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Thursday, September 27, 2018
Today's Featured Topic Disruptive Change Updates Joe Mac's Market Viewpoint Current Themes Major Data Points

Today's Featured Topic

Paradigm Shift to Connected Devices is Boosting the Cybersecurity Industry

Summary: The cybersecurity landscape is seeing exponential growth with attack techniques and sectors changing at an alarming rate. That’s creating tailwinds for cybersecurity companies.

As MRP noted in a May 2017 DIBs report, the web has become a new global battleground void of borderlines, and cybercrime is now BIG business. Cyber-espionage between governments and corporations has increased, phishing incidents are skyrocketing in frequency, and cyber-hijacking are part of the daily conversation. Not only is the volume of attacks rising, so too is the sophistication level of these hacks.

Cybercrime alone costs nations more than $1 trillion globally, far more than the record $300 billion of damage due to natural disasters in 2017. An attack on a computer processing or communications network could cause $50 billion to $120 billion of economic damage.

As such, cybersecurity has become a booming industry, providing private companies and government entities with blankets of protection -- monitoring networks, enhancing firewalls, implementing AI-fueled intrusion detection systems, and using complex cryptographic techniques to store data -– all to combat hackers.

Demand is such that the cybersecurity market is expected to grow from its current value of $153 billion to $248 billion by 2023. That presents a huge opportunity for major technology vendors in the market such as IBM, Symantec, Check Point Software Technologies, Cisco, Microsoft, F5 Networks, FireEye, McAfee, Oracle, Palo Alto Networks, Splunk and Trend Micro.

Several major forces are driving this growth, including increasing technology adoption around the world, cyberterrorism, the rise of Artificial Intelligence (AI) and connected devices, strict data-protection directives, as well as cloud-based business practices among SMEs. The industry is growing so fast that 3.5 million cybersecurity jobs are expected to be unfilled in 2021.

PARADIGM SHIFT TO CONNECTED DEVICES

The digital revolution, while exciting, has brought new challenges and risks to systems. Connected hardware and Internet-of-Things (IoT) devices are often used as entry points for malicious hacks. These days, cybercriminals can buy almost anything on the dark web -- from botnets and ransomware to voter records and hacking tools. In 2017, for example, one anonymous hacker offered more than 40 million U.S. voter registration records from at least nine states.

A study by AT&T found that only 10% of companies surveyed had proper security measures in place to protect against attacks launched through connected devices. This means medical data and digital medical devices are prone to advanced threats, as are the telecommunications, automotive, manufacturing, and finance sectors. In fact, Verizon’s 2018 Payment Security Report noted that compliance with payment security standards actually dropped for the first time in six years, making businesses more vulnerable to cybercrime.

PUBLIC & PRIVATE SECTOR CYBERINVESTMENT ON THE RISE

Meanwhile, governments are becoming more vocal in calling out the ever-increasing cyber threats to national security imposed by malicious nation-state, non-state, and independent actors. In August, the FBI issued a warning to banks about a pending large scale attack known as an ATM “cash-out” strike, in which waves of synchronized fraudulent withdrawals drain bank accounts. The previous month, it was revealed that hackers allegedly working for Russia had easily penetrated the control rooms of US electric utilities and could have caused blackouts.

This has spurred more action on the part of governments. Last week, the Trump administration unveiled a broad National Cybersecurity Strategy that will span multiple levels of government and myriad industries. While the Departments of Defense and Homeland Security already have specifically-tailored plans in place, this is the first major cybersecurity document to apply to the entire U.S. federal government. Additionally, Congress approved a $120 million funding package for the newly-created Office of Cybersecurity, Energy Security, and Emergency Response (CESER) whose mission is to protect critical infrastructure sectors from cyber threats.

Across the pond, the UK government is preparing to launch a new cyber warfare unit that will reportedly be funded to the tune of “hundreds of millions of pounds”. Even the small nation of Israel is emerging as an important international hub for cybersecurity, with an industry worth over $1.4 billion dollars and growing. Last year, investments in Israeli cybersecurity startups reached 801 million dollars, up 40% from 2016.

