Colonial Pipeline: A Warning

Expect More Attacks on Infrastructure Were you forwarded this email? [Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] Colonial Pipeline: A Warning - “We should expect more hacking and more infrastructure disruption in the months ahead”… - Why businesses fail to adequately invest in cybersecurity… - Then Jim Rickards shows you the dangers of financial warfare, and how to protect your money… Recommended Link [[External Advertisement] “IMPERIUM”: The #1 Investment of the 2020s]( [Read more here...]( Could the technology behind this odd-looking machine really be the most transformative innovation in history? Experts are screaming “YES”! Elon Musk calls it “amazing…” A former Apple CEO says “[it will] have a far bigger impact on humanity than the Internet”… While a Harvard Ph.D. says it will “[surpass] the space, atomic, and electronic revolutions in its significance.” It’s a technology I call “Imperium.” And it’s about to spark the biggest investment mega trend in history… with one small Silicon Valley company at the center of it all. Want the details? [Click Here Now]( Portsmouth, New Hampshire May 18, 2021 [Jim Rickards] Dear Reader, By now, you’ve heard a lot about the Colonial pipeline that runs 5,500 miles from Houston, Texas to Linden, New Jersey. It’s one of the longest and most critical energy pipelines in the world, carrying refined products such as gasoline and kerosene from Gulf Coast refineries to major centers in Louisiana, Alabama, Georgia, South Carolina and North Carolina. The pipeline extends to Virginia and Maryland before terminating in Northern New Jersey. Some branches also serve Tennessee. In short, the Colonial pipeline is the major supplier of gasoline to the entire Southeast United States (excluding Florida). The pipeline software was hacked by an Eastern European cybercriminal group called Darkside. Some analysts have suggested that Darkside is supported by Russia, but that claim is disputed. Hackers live in a very murky world. The hack prevented normal operations of the pipeline and caused a severe gasoline shortage in the affected states. The shortage was made worse by hoarding, with motorists, who might normally have been willing to run half-empty, wanting to keep full tanks of gas. After a week of disruption and shortages, Colonial paid a $5 million ransom to regain access to the operating systems. Service was gradually restored, and gas shortages were mostly alleviated by May 16, although problems persisted in some areas. This should not be regarded as a one-off incident. We should expect more hacking and more infrastructure disruption in the months ahead. These attacks and disruptions will not be limited to energy pipelines and could affect the power grid, hydroelectric plants, internet service, and other necessary facets of everyday life. Stock exchanges and other financial markets could be attacked in addition. You should consider the attack on Colonial as a warning. Hacks like this are not as hard to pull off as you might imagine. The truth is most businesses fail to invest in the cybersecurity needed to keep their systems protected. Companies are willing to make financial cuts when it comes to cybersecurity because the costs of outages are borne by the public at large, not the company itself. Colonial lost some revenue during the disruption, but part of this could have been covered by insurance. The lost revenue might not be as great as the costs of a security upgrade. The $5 million ransom was not much more than a rounding error compared to Colonial’s revenues. Again, the real costs were borne by the public. Drivers wasted time waiting in gas lines. Supply chain shortages got worse if trucks couldn’t make deliveries. Meetings were canceled, and appointments were missed because drivers couldn’t get gasoline. There could have been worse outcomes if emergency responders and police patrols were delayed or curtailed. These costs could be in the billions of dollars, but Colonial is not liable. Neither are other infrastructure providers who face similar outages. The only way to balance the scales between public costs and private gains are with government regulation or changes in liability laws. Don’t expect either remedy soon. Instead, you should expect more infrastructure breakdowns, so prepare accordingly. There are countless bad actors out there, ranging from state actors to terrorists to extortionists, who would love nothing more than to unleash chaos in the U.S. Below, I show you how vulnerable markets are to financial warfare, and how to protect your money against the threats. Read on. Regards, Jim Rickards for The Daily Reckoning P.S. The best way to protect your wealth against financial warfare is with hard assets like physical gold. My readers know that I recommend allocating 10% of your investable assets to gold. But please, don’t buy a single ounce of gold until you see [this critical message.]( [The best way to grow your wealth is with select gold stocks, which can explode hundreds or even thousands of percent!]( It’s happened before and I believe it’s ready to happen again. And in my view today’s bargain basement gold prices offer you an incredible bargain, with very little downside and massive upside. [Go here and I’ll explain exactly what’s at stake and how you can take full advantage of it.]( Recommended Link [Elites Moving to Desolate Islands – Why?]( [Read more here...]