Head's Up!: 2010

After last week's Stuxnet disclosures, it was only a matter of time before the viral sabotage was flushed into the open, with Iran confirming that it had been in fact attacked. As expected, Al-Jazeera has just confirmed that not only has Bushehr been infected, but so have numerous other industrial sites all over Iran. Yet despite the pervasive attack, 'no damage or disruption of nuclear facilities has yet been reported, however.' What is surprising is that Iran has made such a major media splash on the topic: one would assume that demonstrating such broad cyberdefensive weakness would not be in the country's favor...

Thursday, September 23, 2010

Is A Virus About To Revolutionize Modern Warfare?

Is A Virus About To Revolutionize Modern Warfare?
Tyler Durden's picture
Submitted by Tyler Durden on 09/23/2010 10:22 -0500

* Germany
* India
* Iran
* Israel
* Nuclear Power

One of the most interesting stories in the last few days, has little to do with finance and economics (at least right now), but arguably very much to do with geopolitics. A fascinating report which cites computer security experts claims that the recent uber-cryptic malware worm Stuxnet is nothing less than a weapon designed to infiltrate industrial systems, and based on attack patterns, the ultimate object of Stuxnet may be none other than Iran's Busher nuclear reactor, which could be targetted for destruction without absolutely any military intervention. Has modern warfare just become obsolete courtesy of a computer virus?

From Yahoo:

Cyber security experts say they have identified the world’s first known cyber super weapon designed specifically to destroy a real-world target – a factory, a refinery, or just maybe a nuclear power plant.

The cyber worm, called Stuxnet, has been the object of intense study since its detection in June. As more has become known about it, alarm about its capabilities and purpose have grown. Some top cyber security experts now say Stuxnet’s arrival heralds something blindingly new: a cyber weapon created to cross from the digital realm to the physical world – to destroy something.

A brief history of Stuxnet:

Stuxnet surfaced in June and, by July, was identified as a hypersophisticated piece of malware probably created by a team working for a nation state, say cyber security experts. Its name is derived from some of the filenames in the malware. It is the first malware known to target and infiltrate industrial supervisory control and data acquisition (SCADA) software used to run chemical plants and factories as well as electric power plants and transmission systems worldwide. That much the experts discovered right away.

But what was the motive of the people who created it? Was Stuxnet intended to steal industrial secrets – pressure, temperature, valve, or other settings –and communicate that proprietary data over the Internet to cyber thieves?

And it gets much more eerie:

Since reverse engineering chunks of Stuxnet's massive code, senior US cyber security experts confirm what Mr. Langner, the German researcher, told the Monitor: Stuxnet is essentially a precision, military-grade cyber missile deployed early last year to seek out and destroy one real-world target of high importance – a target still unknown.

"Stuxnet is a 100-percent-directed cyber attack aimed at destroying an industrial process in the physical world," says Langner, who last week became the first to publicly detail Stuxnet's destructive purpose and its authors' malicious intent. "This is not about espionage, as some have said. This is a 100 percent sabotage attack."

Stuxnet is so sophisticated it may revolutionize the way modern warfare if fought entirely:

Stuxnet's ability to autonomously and without human assistance discriminate among industrial computer systems is telling. It means, says Langner, that it is looking for one specific place and time to attack one specific factory or power plant in the entire world.

"Stuxnet is the key for a very specific lock – in fact, there is only one lock in the world that it will open," Langner says in an interview. "The whole attack is not at all about stealing data but about manipulation of a specific industrial process at a specific moment in time. This is not generic. It is about destroying that process."

The virus has already spread to the point where it is safe to say most critical SCADA infrastructure may already be infected.

So far, Stuxnet has infected at least 45,000 industrial control systems around the world, without blowing them up – although some victims in North America have experienced some serious computer problems, Eric Byres, a Canadian expert, told the Monitor. Most of the victim computers, however, are in Iran, Pakistan, India, and Indonesia. Some systems have been hit in Germany, Canada, and the US, too. Once a system is infected, Stuxnet simply sits and waits – checking every five seconds to see if its exact parameters are met on the system. When they are, Stuxnet is programmed to activate a sequence that will cause the industrial process to self-destruct, Langner says.

Has Stuxnet already hit its target?It might be too late for Stuxnet's target, Langner says. He suggests it has already been hit – and destroyed or heavily damaged. But Stuxnet reveals no overt clues within its code to what it is after.

Will DEADF007 be the keyword that everyone will soon focus on?

Langner's analysis also shows, step by step, what happens after Stuxnet finds its target. Once Stuxnet identifies the critical function running on a programmable logic controller, or PLC, made by Siemens, the giant industrial controls company, the malware takes control. One of the last codes Stuxnet sends is an enigmatic “DEADF007.” Then the fireworks begin, although the precise function being overridden is not known, Langner says. It may be that the maximum safety setting for RPMs on a turbine is overridden, or that lubrication is shut off, or some other vital function shut down. Whatever it is, Stuxnet overrides it, Langner’s analysis shows.

"After the original code [on the PLC] is no longer executed, we can expect that something will blow up soon," Langner writes in his analysis. "Something big."

And the punchline - Iran's nuclear plant may have already been destroyed without anyone firing a shot anywhere:

A geographical distribution of computers hit by Stuxnet, which Microsoft produced in July, found Iran to be the apparent epicenter of the Stuxnet infections. That suggests that any enemy of Iran with advanced cyber war capability might be involved, Langner says. The US is acknowledged to have that ability, and Israel is also reported to have a formidable offensive cyber-war-fighting capability.

Could Stuxnet's target be Iran's Bushehr nuclear power plant, a facility much of the world condemns as a nuclear weapons threat?

Langner is quick to note that his views on Stuxnet's target is speculation based on suggestive threads he has seen in the media. Still, he suspects that the Bushehr plant may already have been wrecked by Stuxnet. Bushehr's expected startup in late August has been delayed, he notes, for unknown reasons. (One Iranian official blamed the delay on hot weather.)