MALWARE EXTENDS EVEN TO CRYPTO-MINING

The most common types of cyberattacks typically come from viruses, spam and identity fraud, however, new forms are emerging all the time. Crypto-mining malware, for example, is a new factor on the threat landscape. After growing by around 400,000 samples in the fourth quarter of 2017, new cryptomining malware samples grew a stunning 629% to more than 2.9 million samples in Q1 2018. By the end of Q2, the number of malware samples had almost doubled to 5.4 million. Older malware are even being retooled with mining capabilities, making it much easier for a cybercriminal to mine cryptocurrency at little financial cost with just the help of botnets.

As the world continues to build connectivity infrastructure, and with the internet airwaves abuzz with ever increasing communication between people, governments and corporations, there will be a growing need for enhanced cyber-surveillance and cybersecurity techniques, both offensive and defensive.

Investors can gain exposure to the industry via the ETFMG Prime Cybersecurity ETF (HACK).

MRP launched Long Cybersecurity as a theme on January 18, 2017. On October 19, 2017, we closed the theme based on our belief that the thematic opportunity, having been well-publicized by the numerous high profile cyberattacks that hit organizations worldwide last year, was already priced into the market. Clearly, our theme closure was premature. Since October 19, 2017, HACK has risen 31% versus the SPY’s 13.31% gain over the same period. Most of that gain occurred this year.

We've also summarized the following articles related to this topic in the Technology section of today's report.

  • Cybersecurity: Trump Administration Moves to Address Cybersecurity Concerns, Congress Funds Cyber Programs
  • Cybersecurity: Britain preparing to launch new cyber warfare unit
  • Cybersecurity: Israel emphasizes role as international cybersecurity hub
  • Cybersecurity: Cryptocurrency mining malware increases 86%
  • Cybersecurity: The dark web is where hackers buy the tools to subvert elections
  • Cybersecurity: AT&T and Ericsson team up to improve ‘Internet of Things’ security

Chart: Cyber Security (HACK) vs S&P 500 (SPY)

Disruptive Change Updates

Markets

  • FX: Europe Finally Has an Excuse to Challenge the Dollar 
  • FX: Nafta Blowup Could Sink the Loonie by 10 Percent, JPMorgan Says

Politics & Policy

  • Sanctions: Trump promises sanctions on foreigners over US election meddling

Monetary Policy

  • Fed: Fed Raises Rates and Says More Coming, Brushing Off Trump Jabs

Finance

  •  THEME ALERT Banks: Meet the banks that are leading the flourishing deal market for pot stocks
  • CapEx: Tech Giants Spend $80 Billion to Make Sure No One Else Can Compete
  • Consumer Credit: As Fed Raises Rates, Consumers Have Yet to Feel the Sting
  • Fintech: JPMorgan’s $11bn fintech bazooka

Construction & Real Estate

  • Infrastructure: A tale of two harbours tells best and worst of China’s ‘Belt and Road’

Services

  • Delivery Apps: food app revolution will eat its drivers

Manufacturing & Logistics

  •  THEME ALERT Automation: A robot that can peel lettuce takes us closer to automating delicate farm work

Transportation

  • Aerospace: Japanese company ispace says it will launch two missions to the Moon in 2020 and 2021
  • EVs: California Weighs an Additional $2,000 Subsidy for Electric Cars

Commodities

  • Crops: ‘Big Opportunity’ Looms for Canadian Soybeans in U.S.-China Spat
  •  THEME ALERT Steel: Why Trump is reluctant to drop tariffs on Canadian steel — regardless of NAFTA outcome

Energy & Environment

  • Batteries: World Bank plans battery revolution in developing nations

Biotechnology & Healthcare

  •  THEME ALERT Pharma: Blockchain Hype May Finally Turn Into Reality in Pharmaceuticals
  •  THEME ALERT Pharma: Pharmacists May Soon Be Able to Tell You the Cheapest Way to Get Prescriptions

Endnote

  • Trade War: CEOs And Investors Sound Off On Tariffs

Joe Mac's Market Viewpoint Top ↑
 

U.S. Markets at Midyear

The U.S. capital markets had a challenging time in the first half of 2018. While the brouhaha about trade wars has been cited by experts as the cause of this year’s rise in volatility, MRP believes otherwise. Extended valuations, investor sentiment, portfolio leverage, an ageing bull market, inflation, and a Fed tightening cycle are all headwinds. In short, several large forces are at play and they will continue to pressure both equity and bond prices in the second half of this year.

