gdi 15 - bullrun negative

7/24/2019 GDI 15 - Bullrun Negative

1/140

GDI 2015 Bullrun Negative


2/140

***Advantage Answers***


3/140

Tech


4/140

UQ Tech !"#aniesTech $ect!r str!ng n!w% A##le and !ther tech c!"#aniesseeing str!ng gr!wth&ichards!n' (ead !) Invest"ent at Blac&!c' 15(Heidi, February

27th, Market Realist, Strong Earnings Report Indicates S !ech Sector"sStrength,# http$%%&arketrealist'co&%2)*%2%strong+earnings+report+indicates+strength+u+s+tech+sector%, %2-%)*, MM.

So /here should in0estors look1 e belie0e &ature in3or&ation technology(or I!. co&panies are a potential bright spot' nlike &ore de3ensi0e sectors

(such as utilities., #rice gains )!r "ature tech st!cs have largel+,een led ,+ earnings gr!wth rather than ,+ "ulti#les e-#ansi!n./ere seeing the trend c!ntinue this earnings seas!n. A##le wasthe stand!ut' !) c!urse. The c!"#an+ re#!rted 1 ,illi!n in #r!3tand 4 ,illi!n in revenue6the "!st #r!3ta,le 7uarter )!r an+c!"#an+ ever. 8arnings #er share 98:$; increased T; and G!!gle9G??G; have als! re#!rted earnings. Alth!ugh ,!th ca"e in underanal+sts esti"ates' G!!gles 8:$ and revenues are ,!th u#' and=icr!s!)t re#!rted an u#tic in sales !) its "!,ile devices' 5ontrastthis /ith disappointing results 3or sectors such as 6nancials, &ultinationals

and energy, and tech appears to be one o3 the 3e/ areas o3 the &arket&o0ing in the right direction' 'S' tech sector beating sales and ESe8pectations Enlarge 9raph Market Realist : 4 strong earnings report is a

tail/ind 3or S tech stocks The U$ tech sect!r l!!s t! ,e

)unda"entall+ str!ng. The str!ng earnings re#!rt #r!vided"!"entu" )!r the sect!r. The U$ tech sect!r 9@; !ut#er)!r"edthe $C: 500 9$:; 9IEE; in ter"s !) earnings gr!wth. Acc!rding t!>act$et' the earnings gr!wth )!r tech c!"#anies6that havere#!rted earnings s! )ar6has ,een F.< )!r Q1.In contrast, 3or theS; * it has been >>.

e8perienced earnings gro/th' !hree o3 the 3our industries e8hibited double+digit gro/th, according to FactSet' !he strong earnings gro/th ca&e despitehead/inds?the stronger S dollar hurting e8porters and a /eak globalecono&y' !he pre0ious graph sho/s the earnings per share, or ES, and

sales beats by the tech sector and the S; * e8+!ech' !he tech sectoroutper3or&ed the broader &arket signi6cantly. A##le 8:$ A##le re#!rtsits ,est 7uarter ever A##le 9AA:; is the largest c!ntri,ut!r t!earnings gr!wth !) ,!th the tech sect!r and the $C: 500. 4pplereported an actual ES o3 @)


5/140

gro/th rate 3or the S; * /ould 3all to )'7= 3ro&


6/140

Tech $ect!r str!ng% H!, gr!wth>all!n' Business &e#!rter' 15(Gicole, February 27th, usiness Ge/saily, ant a !ech Job1 iQerentiate Ooursel3,#http$%%///'businessne/sdaily'co&%77CC+us+tech+ob+gro/th'ht&l, %2-%)*,MM.

4ccording to 5o&p!I4Ks 5yberstates 2)*report, the A"erican techindustr+ added 12F'500 new H!,s ,etween 201K and 201' ,ringingthe t!tal nu",er !) H!,s in the industr+ t! nearl+ .5 "illi!n' !r 5.4#ercent !) the U.$. #rivate sect!r w!r)!rce. This is g!!d news )!r,!th the ec!n!"+ and H!, seeers l!!ing )!r tech #!siti!ns.L!he'S' tech industry continues to &ake signi6cant contributions to ourecono&y,L !odd !hibodeau8, president and 5EP o3 5o&p!I4, said in astate&ent' The tech industr+ acc!unts )!r 4.1 #ercent !) the !verallU.$. GD: and 11. #ercent !) the t!tal U.$. #rivate sect!r #a+r!ll.

/ith annual average wages that are "!re than d!u,le that !) the#rivate sect!r M!verall' we sh!uld ,e d!ing all we can t! enc!uragethe gr!wth and vitalit+ !) !ur nati!nOs tech industr+.hile teche&ploy&ent gre/ in the &aority o3 states (


7/140

recessi!n%and%rec!ver+ #eri!d'according to the report co&&issioned byEngine 4d0ocacy, a tech start+up lobbyist and conducted by the ay 4rea5ouncil Econo&ic Institute' The re#!rt )!und gr!wth n!t Hust in the"!re )a"!us hi%tech hu,s lie $ilic!n Ealle+ and $eattle ,ut innearl+ all c!""unities acr!ss the U$. It )!und F< !) U$ c!unties

had at least !ne hi%tech ,usiness esta,lish"ent in 2011.ela/aretopped the list o3 states 3or gro/th in hi+tech e&ploy&ent in 2)) at )2'-='9reensboro+High oint in Gorth 5arolina /as the county /ith the 3astest

gro/th, a startling


8/140

6ndings are as 3ollo/s$ $ince the d!t%c!" ,ust reached ,!tt!" in earl+ 200'e"#l!+"ent gr!wth in the high%tech sect!r has !ut#aced gr!wth inthe #rivate sect!r as a wh!le ,+ a rati! !) three%t!%!ne. (igh%techsect!r e"#l!+"ent has als! ,een "!re resilient in the recentrecessi!n%and%rec!ver+ #eri!d and in the last +ear. The

une"#l!+"ent rate )!r the high%tech sect!r w!r)!rce hasc!nsistentl+ ,een )ar ,el!w the rate )!r the nati!n as a wh!le' andrecent wage gr!wth has ,een str!nger.8"#l!+"ent gr!wthin S!EMoccupationshas c!nsistentl+ ,een r!,ust thr!ugh!ut the last decade'!ut#acing H!, gains acr!ss all !ccu#ati!ns ,+ a rati! !) 24 t! 1,etween 2002 and 2011. /hen c!",ined with ver+ l!wune"#l!+"ent and str!ng wage gr!wth' this rePects the highde"and )!r w!rers in these 3elds. 8"#l!+"ent #r!Hecti!ns indicatethat de"and )!r high%tech w!rers will ,e str!nger than )!r w!rers!utside !) high%tech at least thr!ugh 2020. 8"#l!+"ent in high%tech

industries is #r!Hected t! gr!w 1.2 #ercent ,etween 2011 and 2020and e"#l!+"ent in $T8= !ccu#ati!ns is e-#ected t! increase ,+1K.F #ercent. 8"#l!+"ent gr!wth )!r the nati!n as a wh!le ise-#ected t! ,e 1K.K #ercent during the sa"e #eri!d. /!rers inhigh%tech industriesand S!EM !ccu#ati!ns earn a su,stantial wage#re"iu" !) ,etween 14 and 24 #ercent relative t! w!rers in !ther3elds' even a)ter adHusting )!r )act!rs !utside !) industr+ !r!ccu#ati!n that aLect wages(such as educational attain&ent, citiDenship status, age, ethnicityand geography, a&ong others.' The gr!wing inc!"e generated ,+ the high%techsect!r and the str!ng e"#l!+"ent gr!wth that su##!rts it are

i"#!rtant c!ntri,ut!rs t! regi!nal ec!n!"ic devel!#"ent. This isillustrated ,+ the l!cal "ulti#lier' which esti"ates that the creati!n!) !ne H!, in the high%tech sect!r !) a regi!n is ass!ciated with thecreati!n !) .K additi!nal H!,s in the l!cal g!!ds and servicesec!n!"+ !) the sa"e regi!n in the l!ng run. That is "!re than threeti"es the l!cal "ulti#lier )!r "anu)acturing' which at 1.' is still7uite high


9/140

UQ 8c!n $tr!ngU$ 8c!n!"+ is str!ng n!w% ec!n!"ic gr!wth and increasedc!nsu"er s#ending=utiani' &euters 8c!n!"ic !rres#!ndent' 15(Tucia, June 2*th,

Reuters, Robust 'S' consu&er spending buoys econo&ic gro/th outlook,#http$%%///'reuters'co&%article%2)*%%2*%us+usa+econo&y+idSUG*)JC2)*2*13eed!ypeVRSS;3eedGa&eVe0erything;0irtualrand5hannelV))*


10/140

U.$. c!nsu"er s#ending rec!rded its largest increase in nearl+ si-+ears in =a+ !n str!ng de"and )!r aut!"!,iles and !ther ,ig%ticetite"s' )urther evidence that ec!n!"ic gr!wth was accelerating inthe sec!nd 7uarter' hile other data on !hursday sho/ed a &odest increase in 6rst+ti&e applications3or une&ploy&ent bene6ts last /eek, the underlying trend in obless clai&s continued to suggest the labor &arket/as tightening' !he strengthening econo&y suggests the Federal Reser0e could raise interest rates this year e0en

as inNation re&ains /ell belo/ the 'S' central bankKs 2 percent target' Many econo&ists e8pect a rate hike in

Septe&ber' This #!rtends well )!r sec!nd%7uarter gr!wth and the,r!ader "!"entu" !) ec!n!"ic activit+ in the sec!nd hal) !) the+ear' and ee#s the #r!s#ect !) a $e#te",er rate hie s7uarel+ !nthe ta,le' said Anth!n+ ar+dais' chie) ec!n!"ic strategist at=iller Ta,a in New !r.The !""erce De#art"ent said c!nsu"ers#ending r!se 0.F #ercent last "!nth' the ,iggest gain since August200F' a)ter a 0.1 #ercent rise in A#ril. =a+Os sturd+ increase inc!nsu"er s#ending' which acc!unts )!r "!re than tw!%thirds !) U.$.ec!n!"ic activit+' suggested h!useh!lds were 3nall+ s#ending

s!"e !) the wind)all )r!" l!wer gas!line #rices' and ca##ed a"!nth !) s!lid ec!n!"ic re#!rts. It was the latest indicati!n thatgr!wth was gaining "!"entu"a3ter gross do&estic product shrank at a '2 percent annualrate in the 6rst Auarter, as the econo&y battled bad /eather, port disruptions, a strong dollar and spending cuts in

the energy sector' Fro& e&ploy&ent to the housing &arket, the econo&ic data 3or May has been bullish' E0en

&anu3acturing, /hich is struggling /ith the lingering eQects o3 dollar strength and lo/er energy prices, is starting to

stabiliDe'

The Gl!,al 8c!n!"+ is str!ng n!w and #r!Hected t! c!ntinuegr!wing

De#art"ent !) 8c!n!"ic and $!cial ALairs' UN we,site' 1(ES4, )%)2%)*, !he nited Gations, orld Econo&ic Situation androspects 2)*$ !he 9lobal Econo&ic Putlook#,http$%%///'un'org%en%de0elop&ent%desa%publications%/esp+2)*'ht&l ,%2C%)*,5S.