There is much more to this story than merely creating page click inducing headlines. Computerworld itself is on the case:

A highly sophisticated computer worm that has spread through Iran, Indonesia and India was built to destroy operations at one target: possibly Iran's Bushehr nuclear reactor.

That's the emerging consensus of security experts who have examined the Stuxnet worm. In recent weeks, they have broken the cryptographic code behind the software and taken a look at how the worm operates in test environments. Researchers studying the worm all agree that Stuxnet was built by a very sophisticated and capable attacker -- possibly a nation-state -- and it was designed to destroy something big.

Though it was first developed more than a year ago, Stuxnet was discovered in July 2010, when a Belarus-based security company found the worm on computers belonging to an Iranian client. Since then it has been the subject of ongoing study by security researchers, who say they have never seen anything like it before. Now, after months of private speculation, some of the researchers who know Stuxnet best say that it may have been built to sabotage Iran's nukes.

And ever more experts are chiming in:

Last week Ralph Langner, a well-respected expert on industrial systems security, published an analysis of the worm, which targets Siemens software systems, and suggested that it may have been used to sabotage Iran's Bushehr nuclear reactor. A Siemens expert, Langner simulated a Siemens industrial network and then analyzed the worm's attack.

Experts had first thought that Stuxnet was written to steal industrial secrets -- factory formulas that could be used to build counterfeit products. But Langner found something quite different. The worm actually looks for very specific Siemens settings -- a kind of fingerprint that tells it that it has been installed on a very specific programmable logic controller (PLC) device -- and then it injects its own code into that system.

Because of the complexity of the attack, the target "must be of extremely high value to the attacker," Langner wrote in his analysis.

The evidence supporting that the attack is truly focusing on Iran is moving beyond the merely circumstantial:

This specific target may well have been Iran's Bushehr reactor, now under construction, Langner said in a blog post. Bushehr reportedly experienced delays last year, several months after Stuxnet is thought to have been created, and, according to screenshots of the plant posted by UPI, it uses the Windows-based Siemens PLC software targeted by Stuxnet.

Another article by Computerworld discusses the lack of patching of a bug which Windows promised had been fixed, yet which allowed the entry of the virus into attacked systems. One wonders why Windows may have misrepresented this weakness...

Microsoft confirmed Wednesday that it overlooked the vulnerability when it was revealed last year.

The vulnerability in Windows Print Spooler service was one of four exploited by Stuxnet, a worm that some have suggested was crafted to sabotage an Iranian nuclear reactor.

Last week, researchers at both Kaspersky Lab and Symantec, the firms that had reported the bug to Microsoft in July and August, respectively, said the print spooler vulnerability had not been publicly disclosed before they found Stuxnet was using the flaw.

Yesterday Microsoft this omission:

"Microsoft is aware of claims that the print spooler vulnerability in MS10-061 was partially discussed in a publication in April 2009," said company spokesman Dave Forstrom in an e-mail Wednesday. "These claims are accurate. Microsoft was not directly made aware of this vulnerability nor its publication at the time of release."

And for the paranoid, there are at least two other unpatched bugs which allow Stuxnet to enter any system it desires:

The security firms also notified Microsoft of two other unpatched bugs that the Stuxnet worm exploited. Those flaws, which can be used by attackers to upgrade access privileges on compromised PCs to administrator status, will be patched in a future update, Microsoft said last week. It has not set a timetable for the fixes, however.

Little information is available about the two lesser vulnerabilities. Danish bug tracker Secunia, for example, has posted only bare-bones advisories, noting that one affects Windows XP while the other affects Vista and Windows Server 2008 machines.

In other words, the entire world could very well be open to attacks by the most sophisticated targeted virus ever created, whose sole purpose may be the eradication of targets which previously involved the involvement of armed combat.

Is the face of warfare about to change forever?

Wednesday, September 22, 2010

Housing isn’t even close to stabilizing Outside the Box - MarketWatch

Thursday, September 16, 2010

The "National Security" Apparatus Has Been Hijacked to Serve the Needs of Big Business

The "National Security" Apparatus Has Been Hijacked to Serve the Needs of Big Business: "

→ Washington’s Blog

As I noted yesterday:

Claims
of 'national security' are ... used to keep basic financial information
- such as who got bailout money - secret. That might not bode for
particularly warm and friendly treatment for someone persistently
demanding the release of such information.

I gave the following two examples:

Reuters noted in January:
U.S.
securities regulators originally treated the New York Federal
Reserve's bid to keep secret many of the details of the American
International Group bailout like a request to protect matters of national security, according to emails obtained by Reuters.

And Business Week wrote on May 23, 2006:
President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations

Further
evidence comes from the Department of Homeland Security's involvement
in requests for information under the Freedom of Information Act. As
AP noted in July:

For
at least a year, the Homeland Security Department detoured requests
for federal records to senior political advisers for highly unusual
scrutiny, probing for information about the requesters and delaying
disclosures deemed too politically sensitive.

***

The
Freedom of Information Act, the main tool forcing the government to be
more open, is designed to be insulated from political considerations.

***

Career employees were ordered to provide Secretary Janet Napolitano's political staff with information about the people who asked for records — such as where they lived, whether they were private citizens or reporters — and about the organizations where they worked.

If a member of Congress sought such documents, employees were told to specify Democrat or Republican.

***

The special reviews at times delayed the release of information to Congress, watchdog groups and the news media for weeks beyond the usual wait, even though the directive specified the reviews should take no more than three days.

***

Two exceptions required White House review: requests to see documents about spending under the $862 billion stimulus law and the calendars for Cabinet members.

Calendars became politically sensitive after AP obtained them for Treasury Secretary Timothy Geithner. They described calls several times each day with Wall Street executives.

***

Under
the law, people can request copies of U.S. government records without
specifying why they want them and are not obligated to provide personal
information about themselves other than their name and an address
where the records should be sent.

Yet several times, at least, junior political staffers asked superiors about the motives or affiliations of the requesters

Wired described it this way:

The
DHS issued a directive to employees in July 2009 requiring a wide
range of public records requests to pass through political appointees
for vetting. These included any requests dealing with
a “controversial or sensitive subject” or pertaining to meetings
involving prominent business leaders and elected officials. Requests
from lawmakers, journalists, and activist and watchdog groups were also
placed under this scrutiny.