Joe Mac's Market Viewpoint: U.S. Markets at Midyear →

Other Viewpoint Reports

Joe Mac's Market Viewpoint: CAPEX Booms! →

Joe Mac's Market Viewpoint: The Inflation Complication →

Joe Mac's Market Viewpoint: A Review of MRP Themes →

Joe Mac's Market Viewpoint: The Coming Value Rotation 

Current MRP Themes Top ↑
 

Autos (S) Electric Utilities (L) TIPS (L)
 
Long-Dated UST (S) Defense  (L) Industrials (L)
 
Materials (L) U.S. Financials & Regional Banks (L) ASEAN Markets (L)
 
Oil & U.S. Energy (L) France (L) Greece (L)
 
Palladium (L) U.S. Pharmaceuticals (S) Gold & Gold Miners (L)
 
Robotics & Automation (L) Video Gaming (L) Lithium (L)
 
Steel (L) Value Over Growth (L) Solar (L)
 
CRISPR (L) Obesity (L)

Major Data Points Top ↑
 

1.

Fed Hikes Rates as Expected

The Federal Reserve raised the target range for the federal funds rate by 25bps to 2 percent to 2.25 percent during its September 2018 meeting, in line with market expectations. GDP growth forecasts for 2018 were raised to 3.1 percent from 2.8 percent in the June projection and for 2019 to 2.5 percent from 2.4 percent. 2020 forecast was left steady at 2 percent. The unemployment rate is seen higher at 3.7 percent in 2018 (3.6 percent in the June projection) and at 3.5 percent in both 2019 and 2020 (the same as in June). PCE inflation forecasts were left steady at 2.1 percent for 2018, eased to 2 percent from 2.1 percent in 2019 and unchanged at 2.1 percent in 2020. Policymakers expect one more rate hike this year, 3 increases in 2019 and 1 in 2020, in line with previous expectations. TE

2.

US Crude Oil Stocks Rise Unexpectedly

Stocks of crude oil in the United States rose by 1.852 million barrels in the week ended September 21st 2018, following a 2.057 million drop in the previous week and compared with market expectations of a 1.279 million decrease. Meanwhile, gasoline inventories increased by 1.530 million barrels while markets expected a 0.788 million gain. TE

3.

US New Home Sales Rebound

Sales of new single-family houses in the United States jumped 3.5 percent from the previous month to a seasonally adjusted annual rate of 629 thousand in August of 2018, following a downwardly revised 1.6 percent drop in July. It compares with market expectations of a 0.5 percent rise to 630 thousand. Sales jumped in the Northeast but fell in the South. TE

Disruptive Change Updates Top ↑
 

Markets

FX: Europe Finally Has an Excuse to Challenge the Dollar

With more and more European companies fleeing Iran following the re-imposition of U.S. sanctions, it may be tempting for Americans to write off Europe’s efforts to save the Iran nuclear deal. It would be wiser to resist the temptation. A new plan by Germany, France, Britain, China and Russia to create special financial infrastructure to work with Iran could be a credible challenge to the U.S. dollar’s long global dominance.

Federica Mogherini, the European Union’s top foreign-policy official, said in New York on Monday that the plan to create a “special purpose vehicle” for trade with Iran “will mean that EU member states will set up a legal entity to facilitate legitimate financial transactions with Iran, and this will allow European companies to continue trade with Iran.” The technical details are still to be worked out, but her wording provides some useful hints on how the scheme will work.