( Former President Trump… Tech moguls like Zuckerberg… Gates… Musk… High-profile politicians and executives… Barack Obama among them… Even pop celebrities like Kim Kardashian… They’re ALL securing the most bizarre… remote… “offshore” properties you can imagine. What is the concerning reason they might be doing this — and what it means for you? [Click Here To Learn More]( The Daily Reckoning Presents: “There is essentially nothing stopping Russia, Iran or China from launching a “first strike” financial warfare attack if it serves some other national strategic purpose”… ****************************** Protect Your Money Against Financial Warfare By Jim Rickards [Jim Rickards]There are many bad actors out there who are preparing to inflict as much damage as possible to the power grid and other critical infrastructure, including the stock market. I would put Russia, China, Iran, North Korea, and a few others at the top of the list, but Iran certainly has good cyber-warfare capability. They’re employing what they call Cyber Brigades that basically spend all their time hacking into critical infrastructure systems. It’s a good bet that all of these systems have already been penetrated. No one can beat the U.S. in a conventional war right now. China, especially, is catching up, but it’s not quite ready at this time. That’s why they’re focusing on attacking America’s critical infrastructure vulnerabilities. This is called an asymmetric response. They want to fight in the area where they can win or at least inflict enormous damage. Look at all the crisis spots around the world: The Persian Gulf, South China Sea, Ukraine, and others. If any of them start to escalate, you’re going to get an asymmetric response function. For example, if President Biden sends the Seventh Fleet into the South China Sea, China might unleash an attack on the U.S. power grid, creating chaos in the United States. Or it could launch an attack on the stock market or conduct other forms of financial warfare. Financial warfare is not the warfare of the future — it is the warfare of the present. It’s going to become a bigger threat as time goes on, too. Financial warfare is actual warfare conducted through banking and capital markets channels. It is not mere economic policy, as in the case of so-called currency wars, trade wars or embargoes. When nations engage in financial warfare, individual investors can be collateral damage. If China tries to attack the U.S. by closing the New York Stock Exchange, for example, it will be tens of millions of Americans who will suffer an immediate loss of wealth as prices plunge and accounts are locked down or frozen. Financial warfare attacks vary in their degree of sophistication and impact. At the low end of the spectrum is a distributed denial-of-service (DDoS) attack. This is done by flooding a target server with an overwhelming volume of message traffic so that either the server shuts down or legitimate users cannot gain access. In such attacks, the target is not actually penetrated, but it is disabled by the message traffic jam. The next level of sophistication is a cyberattack in which the target, say a bank account record file or a stock exchange order system, is actually penetrated. Once inside, the attacking cyber brigade can either steal information, shut down the system or plant sleeper attack viruses that can be activated at a later date. In 2010, the FBI and Department of Homeland Security located such an attack virus planted by Russian security services inside the Nasdaq stock market system. [IMG 1] Here is a formerly classified map showing cyberattacks by the Chinese government against U.S. interests. Each dot represents an attack. Notice the concentration of attacks against technology targets in San Francisco, financial targets in New York, and military and intelligence targets in the Washington-Virginia area. Recommended Link [The End of The Middle Class (The REAL Truth)]( [Read more here...]( The middle class is getting wiped out… and there’s a small group of 12 unelected officials – and they are responsible for the demise of the middle class. Fortune calls this group of unelected officials an… “enlightened coterie of bankers…” Former U.S. Representative Dr. Ron Paul told MSNBC, this group is actually more powerful than congress. As the Huffington Post said, this is already “making the rich richer and leaving you behind.” Look, deep inside, we all know something has gone wrong with our country… And yet nobody seems to put their finger on it. If you ever felt that for some reason you never seem to get ahead, despite working hard and doing everything right. Then you need to take a moment to prepare and grow your wealth during this massive new transfer of wealth. [Click Here For More Details]( The most dangerous attacks of all are those in which the enemy penetrates a bank or stock exchange not to disable it or steal information but to turn it into an enemy drone. Such a market drone can be used by attackers for maximum market disruption and the mass destruction of Americans’ wealth, including your stocks and savings. In this scenario, an attacker could penetrate the order entry system of a major stock exchange such as the New York Stock Exchange. Once inside the order entry system, the attacker would place large sell orders on highly liquid stocks such as Apple or Facebook. Other system participants would then automatically match these orders in the mistaken belief that they were real trades. The sell orders would keep flooding the market, and the selling pressure would feed on itself. The result could be a market decline of 20% or more in a single day, comparable to the stock market crash of October 1987 or the crash of 1929. You would not have to trade anything or be in the market during the attack; you