Moreover, as the ACLU notes, Fusion Centers - a hybrid of military, intelligence agency, police and private corporations set up in centers throughout the country,
and run by the Department of Justice and Department of Homeland
Security - allow big businesses like Boeing get access to classified
information which gives them an unfair advantage over smaller
competitors:

Participation in fusion centers might give
Boeing access to the trade secrets or security vulnerabilities of
competing companies, or might give it an advantage in competing for
government contracts. Expecting a Boeing analyst to distinguish between
information that represents a security risk to Boeing and information
that represents a business risk may be too much to ask.

And a large portion of all intelligence work has now being outsourced to private companies. For example, according to the Washington Post:

Close to 30 percent of the workforce in the intelligence agencies is contractors.

And under the FBI's Infraguard program, businesses sometimes receive intel even before elected officials.

Of
course, 'no-bid' contracts in Iraq and elsewhere are another example
of how national security claims have been used to bypass the normal
bidding process which is designed to save taxpayers money. Halliburton,
Blackwater/Xe, and other friends of the Bush administration have
received tremendous windfalls in this fashion. And because BP supplies most of the oil and gas to the U.S. military, I would be surprised if BP has to participate in normal bidding procedures for new war-related projects.

Indeed, the whole Gulf oil spill is a classic example of how national security
claims have been used to protect a private corporation. Specifically,
as many locals have testified (and as will come out more in the next
couple of years), the Department of Homeland Security has helped to
enforce a blackout of information on how bad the oil spill was, and has
hindered scientists from collecting data from the most impacted sites.

And
Treasury Secretary Hank Paulson warned Congress that there would be
martial law unless the Tarp bailouts were approved. As I pointed out last October:

The New York Times wrote on July 16th:
In retrospect, Congress felt bullied by Mr. Paulson last year. Many of them fervently believed they should not
prop up the banks that had led us to this crisis — yet they were
pushed by Mr. Paulson and Mr. Bernanke into passing the $700 billion
TARP, which was then used to bail out those very banks.
***
Congressmen
Brad Sherman and Paul Kanjorski and Senator James Inhofe all say that
the government warned of martial law if Tarp wasn't passed:

Bait And Switch

Indeed, the Tarp Inspector General has said that Paulson misrepresented some fundamental aspects of Tarp.

And Paulson himself has said:
During the two weeks that Congress considered the [Tarp] legislation, market conditions worsened considerably. It
was clear to me by the time the bill was signed on October 3rd that we
needed to act quickly and forcefully, and that purchasing troubled
assets—our initial focus—would take time to implement and would not be
sufficient given the severity of the problem. In
consultation with the Federal Reserve, I determined that the most
timely, effective step to improve credit market conditions was to
strengthen bank balance sheets quickly through direct purchases of
equity in banks.
So Paulson knew 'by the time the bill was
signed' that it wouldn't be used for its advertised purpose - disposing
of toxic assets - and would instead be used to give money directly to
the big banks?

And see this and this.

In
the above-described ways - and many others as well - the entire
'national security' apparatus has been hijacked to serve the needs of
big business.

President Eisenhower warned us about the
military-industrial complex. But its not just the 'military'.
Homeland Security, intelligence agencies, and other portions of the
government have also become servants of big business as well.

Indeed, the interests of the government and big business are so closely aligned
that some high-level government officials may consider any threat to
the bottom line of the big banks and other corporate giants as an
existential threat to the nation's security.

Tuesday, September 7, 2010

Burry, Predictor of Mortgage Collapse, Bets on Farmland, Gold - Bloomberg

Friday, September 3, 2010

Probe Circles Globe to Find Dirty Money - WSJ.com

Thursday, September 2, 2010

Our Towns - Remembering the Long Island Express, the 1938 Storm - NYTimes.com

ObamaCare and the Constitution

ObamaCare and the Constitution: "

The new health care law, nicknamed ObamaCare, requires every American to purchase health insurance or pay a fine. Supporters say this unprecedented requirement is permitted by the Constitution's Commerce Clause, which allows Congress "to regulate commerce...among the several states." Robert A. Levy, a distinguished legal scholar who chairs the Cato Institute board of directors, speaks on the legitimacy of this legal interpretation. He gave three reasons why the individual mandate should not pass constitutional muster, says Reason Magazine.

The Commerce Clause was never intended, and has never been used, to compel the purchase of a private product. If Congress can force individuals to buy health insurance, then Congress can mandate the purchase of exercise equipment, diet foods, and on and on -- extending the dominion of the federal government to all manner of human conduct, including nonconduct.

The penalty for violating the mandate is not a tax. That means Congress's power "to lay and collect taxes" does not apply. To justify the mandate, Congress expressly cited the commerce power but not the taxing power. The courts should be guided accordingly.

Even if the penalty is deemed to be a tax, the Constitution does not authorize it. The Supreme Court has held that Congress cannot use its taxing power as a backdoor means of regulating, unless the regulation is authorized elsewhere in the Constitution. In this case, there is no other constitutional authorization.

Source: Robert A. Levy, "ObamaCare and the Constitution," Reason Magazine, August-September 2010.

