Cyber Terrorism and Grid Security

Written By Nick Hodge

Posted October 27, 2011

Remember when identity theft was all the rage?

You don’t hear the term as much anymore, but our plugged-in nature has us more vulnerable than ever.

Identity theft — mainly, fraudulent spending — has affected hundreds of millions of people, causing hundreds of billions in losses worldwide in the past decade.

Today, though, your credit card number isn’t the only target of hackers’ keystrokes…

What Do You Do Online?

I bank with an online interest-bearing checking account. I use it to make utility, car, cable, and phone payments. It also contains my entire banking and ATM transaction history.

I pay my mortgage through a separate online account.

I have a brokerage account.

I manage my insurance and health savings account (HSA).

I have an individual retirement account (IRA).

I have a credit card account.

And of course, I have an email account, which doesn’t forget anything and is a catch-all for correspondence from any person or business I interact with: orders, confirmation numbers, pictures, usernames, etc.

The very fabric of my life — and yours, I’m sure — is sewn together with digital thread.

It’s not just our financial data that’s at risk; it’s our personal information, our likes and dislikes, our habits, and even our geographic location.

Google knows what you need and how you’re getting it. It knows where you’re going and how you’re getting there. It knows what you’re cooking. It knows when you’re sick.

Social media, apps, and smartphones have added a whole new layer to this.

People chronicle their lives on Facebook, telling the world what movies and books they like, what they’re doing over the weekend, even which coworker annoys them. Some even sync their phones’ GPS with these accounts to broadcast their location as they go.

It’s all out there in the ether, strings of ones and zeros floating on a server in some cloud.

Individually, you may not think much of it. But when combined, you have a dossier on a nation — a psychological profile, a financial profile, a spending profile, a medical history, a travel log, a family tree, a social interaction chart.

We’re way past identity theft…

These mountains of data are our new Twin Towers.


The Real Threat of Cyber Terrorism

We’ve all seen how penetrable supposed “secure systems” can be.

Hacking has come to be the new tool of both criminals and law enforcement. It’s at the core of today’s activism, now known as hacktivism.

And more and more each day, it’s terrorists’ new weapon of choice.

Since launching denial-of-service attacks against Scientology websites in 2008, the hacker group Anonymous has since infiltrated the websites of the Australian Prime Minister and Parliament, Sony (NYSE: SNE) (taking down the PlayStation Network), MasterCard (NYSE: MA), Visa (NYSE: V), and the Swedish Prosecutor’s office (after Julian Assange was arrested).

It’s been involved in the Arab Spring, hacked Spanish police, and released documents from Bank of America.

It’s claimed it will bring down Facebook on November 5th. (To Americans these days, that’s surely an act of war.)

And it isn’t just the Guy Fawkes’ stuff…

The Pentagon announced computer sabotage can be an act of war earlier this year. It also unveiled its first-ever Cyber Strategy, which the Wall Street Journal described as “an early attempt to grapple with a changing world in which a hacker could pose as significant a threat to U.S. nuclear reactors, subways or pipelines as a hostile country’s military.”

60 Minutes reported last year that hackers have already disabled critical infrastructure in major cities, disrupted essential services, stolen millions of dollars from banks all over the world, infiltrated defense systems, extorted millions from public companies, and even sabotaged our weapons systems…

The segment continued:

“Can you imagine your life without electric power?” Retired Admiral Mike McConnell asked correspondent Steve Kroft.

Until February 2009, McConnell was the nation’s top spy. As chief of national intelligence, he oversaw the Central Intelligence Agency, the Defense Intelligence Agency and the National Security Agency. Few people know as much about cyber warfare, and our dependency on the power grid, and the computer networks that deliver our oil and gas, pump and purify our water, keep track of our money, and operate our transportation systems.

“If I were an attacker and I wanted to do strategic damage to the United States, I would either take the cold of winter or the heat of summer, I probably would sack electric power on the U.S. East Cost, maybe the West Coast, and attempt to cause a cascading effect. All of those things are in the art of the possible from a sophisticated attacker,” McConnell explained.

“Do you believe our adversaries have the capability of bringing down a power grid?” Kroft asked.

“I do,” McConnell replied.

Asked if the U.S. is prepared for such an attack, McConnell told Kroft, “No. The United States is not prepared for such an attack.”

“It is now clear this cyber threat is one [of] the most serious economic and national security challenges we face as a nation,” President Obama said during a speech.

“We know that cyber intruders have probed our electrical grid, and that in other countries cyber attacks have plunged entire cities into darkness,” the president said.

Brazil was the nation that had been plunged into darkness.

The most important thing to know is that this stuff is already happening.

I have an uncle who’s worked on it for decades as an analyst for the Navy before moving on to the National Security Administration (NSA), and eventually defense contracting firm Booz Allen Hamilton.

He’s moving this week to Florida where he’s taken a new job: cyber security for the grid with NextEra Energy (NYSE: NEE). Not a bad stock, by the way, if you like the utility space. It’s paying a 4% dividend.

I know there are more pressing issues affecting the global investment community right now, so I just want you to keep this issue in mind…

When the market comes back, this will be one of the prime places to be.

Steve Christ over at Wealth Daily is already starting to give it broader coverage.

Call it like you see it,

Nick Hodge

Nick Hodge
Editor, Energy and Capital

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