would be wiped out based on the market decline even if you did nothing. Another type of highly malicious attack is penetrating the account records system of a major bank and then systematically erasing account balances in customers’ deposit accounts and 401(k)s. If the attack extended to backup databases, you or other customers might have no way of proving you ever owned the deleted accounts. During a financial war game exercise at the Pentagon some years back, I recommended that the SEC and New York Stock Exchange buy a warehouse in New York and equip it with copper wire hardline phones, hand-held battery powered calculators and other pre-Internet equipment. This facility would serve as a non-digital stock exchange with trading posts. Orders would be phoned in on the hardwire analogue phone system. This is exactly how stocks were traded until recently. Computerized and algorithmic trading would be banned as nonessential. In the event of a shutdown of the New York Stock Exchange by digital attack, the non-digital exchange would be activated. The U.S. would let China and Russia know this facility existed as a deterrent to a digital attack in the first place. If our rivals knew we had a robust non-digital Plan B, they might not bother to conduct a digital attack in the first place. Some analysts respond to such scenarios by saying that the U.S. has cyberwarfare attack capabilities that are just as effective as our enemies’. If Iran, China or Russia ever launched a cyberfinancial attack on the U.S., we could retaliate. The threat of retaliation, they claim, would act as a deterrent and prevent the enemy attack in the first place. This is similar to the doctrine of “mutually assured destruction” or MAD, that prevented nuclear conflict between the U.S. and Russia during the Cold War. This analysis is highly flawed and gives false comfort. MAD worked during the Cold War because both sides wanted to avoid existential losses. In financial warfare, the losses may be existential for the U.S., but this is not true for Russia, China and Iran. Because they are far less developed than the U.S., their markets could be destroyed and it would have little impact on their overall economy or national security. The technological warfare capabilities may be symmetric, but the potential damage is asymmetric, so the deterrent effect on China and Russia is low. There is essentially nothing stopping Russia, Iran or China from launching a “first strike” financial warfare attack if it serves some other national strategic purpose. What can you do to preserve wealth when these cyberfinancial wars break out? The key is to have some portion of your total assets invested in nondigital assets that cannot be hacked, wiped out or disrupted in financial warfare. Such assets include gold, silver, land and private equity that is usually represented by a paper contract and does not rely on electronic exchange trading for liquidity. For gold, I recommend you have a 10% allocation to physical gold if you don’t already. You need the physical metal, not a paper contract. As an investor, you have enough to be concerned about just taking into account factors like inflation, deflation, Fed policy and the overall state of the economy. These days you have another major threat — financial warfare, enabled by cyberattacks and force multipliers. The time to take defensive action by acquiring non-digital assets is yesterday. I also advise you to learn more about how complexity theory impacts markets. The more you understand markets, the better prepared you’ll be. Regards, Jim Rickards for The Daily Reckoning P.S. The best way to protect your wealth against financial warfare is with hard assets like physical gold. My readers know that I recommend allocating 10% of your investable assets to gold. But please, don’t buy a single ounce of gold until you see [this critical message.]( [The best way to grow your wealth is with select gold stocks, which can explode hundreds or even thousands of percent!]( It’s happened before and I believe it’s ready to happen again. And in my view today’s bargain basement gold prices offer you an incredible bargain, with very little downside and massive upside. [Go here and I’ll explain exactly what’s at stake and how you can take full advantage of it.]( --------------------------------------------------------------- Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [James Rickards][James G. Rickards]( is the editor of Strategic Intelligence. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. He is the author of The New York Times bestsellers Currency Wars and The Death of Money. Add feedback@dailyreckoning.com to your address book: [Whitelist us]( Additional Articles & Commentary: [Daily Reckoning Website]( Join the conversation! Follow us on social media: [Facebook]( [LinkedIn]( [Twitter]( [RSS Feed]( [YouTube]( The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Paradigm Press delivering daily email issues and advertisements. To end your Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [unsubscribe here.]( Please read our [Privacy Statement](. For any further comments or concerns please email us at feedback@dailyreckoning.com. If you are having trouble receiving your Daily Reckoning subscription, you can ensure its arrival in your mailbox [by whitelisting The Daily Reckoning.]( [Paradigm Press]© 2021 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We expressly forbid our writers from having a financial interest in any security they personally recommend to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Email Reference ID: 470DRED01