For text:

http://reason.com/archives/2010/06/17/obamacare-and-the-constitution

For more on Health Issues:

http://www.ncpa.org/sub/dpd/?Article_Category=16

Could investors fleeing stocks become a lost generation? - USATODAY.com

Sunday, August 29, 2010

Was the Flash Crash a Warp-Speed Sting? - Barrons.com

Friday, August 27, 2010

Doctors remove nails allegedly hammered into maid by employers - CNN.com

Wednesday, August 25, 2010

Patrick McCully: Kyoto's Carbon Offsetting Moves from Tragedy to Farce

Sunday, August 22, 2010

After Finally Covering The Massive Retail Outflows, The NYT Also "Discloses" The Nanex Crop Circle Mystery

After Finally Covering The Massive Retail Outflows, The NYT Also "Discloses" The Nanex Crop Circle Mystery: "

Reading the NYT these days sure is enlightening: first, one gets news about some odd phenomenon, previously unheard of, that for 15 straight weeks retail investors have been pulling money out of retail funds (hmm, where has one seen this before), and now, with much fanfare, the NYT brings the Nanex Crop Circles to the center stage. At least unlike the former story's 15 week delay, it took the NYT a mere 3 weeks to rehash what Zero Hedge readers had known since July (how is that whole 'value added content' paywall idea going?). Nonetheless, it is satisfying that the criminal stock churning activity reported on first by us, has finally gone mainstream. Of course, the NYT conclusion is typical: "The idea that shadowy computer masterminds were trying to disrupt the
nation’s stock trading struck many people as ridiculous. Wall Street
experts generally characterize it as a conspiracy theory with little
basis in fact." Interesting: yet a mere 4 minutes ago we pointed out that Finra is starting to ferret out illicit HFT trading practices... Maybe the NYT can put two and two together (in real-time this time).

Thursday, August 19, 2010

Major study proves oil plume that's not going away - Yahoo! Finance

Monday, August 16, 2010

Geithner's Old Housemate Just Became A JPMorgan Executive

Wednesday, August 11, 2010

Quote of the Day: Economic Recovery | The Big Picture

Friday, August 6, 2010

Guest Post: Who's Scoffing Now | zero hedge

Tuesday, August 3, 2010

Robert L. Cavnar: Top Kill Procedure Starting - Even with BOP Leaks

Saturday, July 31, 2010

Personal Details Exposed Via Biggest U.S. Websites - WSJ.com

Friday, July 30, 2010

Technical Indicators Favor Stocks But Fundamentals Send Warning Signals - Barrons.com

: St. Louis Fed President Warns Against Japan-Style Deflation - Barrons.com

Op-Ed Contributor - The Volt - G.M.’s Electric Lemon - NYTimes.com

Wednesday, July 28, 2010

Video: Oil spill in Michigan from Marshall resident

Video: Oil spill in Michigan from Marshall resident: "Watch the first-hand video from a Marshall resident of the oil spill that's flowing through the Kalamazoo River.

Friday, July 23, 2010

Immigration Can Fuel U.S. Innovation—and Job Growth - BusinessWeek

Sunday, July 18, 2010

Roubini Global Economics - Nouriel Roubini's EconoMonitor

Methane Release From the Gulf Oil Spill: What Does It Mean? How Bad Could It Get?

Washington's Blog

Breaking: Seep Found Near Blownout Well, BP Not Complying With Government Demands for More Monitoring → Washington's Blog

Friday, July 16, 2010

State has dwindling resources to regulate Kennecott mine « Michigan Messenger

Wednesday, July 14, 2010

Washington's Blog

Trading Stocks? Pack Your Dramamine

Trading Stocks? Pack Your Dramamine: "

A few days ago we discussed that the market no longer responds to any fundamentals but merely gravitates toward various chaotic 'strange attractors' now that HFT-driven stock trading patterns are merely Mandelbrotian fractals, with no rhyme or reason behind self-similar trading patterns and unprecedented record daily volatility. Today, David Rosenberg provides the following chart best capturing the minimum RDA of dramamine required to trade stocks: with 6% average swings in 12 distinct periods in 2010 alone, even with the market virtually flat for the year, it is no wonder retail investors have decided to say goodbye to stocks for ever. This is not a market in which anyone, including retail and institutional investors, with the possible exception a few momentum inducing algos, can generate any alpha. Period. And leveraged beta trades are a recipe for suicide for anyone except those with discount window access. Which is why very soon the only ones trading stocks will be the primary dealers and those who pay multimillion monthly collocation fees to the NYSE in hopes they can frontrun a trade here or there (oh and SEC, your inability to halt flashing a year after saying you would do so, continue to inspire confidence that you are on top of your corruption game).

Tuesday, July 13, 2010

Volcker Rule May Give Goldman, Citigroup Until 2022 to Comply - BusinessWeek

Friday, July 9, 2010

Flawed Financial Bill Contains Huge Surprise: Simon Johnson - Bloomberg

‘Green Infrastructure for Clean Water Act of 2010’ Introduced to Senate

Strategies - Robert Prechter’s Market Forecast Says ‘Take Cover’ - NYTimes.com

Wednesday, July 7, 2010

Joseph Rago: The Massachusetts Health-Care 'Train Wreck' - WSJ.com

Monday, July 5, 2010

Dow Repeats Great Depression Pattern: Charts - CNBC

Oil Companies Reap Billions From Subsidies - NYTimes.com

Photographer Detained For Taking Pics Of BP Refinery As Up To 100% Of Pensacola Area Reservations Canceled | zero hedge

Sunday, July 4, 2010

Iran, Russia and the Real World Obama Cannot Change

Iran, Russia and the Real World Obama Cannot Change: "

I have a frequent nightmare: In the year 2011, with the full support and complicity of their shadow ally, Russia, the Islamofascist regime in Tehran announces that they have developed a deliverable nuclear weapon(s). That any attempt by any nation to dismantle their program through military force or draconian economic sanctions will be viewed as an overt act of war. That they will view any such act of war as justification enough to deploy a nuclear weapon against Israel…regardless of what nation is behind the initial response.

They will cite classic anti-Semitic mantra, such as the myth that international Jewry controls the Western powers, etc. as their reasoning for labeling Israel the chief culprit by default. More to the point, when push comes to shove they know that President Obama harbors no love of the Jewish state (as his harsh treatment of Netanyahu shows) and will have no stomach for a war to protect it.

[Meanwhile the Russians let it be known through diplomatic back-channels that relations between Tehran and Moscow have recently thawed and any retaliatory military strike against Iran for its actions against Israel could be viewed as an attack on Russia.]

The West, assuming it is even motivated to respond at all, is now put in a precarious position for a now-nuclear Iran looms over the Strait of Hormuz like a Colussus. This narrow sea lane is by far the world’s most important oil chokepoint due to its daily flow of 16.5-17 million barrels, or roughly 40 percent of all seaborne oils (20 th percent of oil traded worldwide). At its narrowest point the channel is only 21 miles wide.

