force an independent investigation. You can see now that Trump will use the ‘three times’ to shut down the need to conduct it. If indeed nothing is wrong then he should gladly invite an independent investigation or release findings of the investigation to date. That way he clears his name. Doesn’t pass the sniff test. All this does is undermine confidence, something the world could do without.