Gl!,al ec!n!"ic gr!wth is )!recast t! increase &arginally !ver the

ne-t tw! +ears , according to the nited Gations orld Econo&ic Situation

and rospects 2)* (ES. report, launched today' The gl!,al ec!n!"+ ise-#ected t! gr!w K.1 #er cent in 2015 and K.K #er cent in 201'

c!"#ared with an esti"ated gr!wth !) 2. #er cent )!r 201. Thegl!,al ec!n!"+ e-#anded during 201 at a "!derateand une0en#ace. egacies )r!" the gl!,al 3nancial crisis c!ntinue t! weigh !ngr!wth, /hile ne/ challenges ha0e e&erged, including geopolitical conNictssuch as in kraine and the Ebola epide&ic' Une"#l!+"ent 3guresre&ainhistorically high in so&e regions, but a##ear t! have st!##ed rising'hile gl!,al inPati!n re"ains su,dued, the spectru& ranges 3ro&deNation risks in the euro area to high inNation in so&e de0eloping
http://www.un.org/en/development/desa/publications/wesp-2015.htmlhttp://www.un.org/en/development/desa/publications/wesp-2015.html


11/140

countries. >!reign direct invest"ent inP!ws have re"ained the "!ststa,le and relevant s!urce !) 3nancing )!r devel!#ing c!untries/hereas port3olio capital No/s are highly sensiti0e to changes in riskappetite' !rade gr!wth is e-#ected t! #ic u# "!deratel+ with thev!lu"e !) w!rld i"#!rts !) g!!ds and services #r!Hected t! gr!w ,+

.4 #er cent in 2015' In 2)*, 3scal tightening in "!st devel!#edec!n!"ies will c!ntinue'although the pace o3 tightening is e8pected toslo/' The str!ng U$ d!llar is e-#ected t! re"ain the d!"inant trend!n )!reign e-change "arets. hile so&e ec!n!"ic indicat!rs are#!sitive and "!ving in the right directi!n which #!ints t! the#!tential )!r a gradual return t! c!nsistent ec!n!"ic gr!wth'# saiding3an Hong, irector o3 the e0elop&ent and olicy 4nalysis i0ision 3or

the G epart&ent o3 Econo&ic and Social 4Qairs, &any risks anduncertainties could dash eQorts to get the global econo&y on track and&o0ing 3or/ard'# The U$ ec!n!"+ is e-#ected t! i"#r!ve in 2015%

201' with GD: #r!Hected t! e-#and ,+ 2. and K.1 #er cent'res#ectivel+' Pnly a slight i&pro0e&ent in gro/th is e8pected in esternEurope' !he region is held back by the tra0ails o3 the euro area, /here thele0el o3 9 has yet to regain its pre+recession peak' 4 proected slo/do/n

in Japan is &ainly attributed to the drop o3 pri0ate consu&ption due to ahigher consu&ption ta8' 9ro/th rates in de0eloping countries andecono&ies in transition di0erged &ore during 2)B, as a sharp deceleration

occurred in &any large e&erging econo&ies, particularly in Tatin 4&ericaand the 5o&&on/ealth o3 Independent States (5IS.' In contrast, East 4sia,including 5hina, e8perienced only a &ild slo/do/n, /hile India led South

4sia to a &oderate uptick' A"!ng the devel!#ing c!untries' A)ricas!verall gr!wth "!"entu" will c!ntinue' with GD: gr!wth e-#ectedt! accelerate t! . #er cent in 2015 and .F #er cent in 201' 8astAsia will re"ain the )astest%gr!wing regi!n' and is #r!Hected t! seesta,le gr!wth !) .1 #er cent in 2015 and .0 #er cent in 201'8c!n!"ic gr!wth in $!uth Asia is set t! graduall+ #ic u#'/hileecono&ic gr!wth in atin A"erica and the ari,,ean is #r!Hected t!&oderately i"#r!ve' In the 5IS, prospects are /eak /ith near+Dero gro/the8pected in the Russian Federation' More detailed regional 3orecasts 3ro&ES /ill be released in January 2)*'

The ec!n!"+ is high n!w !nsu"er s#ending' and l!westune"#l!+"ent rate in 15 +earsAss!ciated :ress' an A"erican "ultinati!nal n!n#r!3t newsagenc+' 25(4ssociated ress, +2*+2)*, L'S' 5onsu&er SpendingSurges, rightening Econo&ic Putlook,L Ge/ Oork !i&es,


12/140

http$%%///'nyti&es'co&%2)*%%2%business%econo&y%us+consu&er+

spending+surges+brightening+econo&ic+outlook'ht&l1WrV %%GU.

4SHIG9!PG 6 !nsu"er s#ending in the United $tates surged in =a+with the ,iggest "!nthl+ increase in nearl+ si- +ears 6 a sign !)

str!nger ec!n!"ic gr!wth ahead .!he 5o&&erce epart&ent said on !hursday thatc!nsu"er s#ending r!se 0.F #ercent last "!nth' u# )r!" a revised0.1 #ercent increase in A#ril' May spending registered the biggest gain since 4ugust 2C, anindication that the #!sitive i"#acts )r!" the s!lid #ace !) hiring andchea#er gas!line are starting t! ri##le thr!ugh the ec!n!"+.e are6nally seeing signs o3 consu&ers" beginning to spend the gasoline sa0ings they ha0e been sitting on since the start

o3 this year,# said aul 4sh/orth, chie3 nited States econo&ist at 5apital Econo&ics. :ers!nal inc!"eals! increased a health+ 0.5 #ercent. The savings rate )!r a)ter%ta-inc!"e )ell slightl+ t! 5.1 #ercent )r!" 5. #ercent. Until recentl+'l!wer gas #rices and an i"#r!ved H!, "aret were n!t en!ugh t!unl!c greater c!nsu"er s#ending. Instead' A"ericans ra"#ed u#

their savings. This hel#ed #ut their #ers!nal 3nances !n a "!resustaina,le #ath' ,ut it li"ited the a,ilit+ !) the !verall ec!n!"+'which relies "!stl+ !n c!nsu"er activit+' t! gr!w at a )aster #aceand #!tentiall+ ,!lster their inc!"es. !he consu&er spending report con6r&s signselse/here that people are loosening the grip on their /allets' Als! Thursda+' the a,!rDe#art"ent said that the nu",er !) #e!#le seeing une"#l!+"entaidrose slightly last /eek, but re"ained at a hist!ricall+ l!w level that signalsan i"#r!ving H!, "are t. A##licati!ns r!se K'000 last wee t! aseas!nall+ adHusted 241'000' n!t )ar )r!" the 15%+ear l!w reachedin A#ril !) 22'000.!he 3our+/eek a0erage, a less 0olatile &easure, declined to 27


13/140

GE OPRU (!heStreet. ++ The U.$. e-#ansi!n is entering its seventh +ear ,ut isaging well and has #lent+ !) r!!" t! run' Still, there ha0e been plenty o3 ups anddo/ns, and the econo&yKs poor per3or&ance early this year rekindled concerns that the e8pansion /as in serious

eopardy' ased on the econo&ic data, /e belie0e the e8pansion is &idcycle' !his is typically the longest phase o3

the business cycle be3ore &o0ing into the late+cycle phase, characteristic o3 an o0erheated econo&y poised to slip

into recession' Read More$ 'S' Econo&ic E8pansion Is Got in Jeopardy !here are i&portant Auestions' Is this

e8pansion getting old, and /ill it age si&ilarly to prior ones1 Tong in the !ooth1 hile /eKre probably closer to the

ne8t recession than to the beginning o3 the reco0ery, itOs i"#!rtant t! re"e",er thate-#ansi!ns are getting l!nger. 8-#ansi!ns have lengthened ,ecause!) structural changes' including reduced "acr!ec!n!"ic v!latilit+)r!" i"#r!ved #!lic+' ,etter "anage"ent !) invent!ries the rise !)the "!re sta,le service ec!n!"+ and techn!l!gical change. !he currente8pansion is 72 &onths old, but age is in the eye o3 the beholder' !he three e8pansions prior to the 9reat Recession

lasted an a0erage o3 C* &onths' !his is noticeably longer than the *-+&onth a0erage 3or all e8pansions since )CB*'

!he a0erage duration o3 an e8pansion bet/een )- and )CB* /as 2 &onths' hile this e8pansion is already

longer than the a0erage since orld ar II, e8pansions donKt die o3 old age' 8-#ansi!ns n!r"all+end when the ec!n!"+ !verheats. >!r e-a"#le' the #ast )ewe-#ansi!ns have ended a )ew +ears a)ter the ec!n!"+ reached )ull

e"#l!+"ent' leading t! an accelerati!n in wages and inPati!n andtighter "!netar+ #!lic+. /e d!nOt e-#ect the ec!n!"+ t! reach )ulle"#l!+"ent until this ti"e ne-t +ear' i"#l+ing the ne-t recessi!nw!uldnOt ,e until s!"eti"e in 201F. Historical patterns are si&ply guideposts and shouldbe interpreted care3ully, particularly gi0en that this e8pansion has been anything but nor&al' Focusing on /hen the

e8pansion /ill end can cause so&e to o0erlook ho/ the econo&y changes as the e8pansion &atures' Tearning Fro&

History !he unusual nature o3 this e8pansion suggests that it could age diQerently' (ist!ricall+' realGD: gr!wth has "!derated as the e-#ansi!n "atures' !his is unsurprisingbecause as the e8pansion ages, the econo&y begins to run into capacity constraints and &onetary and 6scal policytransitions 3ro& being acco&&odati0e to restricti0e' ecause ti&ing is i&portant, /e broke each post+orld ar II

e8pansion into thirds to gauge ho/ parts o3 the econo&y ha0e historically per3or&ed as each e8pansion &atured' 4uni0ersal de6nition o3 econo&ic e8pansion is lacking, but 3or this e8ercise, reco0ery and e8pansion are used

interchangeably' (!w #arts !) the ec!n!"+ age is unsur#rising. >!re-a"#le' ca#ital s#ending c!ntri,utes less t! gr!wth as thee-#ansi!n #hase !) the ,usiness c+cle "atures. In #!st%/!rld /ar IIe-#ansi!ns' e7ui#"ent invest"entOs average c!ntri,uti!n t! realGD: gr!wth is largest in the 3rst third !) the e-#ansi!n' receding asthe c!st !) invest"ent increases and returns di"inish. !nsu"ers#endingOs average c!ntri,uti!n t! GD: gr!wth is als! largest in the3rst third !) an e-#ansi!n. The release !) #ent%u# de"and is a ,ig)act!r' as it #r!vides a signi3cant ,!!st t! c!nsu"#ti!n' #articularl+)!r dura,le g!!ds earl+ in the e-#ansi!n. Als!' l!w interest rates

c!ntri,ute t! the re,!und in dura,le c!nsu"#ti!n. $i"ilar )act!rse-#lain wh+ residential invest"entOs ,iggest c!ntri,uti!n t! gr!wthc!"es earl+ in the e-#ansi!n' then )ades 7uicl+. !here are other identi6ablepatterns' Pn a0erage, corporate pro6t Xgro/th is noticeably stronger in the 6rst third o3 an e8pansion than in the

second and third' roducti0ity de&onstrates a si&ilar pattern' Pn the other hand, /ages and population gro/th are

stronger in the 6nal third o3 an e8pansion' !his all suggests that the best ti&es 3or the current e8pansion ha0epassed' ut history doesnKt al/ays repeat itsel3' Read More$ eep i0e Into 'S' ersonal Inco&e hy !his !i&e Is

iQerent (ist!rical averages are n!t e-#lanati!ns' and this e-#ansi!nwill liel+ age diLerentl+. Als!' itOs tric+ t! c!"#are the ec!n!"+Os


14/140

#er)!r"ance during #ast e-#ansi!ns ,ecause de"!gra#hiccharacteristics diLer. $till' n!t !nl+ d!es this e-#ansi!n n!t sh!wsigns !) signi3cant wear and tear' ,ut the unusual nature !) therecessi!n and earl+ e-#ansi!n will cause its later stages t! ,uchist!rical trends. There)!re' while the e-#ansi!n c!uld ,e entering

its 3nal leg' this c!uld ,e its ,est +et . &eal GD: gr!wth hasaccelerated this e-#ansi!n ' ,ucing the hist!rical n!r". There are ac!u#le !) e-#lanati!ns. >irst' the ec!n!"+ was e"erging )r!" a3nancial crisis rather than a garden%variet+ recessi!n. The 3nancialcrisis cast a l!nger shad!w !ver the ec!n!"+' "aing it tae l!ngert! 3nd a rh+th". >urther' the initial stage !) the e-#ansi!n was sl!was h!useh!lds and ,usinesses needed t! c!ntinue t! deleverage.4lso,6scal policy turned restricti0e 0ery Auickly' Got since the &ilitary dra/do/n a3ter orld ar II had the econo&y

3aced as &uch 6scal drag as it did during this reco0ery' !he a0ailability o3 credit is another issue, particularly 3or

households' sually this reco0ers Auickly early in an e8pansion, but that didnKt occur this ti&e' !hough the duration

o3 this e8pansion has been long, there is still a siDable output gap' !here3ore, the econo&y /onKt run out o3 spare

capacity soon, and this /ill keep inNationary pressures at bay' Hence, the Federal Reser0e plans to tighten

&onetary policy gradually' E0en as the Fed begins to nor&aliDe interest rates, &onetary policy /ill re&aine8tre&ely acco&&odati0e' 4lso, the FedKs balance sheet /ill re&ain enor&ous, keeping long+ter& rates lo/er than

they other/ise should be ++ a 3or& o3 sti&ulus that didnKt occur during the tail end o3 the past 3e/ e8pansions' Read