Now Obama will have a choice to make. Will he commit the US Navy to keep the strait open, call the Russian bluff and risk a world war? Or will he back down and seek a “diplomatic” solution. Regardless, even temporarily closing off the Persian Gulf would cause an economically devastating spike in the price of oil and a sympathy rally in all commodities.

This would be just fine for the commodity-rich Russia. With 79 billion barrels of proven reserves they hover above a vast reservoir of untapped crude oil. And let us not overlook natural gas. In fact, according to the EIA, Russia holds the world’s largest natural gas reserves, with 1,680 trillion cubic feet (Tcf), which is nearly twice the reserves in the next largest country which is, guess who, Iran. In 2006 Russia was not only the world’s largest natural gas producer (23.2 Tcf), but also the world’s largest exporter (6.6 Tcf). Russian government forecasts expect gas production to total 31.1 Tcf by 2030. Europe is highly dependent on Russian natural gas through the state-controlled Transneft pipelines they could close with the turn of a nozzle. The EU imports almost half of its natural gas and 30 percent of its oil from Russia. Eastern Europe consumes even higher percentages of Russian gas.

[As my dream moves along, I envision too that as a precursor to Iran’s announcement we see a sustained rally in oil futures before the eventual spike as Tehran will have given their new friends an ample heads-up allowing the barons of Moscow to go long futures as a hedge against what is coming and even profit from the appreciation should their cash business be temporarily dislocated from supply disruptions.]

The fact is the Russians have a vested interest in a nuclear Iran. It is good for business and certainly will greatly diminish the power and influence of the already hard-pressed USA. So even as Russian president Dmitry Medvedev offers lip-service to “limited” sanctions to an ever more bewildered Obama foreign policy team, the true powers in Russia—Putin and the band of hybrid statist/capitalist billionaire oligarchs—will never support effective economic measures that will hurt Iran enough to curb its nuclear ambitions. “The enemy of my enemy is my friend” is the old saying. And the Russians certainly do not look to as us partners…at best competitors, at worst impediments to their desires for expansion that date back into the dimmest past of the ancient tsars. Self-interest is the guiding principle among European nation-states. It always has been and always will be—“rock star” president notwithstanding.

[Meanwhile, as my nightmare unfolds, in another sea channel, the Chinese—who already have strong economic ties with Iran—coincidentally decide to launch a repeat of their bellicose 1996 naval exercises in the Formosa Strait almost within sight of the Taiwanese coast. What will the USA do? How will we treat this act of aggression half way across the world committed by the nation whose military might is formidable and even more prickly, holds much of our national debt and the value of our currency in a death grip?]

The America of my dream is thus weak and quite vulnerable. But this premonition need not come to pass. The first step towards thwarting this one potential future is for the Obama administration to do a re-“reset” in foreign relations and get a grip on who are our friends, who are our enemies, and start treating each accordingly. If Obama truly believes his own rhetoric that a nuclear Iran is “unacceptable” then he must see that we have with Israel a common and imperative goal to prevent Iran from obtaining nuclear weapons. If that means that he must give Israel tacit approval for a military strike with a quiet assurance that we will have their back regardless of what inevitable “condemnation” resolution come downs the UN pipeline then so be it. This is real world stuff here and the future of millions could be at stake. Hyperbole? Part of being a leader is having the capacity to imagine the unimaginable. 9/11 gave us a clue what a few hard-core Islamic zealots with box-cutters and no scruples can do. Just imagine this crowd with a nuke. Again, “unacceptable” means just that: we cannot accept it.

What Obama must accept is that our interests and those of much of the world are not aligned on this matter…either economically or politically. And thus must he find in himself the same “courage” that he conjured up to push through an unpopular healthcare bill at home because he, ahem, knew best, and this time do what is best for the world, whether that world knows it or not.

The fact is that the notion of a “global community” is a myth. Nations are what nations are. And a clue as to how they will conduct their affairs can usually be discerned by picking up a history book and thumbing through a page or two.

Iran is the geopolitical illustration of Newton’s first law of motion which offers that an object in motion will stay in motion on the same course until acted upon. It seems that in his desire to turn inward and create an economic utopia within our borders, Barack Obama is unwilling to accept that the world outside remains a very hazardous place. And there are many in that world who view the imminent decline of American power not as a symbol of a newfound global harmony, but rather an opportunity for mischief. If he stays on his relentless course of statism at home and post-American dogma abroad, Mr. Obama will end up irrevocably weakening this nation with unsustainable domestic activism and an utter misapprehension about the rough and tumble neighborhood in which his happy-faced diplomats are trying to navigate. He may very well get a new world order, that “change” of which he spoke so forcefully in his campaign. But I think the reality will not be so pleasant as his fantasy optimism would have him “hope.”

Saturday, July 3, 2010

Representative Bart Stupak's (MI01)- Stupak Statement on EPA's Kennecott Decision

EPA agrees with Kennecott on permit - MiningJournal.net | News, Sports, Jobs, Marquette Information | The Mining Journal

'Gasland' Documentary Shows Water That Burns, Toxic Effects Of Natural Gas Drilling (VIDEO)

Will Shale-Gas Fears Sink E&P Stocks? - Barrons.com

Friday, July 2, 2010

Hopefully This Chart Will Get Congress To Stop Squabbling About New Jobless Benefits

Hopefully This Chart Will Get Congress To Stop Squabbling About New Jobless Benefits: "

There's not really much bright side to today's job numbers: a hefty drop in unemployment, but only because so many people left the labor force. With the withdrawal of the temporary census jobs, the economy actually lost 125,000 payroll positions in the latest report.

Our own Dan Indiviglio has a chart that shows what's been happening:

2010 Jobs Created

There's a small ray of sunshine with the creation of some private-sector jobs, but the numbers are really thin. If you look at the overall figures, it seems clear that we're just returning to a very dismal trend that was temporarily disrupted by the census hiring. And whatever you think of federal stimulus spending, it's pretty clear that it kept some people working by plugging holes in state budgets, so as that wave of money recedes, we can expect to see a lot of downward pressure on the employment figures as states and municipalities lay off workers. The news reports are already full of teacher layoffs.