Whether or not the “special purpose vehicle” would entice European companies such as France's Total or Germany's Daimler to get back into business with Iran remains to be seen. Given U.S. law enforcement’s wide reach, there would still be a risk involved, and European governments may not be able to protect the companies from it. Some firms will be tempted to try the new infrastructure, however, and the public isn't likely to find out if they do.  In any case, it’s worthwhile for Europe, Russia and China to experiment with dollar-free business. B

FX: Nafta Blowup Could Sink the Loonie by 10 Percent, JPMorgan Says 

Should the U.S. follow through on threats to withdraw from the North American Free Trade Agreement, the Canadian dollar would absorb much of the blow. That’s the view of JPMorgan Chase & Co., who forecast that the loonie could crumble nearly 10 percent against the dollar in the worst case “NoFTA” scenario. A U.S. withdrawal would likely entail 25 percent tariffs on autos and dairy, disrupting supply chains and forcing the Bank of Canada to slash interest rates, according to analysts including Daniel Hui.

Fitch Ratings echoed JPMorgan’s concerns in a report on Monday, writing that a “significant tariff or trade shock” could lead the BOC to pause raising rates in order to help borrowers.

The dollar has gained nearly 3 percent this year against the loonie, trading at C$1.2946 as of 10:38 a.m. in New York. Should negotiations produce a reaffirmed basic trilateral agreement --- JPMorgan’s “best case” scenario -- the loonie could strengthen to C$1.24, the analysts wrote.

While the U.S. and Mexico pursue a bilateral trade deal, Canadian Foreign Minister Chrystia Freeland left Washington last week without a resolution. U.S. trade adviser Peter Navarro said Tuesday that he expects Congress to take up the Nafta deal after the U.S. midterm elections, regardless of the outcome of the November vote. B


Politics & Policy

Sanctions: Trump promises sanctions on foreigners over US election meddling

President Donald Trump has authorised the imposition of sanctions on foreigners accused of interfering in US elections, just two months after he sparked outrage by accepting the denial from Vladimir Putin that Russia had not meddled in the 2016 presidential race. Mr Trump signed an executive order mandating automatic sanctions in cases where America concludes that a foreign person or power has tried to manipulate US elections through direct interference or by disseminating propaganda or disinformation.

Since assuming office, Mr Trump has been under constant pressure to take action to tackle foreign interference in the democratic process in the wake of the conclusion by US intelligence agencies that Russia meddled in the 2016 election to help him beat Hillary Clinton. Mr Trump has repeatedly cast aspersions on that conclusion, partly because he believes it undermines the legitimacy of his surprise victory in 2016.

Dan Coats, the director of national intelligence, who briefed reporters with Mr Bolton, said the policy was not just aimed at Russia, explaining that Washington had also seen signs of interference from China, Iran and North Korea. FT


Monetary Policy

Fed: Fed Raises Rates and Says More Coming, Brushing Off Trump Jabs 

Federal Reserve officials raised interest rates for a third time this year and reaffirmed their outlook for further gradual hikes well into 2019, risking fresh criticism from President Donald Trump. The quarter-point increase boosted the benchmark federal funds rate to a target range of 2 percent to 2.25 percent. The move reflected an upbeat assessment of the economy that was identical to the central bank’s last policy statement eight weeks ago, despite concerns over Trump’s escalating trade war.

Growth and job gains have been “strong” and inflation remains near the central bank’s 2 percent target, the Federal Open Market Committee said in its statement Wednesday following a two-day meeting in Washington. Barring a negative surprise in the economy, updated “dot plot” forecasts made a December rate hike almost certain, as the number of FOMC officials expecting another increase by year-end grew to a bigger majority of 12, from eight in the previous round of projections in June.

In the statement’s only change from the previous one issued Aug. 1, the committee dropped its long-standing description of monetary policy as “accommodative.” That’s an acknowledgment rates have moved closer to the neutral level which neither boosts nor restrains the economy. B


Finance

Banks: Meet the banks that are leading the flourishing deal market for pot stocks

Amid the recent volatility in pot stocks, there is one group that appears to be capitalizing on the cannabis industry: the banks advising on a flourishing deal market for these companies.

About $582 million has been raised for cannabis companies through initial public offerings to date, while nearly $8 billion in mergers and acquisitions have been inked, according to data provided by Dealogic. An even greater number of deals have been done through less-traditional methods, such as reverse mergers and private placements.