More$ eep i0e Into 'S' 9 Rising interest rates /ill pro0ide an ironic boost to housing' In contrast to past

reco0eries, housing has contributed little to gro/th this e8pansion' Higher interest rates could create an urgency 3or

potential ho&ebuyers to enter the &arket' Mortgage rates ha0e &o0ed higher at ti&es during the e8pansion /ith&i8ed i&plications 3or sales' Ho/e0er, as the Fed tightens it should alter e8pectations about the 3uture path o3

&ortgage rates' e are not building enough ho&es either' ased on population gro/th and attrition, housing startsshould be near )'- &illion units per year o0er the ne8t couple o3 years' !here3ore, a large portion o3 the housing

reco0ery is still to co&e' age 9ains oost Spending age gro/th has been &ediocre 3or &ost o3 this e8pansionbut is poised to accelerate as in past e8pansions' ecause the relationship bet/een /age gro/th and consu&er

spending is stronger this cycle than &ost, larger /age gains /ill pro0ide a boost to spending' !hat &eans spending

could add &ore to gro/th in the 6nal leg o3 this e8pansion than it did earlier this cycle, or at si&ilar unctures o3

past e8pansions' !here /ill be possible e8ceptions' 5apital spending has 3ollo/ed a pattern si&ilar to past

e8pansions' Pne reason is that pent+up de&and &ay ha0e been /orked oQ o0er the past 3e/ years' usinesses

&ay also not need to in0est as &uch in eAuip&ent because the econo&yKs potential has declined' usinesses arealready spending &ore on eAuip&ent per /orker than at any ti&e in history' ith the supply o3 labor not increasing

as Auickly, there &ay be less need to in0est in eAuip&ent' e&ographic Issues The de"!gra#hicc!"#!siti!n !) the U.$. will set the later #!rti!n !) this e-#ansi!na#art )r!" !thers. The share !) th!se 5 and !lder is e-#ected t!c!ntinue t! cli", ,ecause !) the aging !) the ,a,+ ,!!"ergenerati!n and increasing li)e e-#ectanc+. ?ver the ne-t c!u#le !)+ears this will weigh !n c!nsu"er s#ending and the la,!r )!rce#artici#ati!n rate and #!tentiall+ sh!rten the e-#ansi!n ,+ causingthe ec!n!"+ t! achieve )ull e"#l!+"ent )aster. The #!tential !Lsett! this is the #ent%u# de"and t! )!r" h!useh!lds. The #ri"ew!ring%age gr!u# has started t! e-#and again. Gr!wth in the#ri"e w!ring%age gr!u# will accelerate and ,e )airl+ str!ng Hust asthe ec!n!"+ enters the ne-t recessi!n.Read More$ 'S' Econo&ic E8pansion Is Got in

Jeopardy


15/140

UQ 8c!n N? !lla#se !"ingU$ ec!n!"+ sta,le% n! c!ntracti!n in the 3rst 7uarter=itchell' 8c!n!"+ &e#!rter' 15(Josh, June ))th, all Street Journal,Reports o3 the 'S' Econo&y"s 5ontraction Ha0e een 9reatly

E8aggerated,# http$%%blogs'/s'co&%econo&ics%2)*%%))%reports+o3+the+u+s+econo&ys+contraction+ha0e+been+greatly+e8aggerated% , %2C%)*, MM.

!he 'S' econo&y contracted '7= in the 6rst Auarter' Pr did it1 !he 5o&&erce epart&ent reported last &onth

that the gross do&estic product 3ell at a seasonally adusted '7= annual rate 3ro& January through March' Go/,

the agency &ight ha0e to essentially say, Ge0er&ind'# !hat"s largely because re#!rts in recentda+s sh!w c!nsu"ers s#ent "!re during the winter6at retailersand !n health care6than #revi!usl+ th!ught. Because c!nsu"ers#ending is such a ,ig #art !) the U.$. ec!n!"+6re#resenting "!rethan tw!%thirds !) !ut#ut"an+ #rivate%sect!r ec!n!"ists arerevising their !wn esti"ates !) 3rst%7uarter GD:. >!recasting 3r"

=acr!ec!n!"ic Advisers n!w thins the ec!n!"+ didnt c!ntract atall' and instead registered a Pat 0.0< Rgr!wthS reading )!r the7uarter.Pthers such as J Morgan 5hase still think 9 3ell, but at a &ilder '2= rate' !he 5o&&erceepart&ent"s ureau o3 Econo&ic 4nalysis /ill gi0e its o/n update on 6rst+Auarter 9 on June 2B' 4s it does 3orall econo&ic reports, the go0ern&ent releases early esti&ates o3 &easures like 9, retail sales and e&ploy&ent

that are based on inco&plete data' Pnce 3resher data co&es in, the go0ern&ent puts out re0ised 6gures' In the

case o3 9, the go0ern&ent releases an initial esti&ate, and then t/o re0isions, 3or each Auarter in the i&&ediate

&onths a3ter it ends' (It then re0ises the& 3urther the 3ollo/ing year'. !he initial reading o3 6rst+Auarter 9,

released in late 4pril, sho/ed '2= gro/th' !he second reading, released last &onth, sho/ed a '7= contraction

that /as based largely on ne/ data sho/ing a surging trade de6cit at the end o3 the Auarter' So /hy is the 6rst

Auarter no/ looking a little less horrible1 !/o &ain reasons' A !""erce re#!rt /ednesda+sh!wed str!nger%than%e-#ected revenues at d!ct!rs !ces. And anagenc+ re#!rt Thursda+ sh!wed that' in additi!n t! a Hu"# in retail

sales in =a+' s#ending was str!nger in #ri!r "!nths' including=arch' than #revi!usl+ th!ught. T! ,e sure' even with the revisi!ns'the 3rst 7uarter was a )!rgetta,le !ne' i) n!t an !utright night"are')!r the ec!n!"+.I3 it stands, the contraction is the third ti&e since the recession ended in &id+2C that9 turned negati0e during a Auarter' E0en a reading o3 Nat or &eager gro/th /ould suggest a big slo/do/n in the

/inter' A sec!nd%7uarter re,!und alread+ a##ears t! have !ccurred'with "an+ #rivate ec!n!"ists #redicting gr!wth !) 2< t! K


16/140

this e-#ansi!n is alread+ l!nger than the average since /!rld /arII' e-#ansi!ns d!nOt die !) !ld age. 8-#ansi!ns n!r"all+ end whenthe ec!n!"+ !verheats.For e8a&ple, the past 3e/ e8pansions ha0e ended a 3e/ years a3ter theecono&y reached 3ull e&ploy&ent, leading to an acceleration in /ages and inNation and tighter &onetary policy'

/e d!nOt e-#ect the ec!n!"+ t! reach )ull e"#l!+"ent until this

ti"e ne-t +ear' i"#l+ing the ne-t recessi!n w!uldnOt ,e untils!"eti"e in 201F. (ist!rical #atterns are si"#l+ guide#!sts andsh!uld ,e inter#reted care)ull+' #articularl+ given that thise-#ansi!n has ,een an+thing ,ut n!r"al. >!cusing !n when thee-#ansi!n will end can cause s!"e t! !verl!! h!w the ec!n!"+changes as the e-#ansi!n "atures. earning >r!" (ist!r+ Theunusual nature !) this e-#ansi!n suggests that it c!uld agediLerentl+. (ist!ricall+' real GD: gr!wth has "!derated as thee-#ansi!n "atures.!his is unsurprising because as the e8pansion ages, the econo&y begins to runinto capacity constraints and &onetary and 6scal policy transitions 3ro& being acco&&odati0e to restricti0e'

ecause ti&ing is i&portant, /e broke each post+orld ar II e8pansion into thirds to gauge ho/ parts o3 the

econo&y ha0e historically per3or&ed as each e8pansion &atured' 4 uni0ersal de6nition o3 econo&ic e8pansion islacking, but 3or this e8ercise, reco0ery and e8pansion are used interchangeably' Ho/ parts o3 the econo&y age is

unsurprising' For e8a&ple, capital spending contributes less to gro/th as the e8pansion phase o3 the business cycle

&atures' In post+orld ar II e8pansions, eAuip&ent in0est&entKs a0erage contribution to real 9 gro/th islargest in the 6rst third o3 the e8pansion, receding as the cost o3 in0est&ent increases and returns di&inish'

5onsu&er spendingKs a0erage contribution to 9 gro/th is also largest in the 6rst third o3 an e8pansion' !herelease o3 pent+up de&and is a big 3actor, as it pro0ides a signi6cant boost to consu&ption, particularly 3or durable

goods early in the e8pansion' 4lso, lo/ interest rates contribute to the rebound in durable consu&ption' Si&ilar

3actors e8plain /hy residential in0est&entKs biggest contribution to gro/th co&es early in the e8pansion, then

3ades Auickly' !here are other identi6able patterns' Pn a0erage, corporate pro6t Xgro/th is noticeably stronger in

the 6rst third o3 an e8pansion than in the second and third' roducti0ity de&onstrates a si&ilar pattern' Pn the

other hand, /ages and population gro/th are stronger in the 6nal third o3 an e8pansion' !his all suggests that the

best ti&es 3or the current e8pansion ha0e passed' ut history doesnKt al/ays repeat itsel3' Read More$ eep i0e

Into 'S' ersonal Inco&e hy !his !i&e Is iQerent Historical a0erages are not e8planations, and this e8pansion

/ill likely age diQerently' 4lso, itKs tricky to co&pare the econo&yKs per3or&ance during past e8pansions because

de&ographic characteristics diQer' Still, not only does this e8pansion not sho/ signs o3 signi6cant /ear and tear,

but the unusual nature o3 the recession and early e8pansion /ill cause its later stages to buck historical trends'

!here3ore, /hile the e8pansion could be entering its 6nal leg, this could be its best yet' Real 9 gro/th has

accelerated this e8pansion, bucking the historical nor&' !here are a couple o3 e8planations' First, the econo&y /as

e&erging 3ro& a 6nancial crisis rather than a garden+0ariety recession' !he 6nancial crisis cast a longer shado/o0er the econo&y, &aking it take longer to 6nd a rhyth&' Further, the initial stage o3 the e8pansion /as slo/ as

households and businesses needed to continue to dele0erage' Als!' 3scal #!lic+ turnedrestrictive ver+ 7uicl+. N!t since the "ilitar+ drawd!wn a)ter /!rld/ar II had the ec!n!"+ )aced as "uch 3scal drag as it did duringthis rec!ver+. The availa,ilit+ !) credit is an!ther issue' #articularl+)!r h!useh!lds. Usuall+ this rec!vers 7uicl+ earl+ in an e-#ansi!n',ut that didnOt !ccur this ti"e. Th!ugh the durati!n !) this

e-#ansi!n has ,een l!ng' there is still a siJa,le !ut#ut ga#.There)!re' the ec!n!"+ w!nOt run !ut !) s#are ca#acit+ s!!n' andthis will ee# inPati!nar+ #ressures at ,a+. (ence' the >ederal&eserve #lans t! tighten "!netar+ #!lic+ graduall+. 8ven as the >ed,egins t! n!r"aliJe interest rates' "!netar+ #!lic+ will re"aine-tre"el+ acc!""!dative. Als!' the >edOs ,alance sheet will re"ainen!r"!us' ee#ing l!ng%ter" rates l!wer than the+ !therwisesh!uld ,e %% a )!r" !) sti"ulus that didnOt !ccur during the tail end


17/140

!) the #ast )ew e-#ansi!ns.Read More$ eep i0e Into 'S' 9 Rising interest rates /ill pro0idean ironic boost to housing' In contrast to past reco0eries, housing has contributed little to gro/th this e8pansion'

Higher interest rates could create an urgency 3or potential ho&ebuyers to enter the &arket' Mortgage rates ha0e

&o0ed higher at ti&es during the e8pansion /ith &i8ed i&plications 3or sales' Ho/e0er, as the Fed tightens it

should alter e8pectations about the 3uture path o3 &ortgage rates. /e are n!t ,uildingen!ugh h!"es either. Based !n #!#ulati!n gr!wth and attriti!n'

h!using starts sh!uld ,e near 1. "illi!n units #er +ear !ver thene-t c!u#le !) +ears. There)!re' a large #!rti!n !) the h!usingrec!ver+ is still t! c!"e.age 9ains oost Spending age gro/th has been &ediocre 3or &ost o3this e8pansion but is poised to accelerate as in past e8pansions' Because the relati!nshi#,etween wage gr!wth and c!nsu"er s#ending is str!nger this c+clethan "!st' larger wage gains will #r!vide a ,!!st t! s#ending. That"eans s#ending c!uld add "!re t! gr!wth in the 3nal leg !) thise-#ansi!n than it did earlier this c+cle' !r at si"ilar Hunctures !)#ast e-#ansi!ns.!here /ill be possible e8ceptions' 5apital spending has 3ollo/ed a pattern si&ilar topast e8pansions' Pne reason is that pent+up de&and &ay ha0e been /orked oQ o0er the past 3e/ years'

usinesses &ay also not need to in0est as &uch in eAuip&ent because the econo&yKs potential has declined'

usinesses are already spending &ore on eAuip&ent per /orker than at any ti&e in history' ith the supply o3 labornot increasing as Auickly, there &ay be less need to in0est in eAuip&ent'

A"erican 8c!n!"+ (igh N!w% high inc!"e #er ca#ita andec!n!"ic "easures

!ung' Gl!,al >inancial =aret $#ecialist' 15 (atrick, January 7th,R!, Is the S econo&y P0erstreched,# http$%%rt'co&%op+edge%2)CC))+us+econo&y+o0erstretched+recession, %2C%)*, MM.