Job Growth

Eventually, of course, we'll return to job growth, but expect that to take some time, especially with the economic aftershocks still rocking the world economy. If next month's numbers look this bad, it will be pretty bad news for Democrats, who had allowed themselves to hope that things might be turning around. But it will be really bad news for households who have to manage through a long, ugly stretch of unemployment. Hopefully, this will spur Congress to stop squabbling over jobless benefits.

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With austerity all the rage around the world, sharp cutbacks to stimulus are going to hit global growth to the tune of 1.25 percentage points, the Institute of International Finance says; the second quarter will probably be the "high-water mark for growth over the next 18-24 months.”

With austerity all the rage around the world, sharp cutbacks to stimulus are going to hit global growth to the tune of 1.25 percentage points, the Institute of International Finance says; the second quarter will probably be the "high-water mark for growth over the next 18-24 months.”: "With austerity all the rage around the world, sharp cutbacks to stimulus are going to hit global growth to the tune of 1.25 percentage points, the Institute of International Finance says; the second quarter will probably be the "high-water mark for growth over the next 18-24 months.”

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Will Austerity Be The Catalyst For War?

Will Austerity Be The Catalyst For War?: "

As always SocGen's Dylan Grice comes out with some tremendous insights in his latest weekly piece 'Double dips, siren calls and inflationary bias of policy.' While the gist of the piece is presenting a comprehensive overview of the traditional and cognitive biases toward inflationary policies and away from hard, unpopular, deflationary/austere measures, Dylan provides a chilling anecdote involving the 1980s conflict between the UK and Argentina, in which it was precisely war that pulled an extremely unpopular government, that of Maggie Thatcher, out of the gutter of public opinion, and soaring in popularity. Thatcher, who came to power oddly enough on a 'mandate to smash inflation, smash the unions and downsize government', saw her popularity immediately slide to 25% (see chart) as people realized the very real pain associated with austerity and a regime fighting run away government. A tangent in Grice's argument is that on very rare occasions, the people of a country do end up making the decision to take on hardship, instead of kicking the can down the road (are you listening Summers?). Yet they promptly grow to regret their decision. So what was it that saved the government, and allowed the Conservatives a second term in which to complete the painful austerity project? The declaration of war by Argentina's General Galtieri over the Falkland Islands. The result was soaring popularity for the Iron Lady, and the rest is history. Looking forward, now that all of Europe is gripped in austerity, and make no mistake - this very same austerity is coming to the US on very short notice (sorry Krugman), and popularity ratings for all political parties are crashing, has the political G-8/20 elite been focused a little too much on the Falkland war? Is war precisely the diversion that Europe and soon America hope to use in order to deflect anger from policies such as Schwarzenegger's imposition of minimum wage salaries yesterday (yes, this is pure austerity)? And is there a Gallup or some other polling 'unpopularity' threshold that the G-20 is waiting for before letting all those aircraft carriers parked next to the Persian Guld loose? Read the below excerpt from Dylan and make up your own minds.

From SocGen's Dylan Grice

How about the UK in the 1980s though? Wasn't Thatcher elected in 1979 on the back of a promise to bring down inflation, smash the trade unions and downsize government? In other words, wasn't Thatcher elected with a mandate for deflation, which demonstrates that sometimes electorates do elect governments to take tough decisions?

Strictly speaking, the UK in the early 1980s doesn't belong in the same category as Canada, Sweden and Finland in the early 1990s. It had lurched between crises in the 1970s the way an all-day drunk lurches between lampposts: inflation peaked at 25% in 1975; the IMF were called in 1976; the bleak 'winter of discontent' of 1978/79 saw widespread power cuts and widespread strike actions by, for example, rail engine drivers, lorry drivers and ambulance drivers.

More infamously, rubbish piled up in Leicester Square after Westminster Council allocated rubbish to be dumped there when refuse collectors went on strike, and coffins piled up in Liverpool after gravediggers went on strike. When asked what the council would do should the gravedigger strike continue Liverpool's Medical Officer said the decomposing bodies would probably have to be thrown in the sea! The gravediggers soon got what they asked for and the strike only lasted two weeks.

So when in 1979 the UK electorate voted in Thatcher on a ticket of painful deflation, the crises caused by a weak and out-of-control-government weren't simply abstract, as they are to most of us today. They were real, and it was in the midst of this chaos that Thatcher came to power.

However, despite winning a clear mandate to smash inflation, smash the unions and downsize government, her immediate reward for carrying out her election pledges was to be marked as the most unpopular prime minister in British political history and by early 1982 her approval rating had slumped to 25%. Despite having voted for Thatcher’s painful medicine and having even understood the need for it, UK voters in the “hot” state people inevitably feel when unemployment spikes had less tolerance for the bitter medicine than they thought they would have in the distantly “cold” state of May 1979.

Squealing with pain and begging for it to stop (364 economists - including former and future Nobel Prize winners - signed an open letter decrying Thatcher's plan to raise taxes in the depths of the 1981 recession to cut borrowing as having no basis in economic theory). Thatcher's chances of a second term to complete her project looked doomed...?

But Britain wasn't the only divided nation in need of social healing at that time. On the other side of the world the widely-hated Argentinian military dictatorship of General Leopoldo Galtieri was experiencing severe economic crisis and widespread social unrest of his own. And to deflect from his domestic problems he did what pressed tyrants have done since the beginning of time - he picked a fight with a foreigner he felt sure he could beat.

Located in the South Atlantic only 300 miles from Argentine shores but 8,000 miles from Britain, the tiny Falkland Islands has been a territory of the UK since it was appropriated from the Argentines in 1833 for its strategic value in navigating Cape Horn. Since this had rankled with generations of Argentinians (as it still does today), Galtieri calculated that an invasion would deflect from his disastrous domestic policies. He also calculated that the UK would balk at the military response required to defend the Islands. The Brits would be vastly outnumbered with implausibly long supply lines and, anyway, the islands were mainly inhabited be sheep.

