Following what are now daily reports of evil Russian hackers penetrating AES-encrypted firewalls at the IRS, and just as evil Chinese hackers penetrating "Einstein 3" in the biggest US hack in history which has allegedly exposed every single federal worker's social security number to shadowy forces in Beijing, the message to Americans is clear: be very afraid, because the "evil hackers" are coming, and your friendly, gargantuan, neighborhood US government (which is clearly here to help you) will get even bigger to respond appropriately.
But don't let any (cyber) crisis go to waste: the porous US security firewall is so bad, Goldman is now pitching cybersecurity stocks in the latest weekly David Kostin sermon. To wit:
The meteoric rise in cybersecurity incidents involving hacking and data breaches has shined a spotlight on this rapidly growing industry within the Tech sector. Cyberwar and cybercrime are two of the defining geopolitical and business challenges of our time. New revelations occur daily about compromised financial, personal, and national security records. Perpetrators range from global superpowers to rogue nation-states, from foreign crime syndicates to petty local criminals, and from social disrupters to teenage hackers. No government, firm, or person is immune from the risk.
Because if you can't profit from conventional war, cyberwar will do just as nicely, and as a result Goldman says "investors seeking to benefit from increased security spending should focus on the ISE Cyber Security Index (HXR)."
The HXR index has outperformed S&P 500 by 19pp YTD (22% vs. 3%). Since 2011, the total return of the index is 123pp higher than the S&P 500 (207% vs. 84%). The relative outperformance of cybersecurity stocks versus S&P 500 matches the surge in the number of exposed records (see Exhibit 2).
Goldman further notes that "the frequency and seriousness of cyberattacks skyrocketed during 2014. Last year 3,014 data breach incidents occurred worldwide exposing 1.1 billion records, with 97% related to either hacking (83%) or fraud (14%). Both incidents and exposed records jumped by 25% during the last year. The US accounted for 50% of total global incidents and exposed records. Businesses accounted for 53% of all reported incidents followed by government entities at 16%. Exhibit 1 contains a list of selected recent high-profile cyberattacks."
It is almost as if the US is doing everything in its power to make life for hackers that much easier, or alternatively to make Goldman's long HXR hit its target in the shortest possible time.
Or perhaps the US is merely giving the impression of a massive onslaught of cyberattacks, one which may well be staged by the biggest cybersecurity infringer, and false flag organizer of them all, the National Security Administration in conjunction with the CIA.
We won't know, however just to make sure that the fear level spread by the Department of "Developed Market" Fear hits panic level promptly, overnight the UK's Sunday Times reported via Reuters, "citing unnamed officials at the office of British Prime Minister David Cameron, the Home Office (interior ministry) and security services" that Britain has pulled out agents from live operations in "hostile countries" after Russia and China cracked top-secret information contained in files leaked by former U.S. National Security Agency contractor Edward Snowden.
MI6 building in London.
It is unclear how the unknown source at MI6 learned that Russia has hacked the Snowden files, but what is clear is that after the US admitted Snowden's whistleblowing in fact was warranted and even led to the halt of NSA spying on US citizens (replaced since with spying by private telecom corporations not subject to FOIA requests courtesy of the US Freedom Act), it was long overdue to turn up the PR heat on Snowden, who is seen increasingly as a hero on both sides of the Atlantic.
British Foreign Secretary Philip Hammond said Snowden had done a huge amount of damage to the West's ability to protect its citizens. "As to the specific allegations this morning, we never comment on operational intelligence matters so I'm not going to talk about what we have or haven't done in order to mitigate the effect of the Snowden revelations, but nobody should be in any doubt that Edward Snowden has caused immense damage," he told Sky News.
Reading a little further reveals that in the modern world having your spies exposed merely lead to invitations for coffee and chocolates.
An official at Cameron's office was quoted, however, as saying that there was "no evidence of anyone being harmed." A spokeswoman at Cameron's office declined to comment when contacted by Reuters.
So Russia and China knew the identities and locations of UK spies but they neither arrested them, nor harmed them in any way. How cultured.
Meanwhile, the soundbite propganda keeps building:
A British intelligence source said Snowden had done "incalculable damage". "In some cases the agencies have been forced to intervene and lift their agents from operations to stop them being identified and killed," the source was quoted as saying.
Needless to say, the timing of this latest "report" is no coincidence. Just like in the US where the NSA seemingly just lost a big battle to the Fourth Amendment, so the UK is poised for a big debate on the manufactured "liberty vs security" debate.
The revelations about the impact of Snowden on intelligence operations comes days after Britain's terrorism law watchdog said the rules governing the security services' abilities to spy on the public needed to be overhauled. Conservative lawmaker and former minister Andrew Mitchell said the timing of the report was "no accident".
"There is a big debate going on," he told BBC radio. "We are going to have legislation bought back to parliament (...) about the way in which individual liberty and privacy is invaded in the interest of collective national security.
"That's a debate we certainly need to have."
Cameron has promised a swathe of new security measures, including more powers to monitor Briton's communications and online activity in what critics have dubbed a "snoopers' charter".
And because Britain's terrorism laws reviewer David Anderson said on Thursday the current system was "undemocratic, unnecessary and - in the long run - intolerable" and called for new safeguards, including judges not ministers approving warrants for intrusive surveillance, saying there needed to be a compelling case for any extensions of powers, this is precisely why now was the right time for some more "anonymously-sourced" anti-liberty propaganda.
So between the IRS and the OPM hacks, not to mention the countless other US hacks and data breaches shown on the top chart, allegedly almost exclusively by Russia and China, which have revealed not only how much US citizens make, spend and save, but the SSN, work and mental history of every Federal worker, the two "isolated" nations now know as much if not more about the US than the US itself.
If this was even remotely true, then the US would long ago have been in a state of war with both nations.