4&erica has a /onder3ul appreciation that /hile capitalis& deli0ers 3or its ad0ocates (better li0ing standards,higher /ages and o3 course, econo&ic gro/th. there are ine0itable (cyclical. do/ns/ings' !his attitude di0erges

3ro& the pre0ailing European &entality /here sad socialist recidi0is& has taken greater hold' Europeango0ern&ents retain a &isguided belie3 that they can de3y econo&ic gra0ity' So&e e0en proQer delusions o3

breaking the econo&ic cycle entirely (e'g' ritain"s 6scal 3ailure 9ordon ro/n.' Mean/hile egg runs do/n the 3aceso3 the E /hen recalling their ridiculous protestations that 4nglo+Sa8on capitalis& /as broken ust as Europe

plunged headlong into their lost decade o3 gro/th' espite the le3t/ard lunge o3 the largely unproducti0e resident

Pba&a (gol3 and basketball aside., at its core, the A"erican ec!n!"+ re"ains#r!#elled ,+ entre#reneurial individuals realiJing the drea" !) sel)%i"#r!ve"ent thr!ugh diligent ris%taing. That sunn+ &eaganite!#ti"is" serves the nati!n well. hina "a+ ,e c!"ing u# !n therails as the single largest ec!n!"+ ,ut U$ inc!"e #er ca#itare"ains un#recedented.!rue, there has been so&e econo&ic 3olly in the S, >E a3orethought,alongside inadeAuate resolution o3 the banking &ess$ Dero ustice a&id a bit o3 point+scoring against those /ith the

te&erity to criticiDe the basketballer+in+chie3' Nevertheless' with a c!re r!,ust )ree

"aret s+ste"' A"erica has ,l!ss!"ed !nce "!re. =eanwhile8ur!#e wall!ws in a )estering #it !) des#air' strangled ,+"eddles!"e red ta#e. Thus A"ericans d! what the+ have alwa+sd!ne ,est less i"#eded ,+ g!vern"ent' the+ P!urish when givens#ace t! gr!w.Sadly, that &a8i& is largely unkno/n in other, poorer continents' Separate to thisecono&ic dialogue, so&e correspondents &ay reNect that the S go0ern&ent has perhaps o0erco&pensated 3or its

laisseD 3aire econo&ics /ith a rather trenchant enthusias& 3or inter0ention in other nations" 3oreign aQairs'

Ge0ertheless, calculating the bread and circuses# indicator o3 hu&an li3e' the A"erican ec!n!"+
http://rt.com/op-edge/219911-us-economy-overstretched-recessionhttp://rt.com/op-edge/219911-us-economy-overstretched-recessionhttp://rt.com/op-edge/219911-us-economy-overstretched-recessionhttp://rt.com/op-edge/219911-us-economy-overstretched-recession


18/140

re"ains in the l!ng%ter" a w!ndr!us ec!n!"ic "arvel t! ,eh!ld:presu&ing that is, the ongoing craDiness o3 Pba&a econo&ics are not reNected in a president to the le3t o3 logical

reason, like Hillary 5linton, 3or instance' !hose preaching a &antra that 4&erica risks splitting at the sea&s ignore

the core econo&ic cohesion : yes there are social issues, but co&pared to the &ass beggaring o3 Euro+youth1 I

think not'


19/140

$urveillance d!esnt hurt c!"#aniesN$A surveillance had little eLect !n tech c!"#anies )!reign"arets% huge gr!wth internati!nall+Insider $urveillance' News in)!r"ati!n !) U$ g!vern"ent

surveillance' 1(Septe&ber 2Bth, e+unking the Myth o3 'S' !ech SalesTost ue to GS4,# https$%%insidersur0eillance'co&%de+bunking+&yth+o3+u+s+

tech+sales+lost+due+nsa%, %2-%)*, MM.

Flashback to Pctober 2)aced with dwindlingU.$. De)ense De#art"ent #urchases 6 the U.$. hasnt #urchase a

single new >%1 in the last 10 +ears 6 de)ense su##liers decisi!n t!#ursue )!reign ,u+ers has )ueled a ,!nanJa. $ales t! Israel' ?"anand Ira7 ee# !cheed =artins #lant hu""ing in >%1 #r!ducti!n.?ver at $i!rs+ Aircra)t' "aers !) the Blac (aw helic!#ter' thec!"#an+ late last +ear re#!rted a K0%+ear c!ntract with Taiwanvalued at !ver U$1.0 ,illi!n. Internati!nal sales at B!eingsde)ense divisi!n c!"#rise 2< !) the c!"#an+s U$KK ,illi!n in
https://insidersurveillance.com/de-bunking-myth-of-u-s-tech-sales-lost-due-nsa/https://insidersurveillance.com/de-bunking-myth-of-u-s-tech-sales-lost-due-nsa/https://insidersurveillance.com/de-bunking-myth-of-u-s-tech-sales-lost-due-nsa/https://insidersurveillance.com/de-bunking-myth-of-u-s-tech-sales-lost-due-nsa/


20/140

de)ense sales. !o be sure, the de3ense &arket is a tough one' Ho/e0er, /hen 'S'sales are lost it"s notbecause a 3oreign buyer /as angry o0er GS4 and decided to buy /eapons syste&s in+country' More o3ten the

ans/er is 3ar si&pler$ co&petition 3ro& a &aor non+'S' player' E8a&ple$ !urkey"s decision to dis# Raytheon"s bid

3or a long range air de3ense syste& /as a si&ple dollars and cents &atter$ 5hina, not e8actly a bastion o3 hu&an

rights, /on the contract' Russian and European co&panies /ere also a&ong the losers' Go one uttered a peep

peep# about the GS4' e3ense e8ecuti0es don"t sit around 3retting about 3oreign sales supposedly lost due to 'S'

spying' !heir real /orry is 5hina, an increasingly aggressi0e player in the de3ense syste&s &arket'


21/140

ATV ?#en Tech Institute &e#!rt?#en Techn!l!g+ Institute re#!rt d!esnt c!nsider a c!"#lete#icture !) ec!n!"ic gr!wth% ,iased and li"ited in)!r"ati!nInsider $urveillance' News in)!r"ati!n !) U$ g!vern"ent

surveillance' 1(Septe&ber 2Bth, e+unking the Myth o3 'S' !ech SalesTost ue to GS4,# https$%%insidersur0eillance'co&%de+bunking+&yth+o3+u+s+

tech+sales+lost+due+nsa%, %2-%)*, MM.

The ?TI #a#er cites the e-a"#le !) Dr!#,!-' A"aJ!n /e, $ervices9A/$; and =icr!s!)t AJure suLering severe l!sses in )!reign cl!udsales t! $witJerlands Art"!ti!n 6 due t! )!reign anger !ver theN$A. The s!urceV An article #u,lished in The Internati!nal BusinessTi"es, 5o&panies !urn to S/itDerland 3or 5loud Storage,# on July B, 2)< ? three /eeks a3ter the 6rst GS4re0elations by Ed/ard Sno/den' escribing 4rt&otion as S/itDerland"s biggest oQshore hosting co&pany,# the

article Auotes the co&pany"s 5EP Mateo Meier clai&ing a B*= u&p in re0enue during that period' As#ects

!) the !riginal article and the #!lic+ #a#er sh!w h!w easil+s#eculati!n is #resented as )act ,+ sl!##+ auth!rs eager t! "ae a#!int with!ut ,!thering t! chec their )actsV N!where in theInternati!nal Business Ti"es st!r+ is an+ evidence #r!ducedsh!wing A/$' Dr!#,!- !r AJure l!sing ,usiness.Gor is any concrete nu&ber onlosses presented' !he closest the reporter can co&e is to a0er$ Ho/e0er no/ ser0ices like ropbo8, 4S and 4Dure

are seen as potentially insecure' ' ''# Seen by /ho&1 !he I! doesn"t say' !he P!I policy paper cites the I! article

as the source 3or an assertion that co&panies like ropbo8 and 4&aDon /ere beginning to lose business to

o0erseas business'# Re&e&ber$ the I! didn"t cite any losses by these co&panies ? it &erely said they /ere

seen# Zby unna&ed sources[ as potentially insecure'# It"s anybody"s guess /hether 4rt&otion is S/itDerland"s

biggest# (or s&allest#. oQshore hosting co&pany' 4rt&otion is a pri0ately held co&pany' It does not pro0ide any

public data on 6nances, nu&bers o3 e&ployees or clients, or any other in3or&ation that could be used to deter&ine

the co&pany"s siDe' A 5< revenue gain in three wees w!uld de)+ the !dds)!r a large enter#rise' s! 6 t! ,!rr!w the #ractice !) s#eculating)r!" !ur su,Hect 6 it is "!st liel+ that Art"!ti!n is a s"allerentre#reneurial venture led ,+ a 8? wh! had the savv+ t!ca#italiJe !n the N$A scandal. Targe enterprise custo&ers, /ho took years to trust the idea o3handing o0er their data to third party cloud pro0iders, are notoriously slo/ to e&brace change' !he likelihood o3

F!SE) co&panies shi3ting cloud ser0ice pro0iders ? in three /eeksY ? is preposterous' E0en Mo& and op

cloud custo&ers /ould scarcely be apt to change their &inds and shi3t all their cloud+stored data that Auickly' E0en

assu&ing that the o0ernight B*= re0enue boost clai& is true, /here is the proo3 tying this cash surge to non+'S'

custo&ers de3ecting 3ro& 4&aDon, ropbo8 or 9oogle to 4rt&otion1 4ns/er$ !here is no proo3' It"s pure hearsay' I3

/e"re picking on 4rt&otion o0er&uch, it"s 3or good cause' !his case study is the &ost substantial proo3# in the

entire P!I paper' Fro& there it degenerates into e0en &ore dubious assess&ents by analysts and industry think

tanks'# P3 these, one o3 the better studies is by the International !echnology and Inno0ation Foundation (I!IF.,

generally hailed as a non+partisan group' ublished in 4ugust 2)


22/140

Rearl+ da+s'S when e"!ti!ns !n the N$A ran high. I) the currentnu",ers e-ist ,earing !ut the case )!r N$A s#+ing da"aging U.$.tech c!"#anies )!reign sales' then wh+ d!esnt ?TI 7u!te the"W Instead, the 3arther one progresses into the P!I policy paper, the &ore in3atuated its authors beco&e /ith /ildly

e8aggerated proections o3 tech industry losses' ithin a 3e/ paragraphs o3 I!IF"s clai&s o3 cloud losses reaching

@S !undati!n' which is chaired ,+ 8ric $ch"idt' e-ecutive chair"an !)G!!gle and !ne !) the #rinci#al critics !) the N$A.