And America was his new best friend too. Hadn't Reagan just warmly received him as a bulwark against communism in Latin America? Hadn't the administration's National Security Advisor just called him the 'majestic general'? Convinced that even if Thatcher wanted to retaliate, she'd be talked out of it by the Reagan administration, he launched a surprise invasion on 2 April 1982. And that morning, Galtieri must have felt pretty pleased with himself. And that morning, Galtieri must have felt pretty pleased with himself. Upon hearing the news, enthralled crowds of patriotic Argentines momentarily forgot the death squads, the 9,000 to 30,000 disappeared 'subversives', the daily grind of high unemployment and 130% inflation, and instead gathered outside Galtieri's balcony in a carnival-like atmosphere to celebrate and show their approval of the invasion. His plan was working like a dream.

But the tribal instinct is a part of the human condition, not only the Argentinean one, and the British public were equally thoroughly gripped by the same fervent collective delusion that we call 'national pride.' Galtieri had miscalculated. Thatcher did respond militarily. The British army - though outnumbered - were better trained and equipped than their foe, whom they dispatched within two months. In the national delirium of that rare episode in the terminal decline of what had once the world's largest empire - a national victory - Thatcher's approval rating, like that of her previously despised party, soared (see chart below). An election was called, duly won by the Conservatives, and the painful austerity project was completed in a second term. The rest, as they say, is history.

Thatcher has gone down as the iron lady who turned Britain around and transformed its fortunes. But how different would the story have been had it not been for the 'majestic general?' The Thatcher experience shows how fragile support for painful economic policies can be even when the democratic mandate for those polices has been won.

Like the Canadian and Scandinavian austerity experience in the 1990s, the painful programs adopted succeeded as much by luck as by political bravery. And this is what worries me. It's not that I'm ideologically wedded to one side or the other, it's that the precedents just aren't encouraging. The Weberists are right to worry exactly because the Krugmanites are right that the required austerity will be so deeply painful and politically risky. Policymakers won't make it happen, so the bond market will make it happen instead.

Cuban Drilling Poses New Threat to Florida Beaches - WSJ.com

A 2.30% Treasury Long Bond Yield? - Barrons.com

Thursday, July 1, 2010

Gold Below $1,200 As Asset Liquidations Spread Like Wildfire

Tuesday, June 29, 2010

Econ Gangs of New York The Reformed Broker

Monday, June 28, 2010

S&P 500: Be Prepared!

S&P 500: Be Prepared!: "
June 25, 2010 Analysis from Chris Kimble

The third and final revision of Q1 GDP was released this morning. Unfortunately the revision was downward from 3.0 to 2.7, which is less than half the GPD of 2009 Q4. In the wake of this disappointing pattern Chris Kimble updates his view of the S&P 500, where he has previously alerted us to the formation of a head-and-shoulders pattern (June 11 and June 16). They're definitely flashing caution, and in the time-honored tradition of the Boy Scouts, investors should Be Prepared!

Click for a larger image

Chris comments: When support gives way, often times it pays to have a plan of action before the event that can be taken with reason and promptly.

The S&P 500 index finds itself at a multiple support price point, should support not hold, investors might want to have a plan of action and not stick around TOO LONG!

For feedback or more information, email Chris at KimbleChartingSolutions@gmail.com.

Precious Metals Update and Fibonacci Over Time

Precious Metals Update and Fibonacci Over Time: "
June 26, 2010 Analysis from Chris Kimble

First Chris Kimble updates us on gold and silver, following up on his June 18 charts:

Fibonacci, wedge resistance and the crayon test are still in play.
Gold closed at $1,255.80; down $1.20 on the week ($1,250 is fib resistance).
Silver closed at $19.17; down 7 cents on the week ($20 is Fib resistance).
GDX was off a third of a percent for the week (See Lucky Charms).

This morning he looks at Gold and offers a less common perspective on Fibonacci patterns — this time on the horizontal rather than the vertical axis.

Click for a larger image

Chris comments: Fibonacci patterns abound in nature, and they are used as key indicators for stock market advancements and retracement levels. Fibonacci is less frequently used as a time gauge.

144 is a number in the Fibonacci sequence (0, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 ...).

Look how 144 could fit into the timeline for movements of gold. Curious coincidence? Or is a pullback at hand?

For feedback or more information, email Chris at KimbleChartingSolutions@gmail.com.

Paul Krugman Throws In The Towel, Says We're Headed For Another Depression

Paul Krugman Throws In The Towel, Says We're Headed For Another Depression: "

Aaron and I discussed the stimulus v austerity question on TechTicker this morning. It basically boils down to pain now or pain later. (Or, if those who actually think we have less control than Krugman does, pain now AND pain later...)

For the last several months, Princeton professor Paul Krugman has become increasingly agitated about what he feels is a disastrous mistake in the making -- a sudden global obsession with 'austerity' that will lead to spending cuts in many nations in Europe and, possibly, the United States.

Krugman believes that this is exactly the same mistake we made in 1937, when the country was beginning to emerge from the Great Depression. A sudden focus on austerity in 1937, it is widely believed, halted four years of strong growth and plunged the country back into recession, sending the unemployment rate soaring again.

In Krugman's view, the world should keep spending now, to offset the pain of the recession and high unemployment--and then start cutting back as soon as the economy is robustly healthy again.

Those concerned about the world's massive debt and deficits, however, have seized control of the public debate, and are scaring the world's governments into cutting back.

Which fate is worse? It depends on your time frame.

Cutting back on spending now would almost certainly make the economy worse, at least for the short run. Not cutting back on spending later, meanwhile (and Congress has shown no ability to curtail spending), will almost certainly keep us on a road to hell in a handbasket.

