What a Dozen Cable Hacks Tell You About Stocks Right Now

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The attacker struck close to midnight, climbing into a manhole at the mouth of California’s Niles Canyon and slicing a series of cables that collectively carried billions of bits of Internet data…’

— Wall Street Journal

If you know anything about the current attacks happening around Silicon Valley, the FBI wants to hear from you.

Somebody’s not happy, but they’re not talking…yet.

The fibre optic infrastructure in the San Francisco Bay Area has been deliberately damaged more than a dozen times in the past year.

The attacks slow Internet service and disrupt financial transactions and emergency phone calls,’ reports the Journal.

See the scene of the crimes for yourself…

Source: The Wall Street Journal
[Click to open in new window]

The catch is: nobody knows the motivation for the crimes. They only know how easy it is to access and hit the network.

You might recall Northern California was where snipers opened fire on an electrical substation in 2013. Gunshots took out 17 transformers. It knocked the substation out of the power grid.

It’s stories like these that keep Revolutionary Tech Investor editor Sam Volkering researching new ‘Defender’ stocks to add to his buy list.

He says they’re the biggest tech trend of this century.

Sam calls attacks like those above ‘CyberPhysical’.

Attacks like these ‘are the next step in a terrifyingly connected world,‘ wrote Sam last week to his subscribers.

He went on:

Some of the more worrying attacks I learnt about included attacks on chemical plants and critical infrastructure.For instance a cyber attacker can access a chemical plant through old out-dated control systems and software.

Some of these old control systems were designed and built in the ’90s and early 2000s. This is a time when digital security from a third party attacker wasn’t even a consideration.By accessing these control systems a hacker can then investigate, understand, and figure out how the system process works.

The flip side, of course, is that every problem represents an investment opportunity. Sam currently has seven cyber security stocks on the Revolutionary Tech Investor buy list. Five are up and two are down. The biggest winner was up 412% at last week’s update.

Looks like there’s plenty of room for the others to run. Unfortunately, crime is a perpetual growth industry.

Last week, UK retailer Carphone Warehouse said hackers stole 2.4 million customer details and 90,000 credit card numbers.

As Sam puts it, ‘If you haven’t invested in any of the Defender stocks yet, there’s never been a better time.’

See for yourself here.

Trailer park blues

It’s possible — though admittedly not likely — that the attacker(s) in the San Francisco Bay Area live in Buena Vista Mobile Home Park. That would at least provide a motive.

In case you didn’t catch the story, Buena Vista Mobile Home Park is in Palo Alto, California. The park is within a few miles of the Google and Facebook headquarters. It’s in the heart of Silicon Valley.

The wages and profits in the US tech sector are so large that it has sent real estate values in the Bay Area skyrocketing. The median income in Palo Alto is $121,465, according to the US Census Bureau.

The owners of the trailer park acquired it 30 years ago for US$4 million.

Today the value of the land, around 4.5 acres, is estimated to be over US$50 million.

Of course, for the owner to sell out and cash in, the trailer park residents will be evicted. And most of them will be forced to leave the area altogether. Obviously, they’re not too happy about it.

There’s even a wider backlash from some long term Palo Alto residents against the rise of the tech barons. That’s because of the effect the real estate boom has had on low income workers and the changing nature of the area.

But most of them are just cashing in. From the WSJ:

Owners of even modest homes can become millionaires if they sell. In April, a newly-built four-bedroom home was offered at $3 million, bid up to $3.8 million and sold in eight days. Many houses have doubled in value in four years, and developers are filling the city’s coffers with fees.

The tech sector in California is a dramatic example of the comeback in US housing. But the real estate sector as a whole is really starting to run.

The WSJ reports that investors have pushed commercial real estate values to record levels around the world. Deal activity in US commercial real estate is up 36% from a year earlier. It’s 37% higher in Europe.

This can keep going. Here’s why.

Cycles, Trends and Forecasts editor Phillip J Anderson says this real estate cycle has seen the rise of something genuinely new: sovereign wealth funds. They have HUGE amounts of money to invest and yet real estate as a percentage of their funds under management remains relatively small.

Consider China. Last month, its sovereign wealth fund bought nine office towers in Sydney and Melbourne, alongside ten shopping centres in France and Belgium.

This has a long way to run yet. To track the property trends you need to know, go here for more on the real estate cycle.

Return of the seamstress to Cottonopolis

I was reading the Financial Times yesterday and came across a comment that seemed extraordinary at first glance. But the implications are huge.

Here’s the story…

Greater Manchester was once dubbed ‘Cottonopolis’ because of its textile industry. Those jobs left to cheaper countries like China.

But the area is now apparently making a comeback after 35 years of decline.

From the FT:

Clair de Lune is bursting at the seams. The maker of baby bedding and accessories is struggling to keep up with orders as staff surrounded by rolls of fabric, boxes of linen and piles of Moses baskets work furiously at sewing machines.

“If I could find another 10 machinists I’ve got work for them tomorrow,” says Polly Rodgers, a director of the family-owned business

The scene is repeated in factories across Greater Manchester.’

The average weekly wage in the UK textile industry is £371 as of last year. That’s the FT quoting the Office of National Statistics.

But here’s the quote that jumped out at me: ‘Jamie Power, the company’s young finance managers, says: “It has become competitive to manufacture here again. It is the same cost as east Asia.”

I just finished a book called The End of Cheap China,by Shaun Rein. One of the points he makes is that China’s competitive advantage in industries like textiles is gone. That’s thanks to rising wages and real estate costs.

That’s not to say he’s bearish on China especially. But that the country is being forced to move higher up the value chain where the margins are fatter.

Low cost production is being moved to places like Vietnam, Bangladesh and Indonesia. And some of it is heading back to where it came from — Britain and the US.

There’s a lot to these developments. Shaun Rein is due to be on The Daily Reckoning Podcast in the next month. Stay tuned for more.

Regards,

Callum Newman,

Asscoiate Editor, Cycles, Trends and Forecasts

Ed Note: This is an excerpt from an article first published in Port Phillip Insider

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Callum Newman

Callum Newman

Callum Newman is the editor of The Daily Reckoning and Associate Editor of Cycles, Trends and Forecasts. He also hosts The Daily Reckoning Podcast. Originally graduating with a degree in Communications, Callum decided financial markets were far more fascinating than anything Marshall McLuhan (the ‘medium is the message’) ever came up with. Today Callum spends his day reading and researching why currencies, commodities and stocks move like they do. So far he’s discovered it’s often in a way you least expect. To have Callum’s thoughts and insights on the current state of the currency, commodities and stock markets delivered straight to your inbox, take out a free subscription to The Daily Reckoning here.
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