23/140

ATV l!ud !"#utingN! i"#act !n U$ cl!ud c!"#uting industr+% d!"estic and)!reign revenues havent )allen=enn' Techn!l!g+ &e#!rter and Auth!r' 1K(Joseph, Septe&ber )*th,

usiness Insider, Ho/ !he GS4 Re0elations May 4ctually e Helping !he S!ech Industry,# http$%%///'businessinsider'co&%ho/+the+nsa+re0elations+&ay+actually+be+help+the+us+tech+industry+2)ace,!! Inc. % sa+ #rivatel+ that the+ have )eltlittle i) an+ i"#act !n their ,usinesses. Insiders at c!"#anies that!Ler re"!te c!"#uting services n!wn as cl!ud c!"#uting'including A"aJ!n and =icr!s!)t !r#' als! sa+ the+ are seeing n!)all!ut. =eanwhile' s"aller U.$. c!"#anies !Lering encr+#ti!n andrelated securit+ services are seeing a Hu"# in ,usiness !verseas'al!ng with an u#tic in sales d!"esticall+ as individuals andc!"#anies w!r harder t! #r!tect secrets. Pur 0alue proposition had been that itKs a/ild /orld out there, /hile doing business internationally you need to protect yoursel3,L said Jon 5allas, co+3ounder

o3 phone and te8t encryption pro0ider Silent 5ircle, /here re0enue Auadrupled 3ro& May to June on a s&all base'

LGo/ the &essage people are getting 3ro& the ne/spapers e0ery day is that itKs a /ild /orld e0en do&estically'L

RPHESIES PF PPM Shortly a3ter Sno/denKs leaked docu&ents detailed collaboration gi0ing the GS4 access tothe accounts o3 tens o3 thousands o3 net co&paniesK users, the big Internet co&panies and their allies issued dire

/arnings, predicting that 4&erican businesses /ould lose tens o3 billions o3 dollars in re0enue abroad as distrust3ul

custo&ers seek out local alternati0es' In a 3ederal court 6ling last /eek, 9oogle said that still+un3olding ne/s

co0erage /as causing Lsubstantial har& to 9oogleKs reputation and businessL' !he co&pany said that could be

&itigated i3 it /ere allo/ed to co&&ent /ith precision about its intelligence dealings' iewise' last"!nth' si- techn!l!g+ trade gr!u#s wr!te t! the /hite (!use t!urge re)!r"s in the s#+ #r!gra"s' citing what it called a stud+#redicting a K5 ,illi!n cu"ulative sh!rt)all ,+ 201 in the vitalec!n!"ic sect!r. That nu",er' it turns !ut' was e-tra#!lated )r!" asecurit+ trade gr!u#Os surve+ !) 204 n!n%U.$. "e",ers % and thegr!u#' the l!ud $ecurit+ Alliance' had e-#licitl+ cauti!ned that its"e",ers werenOt re#resentative !) the entire industr+. I n!w +!uwant sect!rs and nu",ers' ,ut I d!nOt have it' said 8d Blac'#resident !) the !"#uter C !""unicati!ns Industr+ Ass!ciati!n'!ne !) the trade gr!u#s ,ehind the letter. An+,!d+ wh! tells +!uthe+ d! is "aing it u#.L !he trade groups arenKt the only ones issuing dis&al, and headline+grabbing, 3orecasts' Forrester Research analyst Ja&es Staten /rote o3 the @


24/140

/ould co&e to pass only i3 businesses decided that spying /as a bigger issue than the sa0ings they gained 3ro& ashi3t to cloud co&puting' In an inter0ie/ /ith Reuters, Staten said he didnKt belie0e that /ould be the case' LI donKt

think thereKs going to be a signi6cant pullback,L he said, though the rate o3 gro/th could slo/ 3or a couple o3 years'

TI!!TE IM45! G!!gle e"#l!+ees t!ld &euters that the c!"#an+ has seenn! signi3cant i"#act !n its ,usiness' and a #ers!n ,rie)ed !n=icr!s!)tOs ,usiness in 8ur!#e liewise said that c!"#an+ has had

n! issues. At A"aJ!n' which was n!t na"ed in $n!wdenOsd!cu"ents ,ut is seen as a liel+ victi" ,ecause it is a t!# #r!vider!) cl!ud c!"#uting services' a s#!esw!"an said gl!,al de"andhas never ,een greater.


25/140

Alt auses t! TechN$A surveillance n!t ha"#ering tech sect!r% alt causes>!le+' Direct!r !) $trategic !""unicati!ns )!r ?racle' 1(John,4pril


26/140

usinesses recogniDe the potential o3 big data, but 3e/ ha0e the pieces in place to con0ert that potential into abusiness ad0antage' Sonny Singh, Senior ice resident and 9eneral Manager o3 Pracle"s Financial Ser0ices 9lobal

usiness nit, said < percent o3 respondents to an Pracle sur0ey ga0e their organiDations a grade o3 5# or lo/erin preparedness 3or the data deluge' Here too, industry+speci6c solutions can help' 5heck out &y blog post on the

trend a&ong /ith a data &odel, &iddle/are, and analytics suited to their needs' 5o&panies are &o0ing beyond

old+style business and I! align&ent' !here /as a ti&e /hen 5EPs could take co&3ort in kno/ing that their business

and I! strategies /ere closely aligned, but those days are o0er' Tech leaders "ust g! a ste#

)urther and #la+ an active r!le in c!r#!rate strateg+ setting andc!"#etitive anal+sis. R!u "ust ,e #artici#ating in the strateg+%)!r"ulati!n #r!cess'S said :r!)ess!r ash in a e+n!te#resentati!n. !nsu"ers e-#ect i""ediate availa,ilit+ !) #r!ductsand services. Its n!t en!ugh t! attract cust!"ers with l!w #ricesand w!w the" with great service6+!u ,etter have what the+rel!!ing )!r. ?racles The New &etail De"!crac+ surve+ reveals thatc!nsu"ers #ut a #re"iu" !n #r!duct availa,ilit+. In )act' 5 #ercentsa+ availa,ilit+ is "!re i"#!rtant that #rice' and F2 #ercent will n!twait )!r #r!ducts t! c!"e int! st!c. &etailers "ust e-cel at real%

ti"e invent!r+ "anage"ent and ,e a,le t! share that in)!r"ati!nwith cust!"ers.

urtailing N$A surveillance t! i"#r!ve ec!n!"+ )ails% !il is analt cause t! a c!lla#seenned+' /riter )!r ?il :rice' 15(5harles, May )*th, S4 !oday, Pilprices hit struggling oil co&panies,#http$%%///'usatoday'co&%story%&oney%business%2)*%*%2*%oilprice+dotco&+oil+co&panies+struggling%277BC2CC% , %2C%)*, MM.

!w !il #rices have #r!vided a wind)all t! c!nsu"ers ar!und the

w!rld. In the United $tates' the sec!nd largest i"#!rter !) crude9which was recentl+ !vertaen ,+ hina;' "illi!ns !) "!t!rists haveseen their gas ,ills #lu""et !ver the #ast +ear. !he collapse in oil prices since

June o3 last year could result in Lone o3 the biggest trans3ers o3 /ealth in history,L as the ashington ost Ks Ste0e

Mu3son put it in a ece&ber 2)B article' Pil producing countries like Saudi 4rabia and Russia /ould see their

stratospheric e8port re0enues 0anish ++ and oil+consu&ing nations /ould cash in' 'S' consu&ers &ay /ind up /ith

an e8tra @7 in 2)* due to lo/ gasoline prices' MPRE$ Pil &arkets ha0e little to 3ear 3ro& Iran 3or no/ !he head

o3 the 'S' Energy In3or&ation 4d&inistration said in January said that lo/ oil prices pro0ided a Ltre&endous

positi0e i&pactL on the 4&erican econo&y' ut 3resh econo&ic data is con3ounding that proection' The U.$.ec!n!"+ e-#anded at a "eager rate !) Hust 0.2 #ercent in the 3rstthree "!nths !) 2015' and that 3gure c!uld ,e revised l!wer'acc!rding t! the /all $treet !urnal. The #!!r #er)!r"ance can ,eattri,uted' at least in #art' t! l!w !il #rices ' MPRE$ 4 potentially &assi0e /in 3or3racking in !e8as That is ,ecause the U.$. is n!t Hust a "aH!r !il i"#!rter',ut als! a "assive !il #r!ducer. The )all in !il #rices has inPictedwides#read da"age !n !il%#r!ducing states lie Te-as' Alasa'N!rth Da!ta' and !uisiana. I) n!t )!r severe cut,acs in ca#italinvest"ent !n ,ehal) !) A"erican !il c!"#anies and !ther relatedsect!rs' U.$. GD: w!uld have ,een 0.45 #ercentage #!ints higher.
http://www.usatoday.com/story/money/business/2015/05/25/oilprice-dotcom-oil-companies-struggling/27749299/http://www.usatoday.com/story/money/business/2015/05/25/oilprice-dotcom-oil-companies-struggling/27749299/http://www.usatoday.com/story/money/business/2015/05/25/oilprice-dotcom-oil-companies-struggling/27749299/http://www.usatoday.com/story/money/business/2015/05/25/oilprice-dotcom-oil-companies-struggling/27749299/


27/140

The ,illi!ns !) d!llars in slashed invest"ent ri##les thr!ugh all s!rts!) industrial activit+ )r!" "anu)acturing and heav+ e7ui#"ent' t!3nancial services' c!""ercial real estate and even h!using.


28/140

Tech BadTech inn!vati!n is ,ada0id &!t"an%)2%1K(MI! technology re0ie/ board' 4s the editor o3 MIT TechnologyReview, I spend &uch o3 &y ti&e thinking about the types o3 stories and ournalis& that /ill

be &ost 0aluable to our readers' hat do curious, /ell+in3or&ed readers need to kno/ aboute&erging technologies1 4s a /riter, I a& particularly interested these days in the

intersection o3 che&istry, &aterials science, energy, &anu3acturing, and econo&ics'.

9i0en his cal& and reasoned acade&ic de&eanor, it is easy to &iss ust ho/ pro0ocati0e Erik rynol3sson"s

contention really is' rynol3sson, a pro3essor at the MI! Sloan School o3 Manage&ent, and his collaborator and

coauthor 4ndre/ Mc43ee ha0e been arguing 3or the last year and a hal3 that i"#ressive advances inc!"#uter techn!l!g+6)r!" i"#r!ved industrial r!,!tics t!aut!"ated translati!n services6are largel+ ,ehind the sluggishe"#l!+"ent gr!wth !) the last 10 t! 15 +ears. 8ven "!re !"in!us)!r w!rers' the =IT acade"ics )!resee dis"al #r!s#ects )!r "an+t+#es !) H!,s as these #!wer)ul new techn!l!gies are increasingl+

ad!#ted n!t !nl+ in "anu)acturing' clerical' and retail w!r ,ut in#r!)essi!ns such as law' 3nancial services' educati!n' and "edicine.That r!,!ts' aut!"ati!n' and s!)tware can re#lace #e!#le "ightsee" !,vi!usto anyone /ho"s /orked in auto&oti0e &anu3acturing or as a tra0el agent' Butrynol3sson and Mc43ee"s clai" is "!re tr!u,ling and c!ntr!versial. The+,elieve that ra#id techn!l!gical change has ,een destr!+ing H!,s)aster than it is creating the"' c!ntri,uting t! the stagnati!n !)"edian inc!"e and the gr!wth !) ine7ualit+ in the United $tates.And' the+ sus#ect' s!"ething si"ilar is ha##ening in !thertechn!l!gicall+ advanced c!untries. erhaps the &ost da&ning piece o3 e0idence,according to rynol3sson, is a chart that only an econo&ist could lo0e' In econo&ics, producti0ity?the a&ount o3

econo&ic 0alue created 3or a gi0en unit o3 input, such as an hour o3 labor?is a crucial indicator o3 gro/th and

/ealth creation' It is a &easure o3 progress' Pn the chart rynol3sson likes to sho/, separate lines represent

producti0ity and total e&ploy&ent in the nited States' For years a3ter orld ar II, the t/o lines closely tracked

each other, /ith increases in obs corresponding to increases in producti0ity' !he pattern is clear$ as businessesgenerated &ore 0alue 3ro& their /orkers, the country as a /hole beca&e richer, /hich 3ueled &ore econo&ic

acti0ity and created e0en &ore obs' !hen, beginning in 2, the lines di0erge producti0ity continues to riserobustly, but e&ploy&ent suddenly /ilts' y 2)), a signi6cant gap appears bet/een the t/o lines, sho/ing

econo&ic gro/th /ith no parallel increase in ob creation' rynol3sson and Mc43ee call it the great decoupling'#

4nd rynol3sson says he is con6dent that technology is behind both the healthy gro/th in producti0ity and the

