Cyber-Attacks Are The New Cold War

Tyler Durden's picture

Via Scotiabank's Guy Haselmann,

The Invisible Enemy

Earlier this month President Obama declared foreign cyber-threats a “national emergency”.   During the State of the Union address, he said that “if the US government does not improve cyber defenses, we leave our nation and our economy vulnerable”.  This past weekend the TV program 60 Minutes ran a special on cyber security, particularly pertaining to the importance of our nation’s satellite systems.

In the April issue of CIO Magazine, the President and CEO of IDG Communications wrote an article about cybersecurity, stating “significant data breaches at Anthem, Sony, Home Depot, eBay, JPMorgan Chase, Target and many more have caused headline-grabbing business upheavals that worry customers, affect profit margins, and derail corporate careers”.   It seems there are now daily news articles about sinister cyber-activity.

Cyber-threats or crimes can be orchestrated in various ways.   Targets can be aimed at critical infrastructure, manufacturing, power grids, or water supplies.   They could be aimed at disrupting the availability of websites and networks, or at stealing trade secrets and financial information.  Others could be driven by espionage, vandalism, terrorism, sabotage, or any form of criminality.   Activities of the US and British governments have focused on surveillance and hacking of telecommunications.

It is difficult to fight cyber-activity, because the enemy is often invisible and their home address typically unclear.  Building defenses are challenging while continuous ‘patchwork’ is a deficient solution.  Threats morph and change quickly.  For corporations many threats are internal and could come from rogue employees or from senior managers with weak passwords who have access to sensitive files.  Some companies are now even looking into having retaliatory capabilities. 

Warfare today (and in the future) is (and will be) fought differently.  In the 1950’s with the creation of more destructive bombs and weaponry, the idea was ‘Mutually Assured Destruction’ (MAD).   The movie War Games helped us learn that there are no winners.  The warfare ideology today is ‘Multilateral Unconstrained Disruption’ (MUD).  This unrestrictive warfare is meant to disrupt societal functioning; to ‘poison’ information to elevate distrust of all computer information.

Cyber-activity is the new ‘cold war’.   Here are some random facts.

  • 95% of all computers are non-governmental.
  • It is estimated that 40% of all computers are run by pirated copies, and 17% run no antivirus protection.   
  • There are over 6 million known unique Malware viruses.
  • According to a Mandiant report, attackers had free range in a breached system for a median of 205 days in 2014 and 69% of breaches where learned from an outside entity.

The scariest fact I learned in reading up on this topic is that 100% of all microprocessors and chips are produced overseas.   In other words, it is hard to be certain what is really on them.  Like the Stuxnet virus, computers can have a ‘zero-day’ where they are taught to do the wrong thing.

KCS Group, one of the world’s leading strategic intelligence and risk companies, reports a significant increase in cyber-attacks from Iran directed against Saudi Arabia and the US.  The combination of Saudi policies (Yemen), the general rise in Middle East tensions, and the Stuxnet attack on Iran nuclear facilities are all likely motivations.  The virus that infected Saudi state oil company Aramco’s IT system in 2012, for example, erased data on three-quarters of their PC’s, and replaced emails and documents with an image of the US flag in flames.

There is a positive correlation between cyber-attacks and the rise of geopolitical tensions.  Pricing these heightened risks into markets however is impossible.  ‘Event risk’ always exists, but handicapping it appropriately is a futile exercise.  Markets participants do not try, because of improvements in data mining and due to the speed of news when there is something concrete to react to.

  • In a similar manner, markets are not reacting to the threats or rumors of a Greece default or a Fed rate hike, because those threats have been delayed time and time again.  Markets have learned to react only to concrete news.

At this point, you might be wondering why I bothered writing this note and how can these factors can help in terms of financial risk management.  Well, I believe good traders, portfolio managers, and business managers should try to think through every conceivable contingency.   In doing so ahead of time, managers should have a better handle on how to proceed should one of these events occur.  They will be two steps ahead.

It might be helpful to analyze what happened to the stock prices of the companies mentioned above when they were hacked.  How deeply were the firms impacted?  How long did the impacts last?  Some may have ultimately been left stronger as weaknesses were exposed and then stronger processes implemented.   Oil traders should know if oil prices were affected by the Aramco attack?

Game plans are not just applicable to portfolio exposures, but directly to individuals personally.   Corporate managers should have a plan B, contingency plans, and a disaster recovery site.  I heard Jamie Dimon of JPM say at a conference that his firm is doubling the amount they spend on computer security in 2015 to $1.2 billion.

On June 5 in New York City, I am attending the Information Security Summit to hear more from industry experts in this area.  Simply waiting for an event to react to may be too costly.  I hope to obtain some suggestions for being proactive.   The experts may even have some good suggestions for preventative medicine.  At a minimum, I recommend that you encourage your firm’s Chief Security Officer to attend.  Welcome to 2015.

“Never trust a computer you can’t throw out a window.” – Steve Wozniak

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heisenberg991's picture



Weaponized Innocense's picture
Weaponized Innocense (not verified) heisenberg991 Apr 28, 2015 5:18 PM

First and foremost leave all back doors open as a matter of national security! There ya go that should "fix" everything just right!

green sheen's picture

Tyler and the rich want to set up a gold standard to rape you even harder. Why do you think this website will never tell you about 9/11? Why is it ZeroHedge will never tell you what a local currency would do to the bankers? Or the inflation caused by fractional reserve lending, which is 10 times more money printing than the Federal Reserve does?