The White House's own budget projections show the deficit improving as a percent of GDP to about -4% by 2013. After that, however, even the White House doesn't think things will get much better. After a few years of bumping along at about -4%, the deficit will begin to soar at the end of the decade. And thanks to the ballooning costs of Medicare, Medicaid, and Social Security--along with inflating interest payments from all the debt we're accumulating--the White House expects the deficit to soar to a staggering -62% of GDP by 2085.

What Krugman and his foe s agree on is that that's no way to run a country. And it's time we finally faced up to that.

In the meantime, we'll continue to fight about what to do in the near-term. And Krugman thinks he has lost that war and we're headed for another Depression.

See why Krugman's nemesis, Niall Ferguson, thinks the U.S. is screwed >d

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Oil Spill Might Be Making Natural Seeps Larger

Oil Spill Might Be Making Natural Seeps Larger: "

→ Washington’s

Blog

The deep sea subs have found other leaks a couple of miles from BP's
gushing blowout preventer and riser.

For example, the Houston
Chronicle noted
on June 21st:

A report from the National Oceanic
and Atmospheric Administration on Monday noted research vessels found
natural gas seeping from the sea floor several miles away from the well.

While
many might be quick to take this as confirmation of Matt Simmons' claims
that there is another leak directly caused by the sinking of the
drilling rig, the Chronicle goes on to explain:

Those
appear to be pre-existing seeps that occur naturally, a NOAA
spokeswoman said, and unrelated to the spill.

But
the Washington Post made a very important
point yesterday:

Bruce Bullock, director
of the Maguire Energy Institute at Southern Methodist University, said
additional leaks are a possible source of deep-sea plumes of oil
detected by research vessels. But this part of the gulf is pocked with
natural seeps, he noted. Conceivably
the drilling of the well, and/or the subsequent blowout, could have
affected the seeps, he said.

'Once you started disturbing the underground geology, you may have made
one of those seeps even worse,' he said.

Remember
that geologists have said that if the well casing is substantially
breached, the oil and methane gas will find a way through fractures in
the surrounding geology and make it into the ocean. For example, the
Houston Chronicle notes:

If the well
casing burst it could send oil and gas streaming through the strata to
appear elsewhere on the sea floor ....

Obviously,
if there are natural oil or gas seeps nearby, there are already
pre-existing channels up to the seafloor ... so that may very well be
the path of least resistance for the subterranean oil to flow up to the
seafloor.

Therefore, if there were a substantial breach in the
well bore, nearby natural oil and gas seeps could very well increase in
volume.

Because BP would like to minimize
leak estimates to minimize the damages it has to pay under the Clean
Water Act, BP would undoubtedly try to pretend that the nearby
natural seeps always had the same volume. In other words, the owner
of the oil drilling prospect where the spill is occuring - BP - may be
the only party to have mapped out the nearby seeps (Anadarko and Mitsui
were partners
with BP in the oil prospect; but - as passive partners - they probably
didn't take a hands-on approach to such details).

So don't be
surprised if - when formerly tiny seeps become gushers - BP tries to
pretend that they were always that large.

Indeed - given BP's
track record of prevarication - don't be shocked if BP pretends that
brand new gushers are ancient, natural seeps.

USS Carrier Harry Truman Now Officially Just Off Iran, As Israel Allegedly Plotting An Imminent Tehran Raid

USS Carrier Harry Truman Now Officially Just Off Iran, As Israel Allegedly Plotting An Imminent Tehran Raid: "

As we first reported last week, in an article that was met with much original skepticism, the Pentagon has now confirmed that a fleet of 12 warships has passed the Suez Canal, and is now likely awaiting orders to support the escalation in the Persian Gulf. The attached image from Stratfor shows the latest positioning of US aircraft carrier groups as of June 23: the USS Harry Truman (CVN-75) is now right next to USS Eisenhower (CVN 69), both of which are waiting patiently just off Iran.

As for the catalyst the two carriers may be anticipating, we provide the following update from the Gulf Daily News where we read that Israel may be on the verge of an attack of Iran, with an incursion originating from military bases in Azerbaijan and Georgia.

Israel is massing warplanes in the Caucasus for an attack on Iran, it was revealed yesterday.

Preparations are underway to launch the military attack from Azerbaijan and Georgia, reports our sister paper Akhbar Al Khaleej, quoting military sources.

Israel was, in fact, training pilots in Turkey to launch the strike and was smuggling planes into Georgia using Turkish airspace, they said.

However, Turkey was unaware of Israel's intention of transferring the planes to Georgia, the sources said.

The unexpected crisis between Israel and Turkey following an Israeli commando raid on an aid flotilla bound for Gaza Strip hit Israeli calculations.

Azerbaijan-based intelligence units, working under the cover of technicians, trainers and consultants, have helped with the preparations, the sources said.

Military equipment, mostly supplied by the US, was transported to a Georgian port via the Black Sea.

Georgian coastguard and Israeli controllers are co-operating to hide the operations from Russian vessels, said the sources.

They point out that according to Israel, it will not be in a position to launch a strike on Iran without using bases in Georgia and Azerbaijan due to the limited capabilities of its nuclear submarines stationed near the Iranian coast.

Meanwhile, Iran's Press TV reported that a very large contingent of US ground forces had massed in Azerbaijan, near the Iranian border. The independent Azerbaijani news website Trend confirmed the report.

Those reports came just days after the Pentagon confirmed that an unusually large fleet of US warships had indeed passed through Egypt's Suez Canal en route to the Gulf. At least one Israeli warship reportedly joined the American armada.

Press TV also quoted Iranian Revolultionary Guard Brigadier General Mehdi Moini as saying that the country's forces are mobilised and ready to face Israelli and American 'misadventures' near its borders.

* Iran last night said it has cancelled plans to send an aid ship to the Gaza Strip as Israel 'had sent a letter to the UN saying that the presence of Iranian and Lebanese ships in the Gaza area will be considered a declaration of war on that regime and it will confront it,' Irna said.

We caution readers to take this news with a grain of salt as the Gulf Daily News' sister publication, Akhbar Al Khaleej, has a slightly less than stellar credibility rating. Then again, this is what some, Breaking News Online most notably, said about last week's carrier news, urging readers to ignore it.

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