/eak gro/th in obs' It"s a startling assertion because it threatens the )aith that "an+ec!n!"ists #lace in techn!l!gical #r!gress' rynol3sson and Mc43ee still belie0e thattechn!l!g+boosts producti0ity and &akes societies /ealthier, but they think that it can als! havea dar sideV techn!l!gical #r!gress is eli"inating the need )!r "an+t+#es !) H!,s and leaving the t+#ical w!rer w!rse !L than ,e)!re' +rynol3sson can point to a second chart indicating that &edian inco&e is 3ailing to rise e0en as the gross do&estic

product soars' It"s the great parado8 o3 our era,# he says' R:r!ductivit+ is at rec!rd levels'inn!vati!n has never ,een )aster' and +et at the sa"e ti"e' we havea )alling "edian inc!"e and we have )ewer H!,s. :e!#le are )alling,ehind ,ecause techn!l!g+ is advancing s! )ast and !ur sills and!rganiJati!ns arent ee#ing u#.Srynol3sson and Mc43ee are not Tuddites' Indeed, theyare so&eti&es accused o3 being too opti&istic about the e8tent and speed o3 recent digital ad0ances' rynol3sson


29/140

says they began /riting Race 4gainst the Machine, the 2)) book in /hich they laid out &uch o3 their argu&ent,because they /anted to e8plain the econo&ic bene6ts o3 these ne/ technologies (rynol3sson spent &uch o3 the

)CCs sni^ng out e0idence that in3or&ation technology /as boosting rates o3 producti0ity.' ut it beca&e clear tothe& that the sa&e technologies &aking &any obs sa3er, easier, and &ore producti0e /ere also reducing the

de&and 3or &any types o3 hu&an /orkers' 4necdotal e0idence that digital technologies threaten obs is, o3 course,

e0ery/here' Robots and ad0anced auto&ation ha0e been co&&on in &any types o3 &anu3acturing 3or decades' In

the nited States and 5hina, the /orld"s &anu3acturing po/erhouses, 3e/er people /ork in &anu3acturing today

than in )CC7, thanks at least in part to auto&ation' Modern auto&oti0e plants, &any o3 /hich /ere trans3or&ed by

industrial robotics in the )C-s, routinely use &achines that autono&ously /eld and paint body parts?tasks that

/ere once handled by hu&ans' Most recently, industrial robots like Rethink Robotics" a8ter (see !he lue+5ollar

Robot,# May%June 2)


30/140

+,ersecurit+


31/140

UQ $ecurit+ (igh N!w!"#anies i"#r!ving encr+#ti!n n!w% G!!gle' >ace,!!' andT!r re)!r"ing

uchler' Tech /riter )!r >inancial Ti"es' 201 (Go0e&ber B,

Hannah, Financial !i&es, !ech co&panies step up encryption in /akeo3 Sno/den,# http$%%///'3t'co&%c&s%s%%


32/140

nu&ber one lesson is you /ill scre/ up i3 you use products /hich ha0en"t

been properly tested'#


33/140

N$A D!esnt (urt $ecurit+N$A ,acd!!rs d!nt under"ine Internet securit+%studies sh!wthat the+ have little t! n! eLectBaer 1(Ste/art, 3or&er 4ssistant Secretary 3or olicy at the S

epart&ent o3 Ho&eland Security, ashington ost B+


34/140

Hust assu"es; that there is a ,acd!!r in the dual elli#tic curvestandard.In 27, so&e Microso3t researchers e8plained ho/ a backdoor&ight ha0e been i&planted in the standard' &esearchers have ,eenl!!ing )!r wa+s t! e-#l!it the ,acd!!r and thus #r!ve itse-istence ever since. et the #a#er c!ncedes that the researchers

cant c!n3r" the e-istence !) a Paw. Instead, the researchers had to&ake up a diQerent Na/ed protocol and sho/ ho/ Auickly they could e8ploitthat 0ulnerability' !he arti6ciality o3 that e8ercise probably should ha0e &ade

Reuters a little &ore skeptical about the study"s results, but there"s a &orei&portant point in the researchers" concession' $even +ears is a li)eti"ein cr+#tanal+tic attacs' s! its 7uite a sur#rise that n! ,acd!!rhas ,een #r!ved in all this ti"e. It raises the #!ssi,ilit+ that therereall+ is n! Paw: or that GS4 has introduced a Na/ that only GS4 cane8ploit' Thats i"#!rtant ,ecause the #ress and a l!t !)cr+#t!gra#hers have ,een sa+ing that N$A weaened internet

securit+ )!r ever+!ne.ut i3 there is no Na/, or i3 it"s a Na/ only GS4 cane8ploit, then at /orst internet security has been /eakened 3or ad0ersariesand intelligence targets o3 the nited States' 5all &e old+3ashioned, but thatsounds like a good thing to &e' P3 course, acade&ic cryptographers &ay still

argue that it"s not, but only by Nirting /ith a &oral relati0is& that &ost4&ericans don"t share' 2' I) theres a ,acd!!r in the standard' its hadn! discerni,le eLect !n internet securit+. Tal a,!ut ,ur+ing thelede. A)ter "easuring h!w )ast their )ae standards c!ntrived Pawc!uld ,e e-#l!ited' the researchers decided t! g! l!!ing )!re-a"#les !) the Pawed elli#tic curve standard in the wild. /hat

the+ )!und see"s t! cast d!u,t !n the news value !) the wh!le Pa#.It turns out that you can scan &ore or less e0ery public+3acing ser0er on theinternet in less than an hour' 4 co&pany called &ap /ill do it 3or you 3or3ree' !he researchers used Map, and they 3ound a total o3 2)'- &illionser0ers oQering secure http connections o3 the sort that the contro0ersial

elliptic cur0e standard is accused o3 sub0erting' 4nd ho/ &any o3 those 2)'-&illion ser0ers /ere clearly using the contro0ersial standard1 72' Tet &esay that again' 72 out o3 2),-, secure ser0ers used the standard that

is accused /ithout conclusi0e proo3 o3 /eakening security on the internet' Ina 6t o3 understate&ent' the researchers note that this is &uch less than

)='# ell, yes' In 3act, it is less than one percent in the sa&e /ay that the/eight o3 your cat is less than that o3 a bull 43rican elephant : three orders o3

&agnitude less' ut another /ay, !nl+ .000K< !) the secure servers !nthe internet were )!und t! ,e running c!de that is su,Hect t! the)a"!us Paw. I) it is a Paw. And its liel+ that the vast "aH!rit+ !)th!se servers are !) n! interest t! the United $tates g!vern"ent' s!the ,acd!!r w!uld never ,e used )!r the". I) +!u assu"e that N$A


35/140

has a real interest in "a+,e 1< !) internet trac' thats 42 servers!n the internet wh!se securit+ "ight ,e #ut at ris ,+ the standard6 and then !nl+ i) the+ har,!r in)!r"ati!n !) intelligence interest t!the United $tates g!vern"ent.ig /hoop' Thats n!t even ta,lestaes in the w!rld !) c!"#uter securit+.hen other researchers /ent

looking 3or de0ices on the internet that /ere open to attack because o3Na/ed plug and play protocols, they 3ound B or * &illion online de0ices/ith the security Na/, a Na/ that so&e &anu3acturers ha0e si&ply re3used

to 68' 4nd there are bet/een


36/140

Marble Security, says itKs possible that /ith the GS4Ks &ulti+billion dollar

budget and tens o3 thousands o3 e&ployees, the agency &ay ha0edisco0ered "athe"atical techni7ues t! weaen certain cr+#t!gra#hics+ste"s' LHo/e0er, such 3unda&ental &athe&atical research d!esnOtc!nstitute ,ac d!!rs !r !ther c!vert agendas' evans sa+s.

:erha#s the N$A has disc!vered wa+s t! crac these s+ste"s thathave n!t ,een disc!vered ,+ the s"artest researchers in acade"iaand industr+. But thereOs n! law against clever "athe"aticianscreating new encr+#ti!n sche"es. evans sa+s he disagrees withthe characteriJati!n that the N$A' thr!ugh the use !) ,illi!ns !)d!llars !) research' has e-#!sed the U.$. t! c+,erattacs. ItOs Hustludicr!us' evans sa+s. ItOs n!t lie the N$A #!sted !#en s!urcet!!ls t! crac encr+#ti!n. a0e Fry&ier, 0ice president and chie3in3or&ation security o^cer o3 I! co&pany nisys, opines Lthe N$A is d!ingwhat intelligence agencies are su##!sed t! d! gather

intelligence.L !he &ethods and techniAues outlined in the !i&esK reportLha0e little to do /ith the underlying encryption technology and e0erythingto do /ith co&pro&ising one side o3 a t/o+/ay con0ersation orco&pro&ising encryption keys,L Fry&ier says' L!here are &any

i&ple&entations o3 encryption algorith&s, any o3 /hich are subecti&ple&entation bugs, sa&e as any so3t/are'L Jakob Ehrens0ard, chie3technology o^cer at Oubico, an authentication security co&pany, /hich also

&anu3acturers hard/are security &odules, points out that Secure SocketsTayer and !ransport Tayer Security are the standard security technologies 3orestablishing an encrypted link bet/een a /eb ser0er and a bro/ser' L!here

are so&e by+design /eaknesses /ith the concept o3 SST%!TS, /hich could bee8ploited by not only go0ern&ents but also 3raudulent users,L Ehrens0ardobser0es' L!hey basically allo/ anyone to connect to anyone and establishcon6dentiality'L a0e 4nderson, a senior director /ith oltage Security,e&phasiDes that encryption, in general, is robust technology' LIt see"sliel+ that an+ #!ssi,le wa+ that the N$A "ight have ,+#assedencr+#ti!n was al"!st certainl+ due t! a Paw in the e+"anage"ent #r!cesses that su##!rt the use !) encr+#ti!n' ratherthan thr!ugh the cr+#t!gra#h+ itsel)' sa+s Anders!n. $!' is it#!ssi,le that the N$A can decr+#t 3nancial and sh!##ing acc!untsW

:erha#s' ,ut !nl+ i) the cr+#t!gra#h+ that was used t! #r!tect thesensitive transacti!ns was i"#r!#erl+ i"#le"ented.


37/140

Bullrun 2 +,ersecurit+NI$T increasingl+ e+ t! c+,ersecurit+

ha#"an' 1 (5ate, Editor o3 4d0isen Risk Get/ork, GIS! e&erges as a0ery i&portant tool"# http$%%///'cyberrisknet/ork'co&%2)B%)%urtherresearch is needed t! ensure that these techn!l!gies are accurateand that generally accepted &ethods o3 testing and%or 0eri3ying bio&etric


38/140

technologies e8ist' 4nother general class o3 technologies reAuiring additional

study is /earable technology' GIS!IR -)B only brieNy e8plores thepossibilities oQered by /earable de0ices in a public sa3ety conte8t, but asthe techn!l!g+ ,ec!"es "!re #revalent' new and n!vel a##licati!ns"a+ ,egin t! sur)ace' #ushing t!da+s ,!undaries.

N$A discl!sures have the eLect !) i"#r!ving internet securit+%"!ne+ dedicated t! i"#r!ving securit+Th!"s!n' Techn!l!g+ &e#!rter )!r the &egister' 1(Iain, June)2th, !he Register, !ech co&panies are raising their ga&e (and pants. post+

Sno/den,#http$%%///'theregister'co'uk%2)B%%)2%sa3eWinWourWhandsWsecurityWindustryWtakesWaWhitW3ro&Wsno/densWyear%1pageV), %2-%)*, MM.

I) theres a #!sitive t! the discl!sures ,+ e-%Nati!nal $ecurit+!ntract!r 9N$A; c!ntract!r 8dward $n!wden' its that its ,een adisaster )!r techn!l!g+ and internet 3r"s. es' a #!sitive.In the last year/e"0e learned the GS4 has backdoors placed in the hard/are that &akes net/orks, the e8istence o3 &assi0e

3unnels placed in internet and phone co&panies" data centers to suck up 0ast a&ounts o3 data, and the breaking o3

internet encryption' The eLect !) all this sh!uld ,e a raising !) thesec!"#anies ga"es and a shaing !) users c!"#lacenc+ in rel+ing!n R)reeS #r!ducts and in ,eing t!! acce#ting !) what the+re givenand !) standard Rs!luti!ns.S Alread+' tech and we, c!"#anies arec!"ing ,ac. aught with their #ants d!wn' the+ are n!w ,einggiven the ti"e and "!ne+ t! #ull the" ,ac u# again. re+Sno/den it /as

generally assu&ed the go0ern&ent /as carrying out so&e sorts o3 sur0eillance against key targets and that thebright boys and girls at the Gational Security 4gency (GS4. could sub0ert security syste&s i3 they really /anted to'

N$A surveillance all!ws ,usinesses t! i"#r!ve securit+%creates necessit+ )!r changeTh!"s!n' Techn!l!g+ &e#!rter )!r the &egister' 1(Iain, June)2th, !he Register, !ech co&panies are raising their ga&e (and pants. post+

Sno/den,#http$%%///'theregister'co'uk%2)B%%)2%sa3eWinWourWhandsWsecurityWindustryWtakesWaWhitW3ro&Wsno/densWyear%1pageV2, %2-%)*, MM.