Most of you slaves are too far gone for this to compute. You desire your own repression. They raped you with bitcoins but you take it like you enjoyed it and want some more. It's not complicated. They are going to confiscate your gold after you consent to a gold standard. AGAIN.

CH1's picture

The author's a statist, fear-mongering tool.

Ignatius's picture

If I was in the 3rd world I wouldn't be looking over my shoulder worrying if 1s and 0s were coming at me.

Higher on my priority worry list would be the CIA, drones and depleted uranium shells, I think.

MonetaryApostate's picture

You are under estimating the power & dangers of digital terrorism.... 

(Maybe the author does a poor job of outlining the threats & newer technologies...)

Basically they could send us back to the stone age because they own all of the mega corps & shit we need, I don't think the 3rd world nations are our problem, it's those with their fingers over the buttons threatening us with their tools if we don't pay our taxes & obey like good little slaves...

edotabin's picture

Nnnnaaaahhhhh, they just couldn't come up with some missile porn, so they went digital for a brief period.

Ignatius's picture

Listen to this guy.  He's been here for over 5 weeks, for christ's sake.

Urban Redneck's picture

US Nuclear Lauch Code: 00000000

(while Dark Helmet was running SAC for several decades)

legend247's picture
legend247 (not verified) heisenberg991 Apr 29, 2015 2:59 AM

Since I started freelancing I've been bringing in $90 bucks/h… I sit at home and i am doing my work from my laptop. Th? best thing is that i get more time to spent with my family and with my kids and in the same time i can earn enough to support them... You can do it too. Start here...

Row Well Number 41's picture

One of the most effective forms of industrial or military sabotage limits itself to damage that can never be thoroughly proven—or even proven at all—to be anything deliberate. It is like an invisible political movement; perhaps it isn’t there at all. If a bomb is wired to a car’s ignition, then obviously there is an enemy; if public building or a political headquarters is blown up, then there is a political enemy. But if an accident, or a series of accidents, occurs, if equipment merely fails to function, if it appears faulty, especially in a slow fashion, over a period of natural time, with numerous small failures and misfirings—then the victim, whether a person or a party or a country, can never marshal itself to defend itself.
    -- Philip K Dick



Sturm und Drang's picture

Like the two recently published Russian rocket failures.

jdtexas's picture

How about Operation Gladio.....especially when your enemy is your own people

Operation Gladio (Video)

johny2's picture

the new cold war is using CIA to overthrow the elected government, propaganda spread by msm, using false flags, economic sanctions, oil weapon and some others as stuxnet. All one sided attempts to start a hot war to hide the reality that is surfacing more and more thanks to the free information on internet.

SofaPapa's picture

The media is THE issue.  There is no truth now, just a variety of flavors of lying.  Yet so many form their opinions and act based on the lies.  Until the lies are recognized for what they are, we are still at zero.  This must be step one.  Action is useless when based on false information.

MonetaryApostate's picture

Countries aren't stupid, they know when the US or should I say the UK Is playing terrorist in their country, and yes they know what the CIA / M16 is doing in their country, or they would have fell a long time ago (surely)...  When the dust settles, it's not going to be pretty...

Take this question to heart...  What do you think would happen to you if you took some guns and went around shooting everyone in your neighborhood?

Now apply that to America & the UK....

RMolineaux's picture

Moving into cyber warfare is moving the advantage to nations such as Russia, China and Iran.  These countries have cyber capabilities equal to, or greater than, the US, thereby enabling them to offset the military hardware advantage of the US in this new asymetrical contest.

kchrisc's picture

"Cyber-Attacks Are The New Cold War"

Actually the cold war was a Zion and MIC plunder-farce. Then when one considers who was really behind Russian communism, well...

Cyber-attacks are more like the 9/11 false-flag: An excuse for more tyranny.

Liberty is a demand. Tyranny is submission.


Read Terry Reeds book, "Compromised," for background on the Cold War farce. Not the book's main premise, but it's the farce is all too evident.

MayIMommaDogFace2theBananaPatch's picture

And MUD spelled backwards is DUM

Wile E. Coyote - Super Genius

fascismlover's picture

The movie War Games taught us that computers can talk cutely if they are programmed that way...that's about it.  The movie Threads and it's little brother: The Day After taught us about the realities of MAD.  Cyber crime does not involve skin melting off of me so I could care less who steals what virtual thing from some other virtual person.

ali-ali-al-qomfri's picture

it's still MAD -Mutually Assured Deletions

amanfromMars's picture

Guy Haselmann, Hi,

The secret sauce is to be the secret source which creates events virtually/practically invisibly, for markets and systems/punters and machines to react to.

But the Great Game is nothing new even though nowadays the intelligence used and needed to lead everything and anything with IT in it is certainly different and much more advanced than ever before considered or believed possible.

And the immaculate stealth which allows that situation and IT unbridled free reign to target that which is unfit for Future Greater IntelAIgent Game purpose, is simple second and third party ignorance and disbelief of that fact and revelation and shared free narratives which exploit the colossal vulnerability/heavenly opportunity.

I Kid U Not.

And, believe it or believe it not, it is a recognised rich field of endeavour and enterprise .... [a href=""][/a]

Calculus99's picture

He's right, this is a) the future of war/disruption and b) good traders will think through what might happen and what they will do.