5hris Soghoian, principal technologist at the 4&erican 5i0il Tiberties nion and a noted pri0acy researcher and acti0ist, told !he

Register that the r!gue s+sad"inOs acti!ns had #r!ved a catal+st )!rchange. The leas caused a l!t !) anger in these c!"#anies' and in#articular with the securit+ tea"s in these c!"#anies. Thesesecurit+ tea"s have had a list !) things the+Ove wanted t! d! )!r+ears ,ut ,udgets are li"ited and s! the+ )!cus res!urces !n the,iggest threats' he t!ld us. N!w' itOs "+ understanding that in thewae !) the $n!wden discl!sures' that securit+ tea"s have ,een
http://www.theregister.co.uk/2014/06/12/safe_in_our_hands_security_industry_takes_a_hit_from_snowdens_year/?page=1http://www.theregister.co.uk/2014/06/12/safe_in_our_hands_security_industry_takes_a_hit_from_snowdens_year/?page=1http://www.theregister.co.uk/2014/06/12/safe_in_our_hands_security_industry_takes_a_hit_from_snowdens_year/?page=1http://www.theregister.co.uk/2014/06/12/safe_in_our_hands_security_industry_takes_a_hit_from_snowdens_year/?page=1http://www.theregister.co.uk/2014/06/12/safe_in_our_hands_security_industry_takes_a_hit_from_snowdens_year/?page=1http://www.theregister.co.uk/2014/06/12/safe_in_our_hands_security_industry_takes_a_hit_from_snowdens_year/?page=1http://www.theregister.co.uk/2014/06/12/safe_in_our_hands_security_industry_takes_a_hit_from_snowdens_year/?page=1http://www.theregister.co.uk/2014/06/12/safe_in_our_hands_security_industry_takes_a_hit_from_snowdens_year/?page=1


39/140

given #rett+ "uch a ,lan chec and can s#end whatever the+ wantt! s#end t! #r!tect the lin ,etween the user and the c!"#an+.Ho/e0er, Soghoian pointed out that this is only hal3 o3 the solution' 9oogle and others pay 3or L3reeL e&ail syste&s by tra/ling

through the data consu&ers gi0e the& and selling ad0ertising based around that' !hat business &odel isn"t going to change any

ti&e soon, he /arned, but as long as itKs in place the GS4 /ill try to sub0ert itL' 5hristopher Soghoian SoghoianV securit+)!ls can' and are' "aing things ,etter $n!wden hasnt given

"an+ interviews since g!ing !n the run' ,ut !ne !) the "essages hehas c!nsistentl+ #ut !ut is that g!!d encr+#ti!n is still sa)e )r!" the#r+ing e+es !) the N$A.Oet e0en that isn"t a per3ect solution' In ece&ber 2)


40/140

G!!gle Inc. and >ace,!! Inc. % sa+ #rivatel+ that the+ have )eltlittle i) an+ i"#act !n their ,usinesses. Insiders at c!"#anies that!Ler re"!te c!"#uting services n!wn as cl!ud c!"#uting'including A"aJ!n and =icr!s!)t !r#' als! sa+ the+ are seeing n!)all!ut. =eanwhile' s"aller U.$. c!"#anies !Lering encr+#ti!n and

related securit+ services are seeing a Hu"# in ,usiness !verseas'al!ng with an u#tic in sales d!"esticall+ as individuals andc!"#anies w!r harder t! #r!tect secrets.LPur 0alue proposition hadbeen that itKs a /ild /orld out there, /hile doing business internationally youneed to protect yoursel3,L said Jon 5allas, co+3ounder o3 phone and te8tencryption pro0ider Silent 5ircle, /here re0enue Auadrupled 3ro& May toJune on a s&all base' LGo/ the &essage people are getting 3ro& the

ne/spapers e0ery day is that itKs a /ild /orld e0en do&estically'LRPHESIES PF PPM $h!rtl+ a)ter $n!wdenOs leaed d!cu"entsdetailed c!lla,!rati!n giving the N$A access t! the acc!unts !) tens

!) th!usands !) net c!"#aniesO users' the ,ig Internet c!"#aniesand their allies issued dire warnings' #redicting that A"erican,usinesses w!uld l!se tens !) ,illi!ns !) d!llars in revenue a,r!adas distrust)ul cust!"ers see !ut l!cal alternatives. In a )ederalc!urt 3ling last wee' G!!gle said that still%un)!lding news c!veragewas causing su,stantial har" t! G!!gleOs re#utati!n and,usiness. The c!"#an+ said that c!uld ,e "itigated i) it wereall!wed t! c!""ent with #recisi!n a,!ut its intelligence dealings.iewise' last "!nth' si- techn!l!g+ trade gr!u#s wr!te t! the/hite (!use t! urge re)!r"s in the s#+ #r!gra"s' citing what it

called a stud+ #redicting a K5 ,illi!n cu"ulative sh!rt)all ,+ 201in the vital ec!n!"ic sect!r. That nu",er' it turns !ut' wase-tra#!lated )r!" a securit+ trade gr!u#Os surve+ !) 204 n!n%U.$."e",ers % and the gr!u#' the l!ud $ecurit+ Alliance' had e-#licitl+cauti!ned that its "e",ers werenOt re#resentative !) the entireindustr+. I n!w +!u want sect!rs and nu",ers' ,ut I d!nOt haveit' said 8d Blac' #resident !) the !"#uter C !""unicati!nsIndustr+ Ass!ciati!n' !ne !) the trade gr!u#s ,ehind the letter.An+,!d+ wh! tells +!u the+ d! is "aing it u#.!he trade groupsarenKt the only ones issuing dis&al, and headline+grabbing, 3orecasts'

>!rrester &esearch anal+st a"es $taten wr!te !) the K5 ,illi!n3gureV /e thin this esti"ate is t!! l!w and c!uld ,e as high as10 ,illi!n' !r a 25 #ercent hit t! !verall IT service #r!viderrevenues. $tatenOs c!""ents generated d!Jens !) "edia st!ries's!"e !) which neglected t! "enti!n that $taten said the w!rstw!uld c!"e t! #ass !nl+ i) ,usinesses decided that s#+ing was a,igger issue than the savings the+ gained )r!" a shi)t t! cl!ud


41/140

c!"#uting. In an interview with &euters' $taten said he didnOt,elieve that w!uld ,e the case. I d!nOt thin thereOs g!ing t! ,e asigni3cant #ull,ac' he said, though the rate o3 gro/th could slo/ 3or acouple o3 years' TI!!TE IM45! G!!gle e"#l!+ees t!ld &euters that thec!"#an+ has seen n! signi3cant i"#act !n its ,usiness' and a

#ers!n ,rie)ed !n =icr!s!)tOs ,usiness in 8ur!#e liewise said thatc!"#an+ has had n! issues. At A"aJ!n' which was n!t na"ed in$n!wdenOs d!cu"ents ,ut is seen as a liel+ victi" ,ecause it is at!# #r!vider !) cl!ud c!"#uting services' a s#!esw!"an saidgl!,al de"and has never ,een greater.In the &ore than three &onthssince Sno/denKs re0elations began, no publicly traded 'S' co&pany hascited hi& in a securities 6ling, /here they are reAuired to report e0ents that

are &aterial to their business' Pne reason that the prophecies o3 businessdoo& are getting such a /ide airing is that both the 'S' industry and itso0erseas detractors ha0e been saying the sa&e thing + that custo&ers /ill

stop buying 3ro& 'S' cloud co&panies' oliticians in Europe and raDil ha0ecited the Sno/den docu&ents in pushing 3or ne/ pri0acy la/s and standards3or cloud contracts and in urging local co&panies to steer clear o3 'S'0endors' LI3 European cloud custo&ers cannot trust the 'S' go0ern&ent,

then &aybe they /onKt trust 'S' cloud pro0iders either,L European5o&&ission ice resident Geelie Uroes told !he 9uardian' LI3 I a& right,there are &ultibillion+euro conseAuences 3or 4&erican co&panies'L !here

ha0e indeed been so&e contract cancellations' 5harles Mount, chie3e8ecuti0e o3 business 6le+sharing ser0ice PneHub, told Reuters that anauto&ated syste& that asks custo&ers /hy they ha0e dropped the PneHub

ser0ice elicited this reply 3ro& an unspeci6ed ertels&ann unit in 4ustria$LHeadAuarters is banning storage o3 co&pany data in the 'S' or /ith 'S'co&panies altogether because o3 the GS4 data+&ining and industrialespionage' Oou should /atch out 3or that' Maybe you should think abouthosting in Iceland, S/eden or so&e other place kno/n 3or co&plying /ith

their o/n pri0acy legislation'L ertels&ann spokes&an 5hristian Steinho3said the co&pany couldnKt con6r& that the e8change had occurred andthere3ore /ouldnKt co&&ent' FE 9PP 4T!ERG4!IES !here are &ultiple

theories 3or /hy the business i&pact o3 the Sno/den leaks has been so&ini&al' Pne is that cloud custo&ers ha0e 3e/ good alternati0es, since 'S'

co&panies ha0e &ost o3 the &arket and s/itching costs &oney' erhaps&ore con0incing, 4&aDon, Microso3t and so&e others oQer data centers in

Europe /ith encryption that pre0ents signi6cant hurdles to snooping byanyone including the ser0ice pro0iders the&sel0es and the 'S' agencies'Encryption, ho/e0er, co&es /ith dra/backs, &aking using the cloud &orecu&berso&e' Pn !hursday, raDilKs president called 3or la/s that /ould

reAuire local data centers 3or the likes o3 9oogle and Facebook' ut 3or&er


42/140

senior 9oogle engineer ill 5oughran, no/ a partner at SeAuoia 5apital, said

that e0en in the /orst+case scenario, those co&panies /ould si&ply spende8tra to &anage &ore alkaniDed syste&s' 4nother possibility is that tech+buying co&panies else/here belie0e that their o/n go0ern&ents ha0e

scanning procedures that are e0ery bit as in0asi0e as the 4&erican

progra&s' So&e think itKs ust a &atter o3 ti&e, ho/e0er, be3ore 'S'industry suQers signi6cantly' LIndustry is still in denial,L said 5aspar o/den,once the chie3 pri0acy o^cer at Microso3t and no/ an independent

researcher and pri0acy ad0ocate in Europe' LItKs like ile E' 5oyote runningo0er the cliQ, his legs are still turning but he hasnKt started 3alling yet'L PPGFPR EG5RO!IPG SE5!PR As )!r the u#side' s! )ar !nl+ a "in!rit+ !)#e!#le and ,usinesses are tacling encr+#ti!n !n their !wn !r"!ving t! #rivac+%#r!tecting /e, ,r!wsers' ,ut encr+#ti!n ise-#ected t! get easier with "!re new entrants. $n!wden hi"sel)said that str!ng encr+#ti!n' a##lied c!rrectl+' was still relia,le'

even th!ugh the N$A has craced !r circu"vented "!st !) the!rdinar+' ,uilt%in securit+ ar!und /e, e"ail and 3nancialtransacti!ns.Ja&es enaro, a patent attorney /ith security training inashington, /as already using retty 9ood ri0acy (9., a co&plicated

syste& 3or encrypting e&ail, be3ore the Sno/den leaks' 43ter/ard, headopted phone and te8t encryption as /ell to protect client in3or&ation'L?ne !) the results we see )r!" $n!wden is an increased awarenessacr!ss the ,!ard a,!ut the incredi,le c+,er insecurit+' Denar!said. $!"e earl+ ad!#ters !) encr+#ti!n have seni!r H!,s insidec!"#anies' and the+ c!uld ,ring their ha,its t! the !ce and

eventuall+ change the techn!l!g+ ha,its !) the wh!le w!r#lace' inthe sa"e wa+ that e-ecutive )!ndness )!r i:h!nes and i:ads#r!"#ted "!re c!"#anies t! all!w the" access t! c!r#!ratenetw!rs.L5lients are no/ inAuiring ho/ they can protect their datao0erseas, /hat kinds o3 access the states &ight ha0e and /hat controls or

constraints they could put in /ith residency or encryption,L said 9artnerresearcher Ta/rence ingree, 3or&erly chie3 security architect at eopleSo3t,later bought by Pracle' Richard Stiennon, a security industry analyst and

author, predicted that security spending /ill rise sharply' 4 /eek ago, 9ooglesaid it had intensi6ed encryption o3 internal data No/s a3ter learning about

GS4 practices 3ro& Sno/denKs 6les, and consultants are urging other bigbusinesses to do the sa&e' Stiennon said that a3ter &ore co&panies encrypt,

the GS4 and other agencies /ill spend &ore to break through, accelerating alucrati0e cycle' L!hey /ill start 3ocusing on the encrypted data, becausethatKs /here all the good stuQ is,L Stiennon said' 4lready, in a 6scal 2)rancisc!. RIt is #!ssi,le)!r a terr!rist gr!u# t! devel!# c+,er%attac t!!ls !n their !wn !r t!,u+ the" !n the ,lac "aret'S +nn warned. RA c!u#le d!Jentalented #r!gra""ers wearing Pi#%P!#s and drining &ed Bull cand! a l!t !) da"age.S The de#ut+ de)ense secretar+ was c!nPating)ear and realit+' n!t Hust a,!ut what sti"ulant%drining#r!gra""ers are actuall+ hired t! d!' ,ut als! what is needed t!#ull !L an attac that causes "eaning)ul vi!lence' !he reAuire&ents go /ellbeyond 6nding top cyber e8perts' Taing d!wn h+dr!electric generat!rs' !rdesigning "alware lie $tu-net that causes nuclear centri)uges t!

s#in !ut !) se7uence d!esnt Hust re7uire the sills and "eans t! getint! a c!"#uter s+ste". Its als! n!wing what t! d! !nce +!u arein. T! cause true da"age re7uires an understanding !) the devicesthe"selves and h!w the+ run' the engineering and #h+sics ,ehindthe target. The $tu-net case' )!r e-a"#le' inv!lved n!t Hust c+,ere-#erts well ,e+!nd a )ew wearing Pi#%P!#s' ,ut als! e-#erts inareas that ranged )r!" intelligence and surveillance t! nuclear#h+sics t! the engineering !) a s#eci3c ind !) $ie"ens%,randindustrial e7ui#"ent. It als! re7uired e-#ensive tests' n!t !nl+ !)the s!)tware' ,ut !n w!ring versi!ns !) the target hardware as

well.4s 9eorge R' Tucas Jr', a pro3essor at the 'S' Ga0al 4cade&y, put it, conducting a truly &ass+scale action

using cyber &eans si&ply outstrips the intellectual, organiDational and personnel capacities o3 e0en the &ost /ell+

3unded and /ell+organiDed terrorist organiDation, as /ell as those o3 e0en the &ost sophisticated international

cri&inal enterprises'# ucas said the threat !) c+,er terr!ris" has ,eenvastl+ !ver,l!wn. !o be blunt' neither the 1%+ear%!ld hacer in +!urne-t%d!!r neigh,!rs u#stairs ,edr!!"' n!r the tw!% !r three%#ers!n al%Qaida cell h!led u# in s!"e a#art"ent in (a",urg areg!ing t! ,ring d!wn the Glen an+!n and (!!ver da"s,# he said' e shouldbe crystal clear$ !his is not to say that terrorist groups are uninterested in using the technology o3 cyberspace to

carry out acts o3 0iolence' In 2), al+>aida co&puters seiDed in 43ghanistan /ere 3ound to contain &odels o3 a

da&, plus engineering so3t/are that si&ulated the catastrophic 3ailure o3 controls' Fi0e years later, ihadist /ebsites

/ere urging cyber attacks on the 'S' 6nancial industry to retaliate 3or abuses at 9uantana&o ay' Gor does it

&ean that cyber terroris&, particularly attacks on critical in3rastructure, is o3 no concern' In 27, Idaho Gational

Tab researchers e8peri&ented /ith cyber attacks on their o/n 3acility they learned that re&otely changing theoperating cycle o3 a po/er generator could &ake it catch 6re' Four years later, the Tos 4ngeles !i&es reported that

/hite+hat hackers hired by a /ater pro0ider in 5ali3ornia broke into the syste& in less than a /eek' olicy&akers

&ust /orry that real+/orld 0ersions o3 such attacks &ight ha0e a ripple eQect that could, 3or e8a&ple, knock out

parts o3 the national po/er grid or shut do/n a &unicipal or e0en regional /ater supply' But s! )ar' whatterr!rists have acc!"#lished in the c+,er real" d!esnt "atch !ur)ears' their drea"s !r even what the+ have "anaged thr!ughtraditi!nal "eans. The !nl+ #u,licl+ d!cu"ented case !) an actual


53/140

al%Qaida atte"#t at a c+,er attac w!uldnt have even "et the >BIde3niti!n' nder Auestioning at 9uantana&o ay, Moh&edou Puld Slahi con3essed to trying to knock o`inethe Israeli pri&e &inister"s public /ebsite' !he sa&e goes 3or the Septe&ber denial+o3+ser0ice attacks on 60e 'S'

banking 6r&s, 3or /hich the Isla&ist group IDD ad+in al+>assa& 5yber Fighters# clai&ed responsibility' (So&e

e8perts belie0e the group /as &erely stealing credit 3or so&eone else"s /ork'. !he attacks, /hich pre0ented

custo&ers 3ro& accessing the sites 3or a 3e/ hours, /ere the eAui0alent o3 a cro/d standing in your lobby blocking

access or a gang o3 neighborhood kids constantly doing ring and runs# at your 3ront doorbell' It"s annoying, to be

sure, but nothing that /ould &ake the terroris& threat &atri8 i3 you re&o0ed the /ord cyber'# 4nd /hile it &ay

&ake 3or good headlines, it is certainly not in the 0ein o3 a cyber C%))# or digital earl Harbor'# 8ven the2004 c+,er attacs !n 8st!nia' the "!st%discussed incident !) itsind' had little i"#act !n the dail+ li)e !) the average 8st!nian andcertainl+ n! l!ng%ter" eLect' 4llegedly assisted by the Russian go0ern&ent, and hence /ellbeyond the capacity o3 &ost terror organiDations, the attacs "erel+ disru#ted #u,lic%)acing g!vern"ent we,sites )!r a )ew da+s.5o&pare that /ith the i&pact o3 planescrashing into the center o3 the 'S' 6nancial syste&, the Tondon sub/ay attacks or the thousands o3 ho&e&ade

bo&b attacks that happen around the /orld each year' 8ven when +!u "!ve int! theRwhat i)S side the da"age #!tential !) c+,er terr!r still #ales

c!"#ared with !ther t+#es !) #!tential terr!r attacs. A disru#ti!n!) the #!wer grid )!r a )ew da+s w!uld certainl+ ,e catastr!#hic9th!ugh its s!"ething that /ashingt!n' D..' residents have livedthr!ugh in the last +ear. D!es the :e#c! #!wer c!"#an+ 7uali)+ as ac+,er threatW;. ut, again, in strategic planning, /e ha0e to put threats into conte8t' !he e8plosion o3

ust one nuclear bo&b, e0en a ury+rigged radiological dirty bo&b,# could irradiate an 4&erican city 3or centuries'

Si&ilarly, /hile a co&puter 0irus could /reak ha0oc in the econo&y, a biological attack could change our 0ery

patterns o3 li3e 3ore0er' 4s one cyber e8pert said, There are Mc+,er threats !ut there',ut there are n! threats that threaten !ur )unda"ental wa+ !) li)e.S

D!nt ,elieve the h+#e n! c+,erattacs are c!"ing' threatsare !vere"#hasiJed./alt' #r!)ess!r !) internati!nal relati!ns at (arvard Universit+'10 (Stephen,


54/140

0aluable in3or&ation /as stolen or ho/ &uch actual da&age /as done' And as with !thers#ecialiJed areas !) technology and%or &ilitary aQairs, a l!t !)thee-#ertshave aclear 0estedinterest in h+#ing the threat, s! as t! create greaterde"and 3or their ser0ices' lus, /e already see& to ha0e politicians leaping on the issue as a /ay to grabso&e pork 3or their states' Second, there are lots o3 diQerent proble&s being lu&ped under a single banner,/hether the label is Lcyber+terrorL or Lcyber+/ar'L Pne issue is the use o3 0arious co&puter tools to degrade an

ene&y"s &ilitary capabilities (e'g', by disrupting co&&unications nets, spoo6ng sensors, etc'.' 4 second issue is the

alleged threat that bad guys /ould penetrate co&puter net/orks and shut do/n po/er grids, air tra^c control,

tra^c lights, and other i&portant ele&ents o3 in3rastructure, the /ay that internet terrorists (led by a disgruntled

co&puter e8pert. did in the &o0ie Ti0e Free and ie Hard' 4 third proble& is /eb+based cri&inal acti0ity, including

identity the3t or si&ple 3raud (e'g', those e&ails /e all get 3ro& so&eone in Gigeria announcing that they ha0e

&illions to gi0e us once /e send the& so&e account in3or&ation.' 4 3ourth potential threat is cyber+espionage#

i'e', cle0er 3oreign hackers penetrate entagon or de3ense contractors" co&puters and do/nload 0aluable classi6ed

in3or&ation' 4nd then there are annoying acti0ities like 0iruses, denial+o3+ser0ice attacks, and other things that

aQect the stability o3 /eb+based acti0ities and disrupt co&&erce (and &y ability to send posts into F.' !his sounds

like a rich &enu o3 potential trouble, and putting the phrase LcyberL in 3ront o3 al&ost any noun &akes it sound

trendy and a bit &ore 3rightening' ut notice too that these are all so&e/hat diQerent proble&s o3 Auite diQerent

i&portance, and the appropriate response to each is likely to be diQerent too' So&e issues ? such as the danger o3

cyber+espionage ? &ay not reAuire elaborate technical 68es but si&ply &ore rigorous security procedures toisolate classi6ed &aterial 3ro& the /eb' Pther proble&s &ay not reAuire big 3ederal progra&s to address, in part

because both indi0iduals and the pri0ate sector ha0e incenti0es to protect the&sel0es (e'g', 0ia 6re/alls or by

backing up critical data.' 4nd as 9reen/ald /arns, there &ay be real costs to ci0il l iberties i3 concerns about 0aguecyber dangers lead us to grant the GS4 or so&e other go0ern&ent agency greater control o0er the Internet' !hird,

this is another issue that cries out 3or so&e co&parati0e cost+bene6t analysis' Is the danger that so&e &align

hacker crashes a po/er grid greater than the likelihood that a bliDDard /ould do the sa&e thing1 Is the risk o3 cyber+

espionage greater than the potential danger 3ro& &ore traditional 3or&s o3 spying1 ithout a co&parati0e

assess&ent o3 diQerent risks and the costs o3 &itigating each one, /e /ill allocate resources on the basis o3 hype

rather than analysis' In short, &y 3ear is not that /e /on"t take reasonable precautions against a potential set o3

dangers "+ c!ncern is that we will s#end tens !) ,illi!ns !) d!llars#r!tecting !urselves against a set !) threats that are n!t asdanger!us as we are currentl+ ,eing t!ld the+ are.

The threat !) c+,er terr!ris" is e-aggerated little t! n!i"#act

$inger' direct!r !) the enter )!r 21st entur+ $ecurit+ andIntelligence and a seni!r )ell!w in >!reign :!lic+ at Br!!ings'12 (eter, Go0e&ber 2)2, rookings, !he 5yber !error ogey&an,http$%%///'brookings'edu%research%articles%2)2%))%cyber+terror+singer , M4M.

e ha0e let our 3ears obscure ho/ terrorists really use the Internet' 4bout


55/140

there is 0iolence,# yet &any discussions s/eep all sorts o3 non0iolent online &ischie3 into the terror# bin' ariousreports lu&p together e0erything 3ro& e3ense Secretary Teon anetta"s recent state&ents that a terror group

&ight laun

gdi 15 - bullrun negative

Documents