That has been a boon to Canadian banks, in particular. Firms from Canada don't typically appear at the top of the so-called league tables — the quarterly and annual rankings of investment banks based on the amount of fees they generate from deals — as those spots are typically taken by large U.S. banks like Goldman Sachs and J.P. Morgan. But when it comes to the cannabis industry, Canadian banks like Canaccord Genuity and BMO Capital Markets hold the highest rank, according to Dealogic.

Part of that has to do with the size of the deals — they're still relatively small and don't always capture the attention of the larger American banks. But even the bigger deals tend to be managed by Canadian firms, thanks to the lack of regulatory risk those firms face. CNBC

CapEx: Tech Giants Spend $80 Billion to Make Sure No One Else Can Compete

Google parent Alphabet Inc. and the other four dominant U.S. technology companies—Apple, Amazon.com, Microsoft, and Facebook—are fast becoming industrial giants. They spent a combined $80 billion in the last year on big-ticket physical assets, including manufacturing equipment and specialized tools for assembling iPhones and the powerful computers and undersea internet cables Facebook needs to fire up Instagram videos in a flash.

Thanks to this surge in spending—up from $40 billion in 2015—they’ve joined the ranks of automakers, telephone companies, and oil drillers as the country’s biggest spenders on capital goods, items including factories, heavy equipment, and real estate that are considered long-term investments. Their combined outlay is about 10 times what General Motors spends annually on its plants, vehicle-assembly robots, and other materials.

The splurge by tech companies is behind an upswing in capital-goods spending among big U.S. companies, which is seeing its fastest growth in years, according to a Credit Suisse analysis. The $80 billion tab also is a snapshot of why it’s tough to unseat the tech giants. How can a company hope to compete with Google’s driverless cars when it spends $20 billion a year to ensure it has the best laser-guided sensors and computer chips? There are a lot of physical assets behind all those internet clouds. B

Consumer Credit: As Fed Raises Rates, Consumers Have Yet to Feel the Sting

U.S. consumer borrowing costs have drifted higher in recent months ahead of the Federal Reserve’s likely decision Wednesday to raise short-term interest rates, though the increases have generally been modest. Average rates for credit cards, 30-year mortgages, auto loans and home-equity lines of credit have all risen since June 13, when the central bank announced a quarter-percentage-point increase in its benchmark rate and penciled in two more such moves this year.

The rate on a 30-year fixed-rate mortgage averaged 4.65% last week, up from 4.54% on June 7, and it is now at the highest level since 2011, according to Freddie Mac. Variable rates on credit-card debt averaged 17.31% last week, compared with 17% on June 6, according to Bankrate.com. Average rates on 5-year new car loans were 4.80% last week, compared with 4.71% on June 6.

The Fed’s benchmark rate influences many others throughout the economy, but consumer borrowing costs are ultimately set in the markets based on a variety of factors. In some cases, consumer rates have been restrained by competition among lenders jockeying for market share in a booming economy. Also, new technologies have made it easier for consumers to apply for financing and compare rates quickly. WSJ

Fintech: JPMorgan’s $11bn fintech bazooka

The resulting $10.8bn tally for this year — which is roughly split 50/50 between “change the bank” and “run the bank” spend — has helped JPMorgan position itself at the vanguard of innovation and to instil awe and envy in many rivals. JPMorgan’s fintech spend has to, of course, be viewed in the context of its size. Only the big Chinese banks and HSBC — which recently announced plans to spend $15bn-$17bn over three years mostly on technology — can match JPMorgan’s $2.6tn of assets.

Spending on technology by banks in the Americas, Europe and Asia-Pacific is forecast to increase 4.2 per cent this year to just over $261bn, of which 45 per cent is in North America and only 32 per cent in Europe. Banks in Europe are particularly attuned to how heavily they are being outspent; Deutsche Bank’s entire non interest cost base last year was less than $30m, UBS’s 2017 operating expenses were less than $25m, Credit Suisse’s were below $18.5m, of which about $3bn is spent on technology.

JPMorgan employs 50,000 technology specialists — or a fifth of its total workforce — and has claimed some eye-catching firsts, including using artificial intelligence to execute securities trades. Investments in technology allowed the bank to launch a low cost digital share trading platform last month, which is helping it counter the threat from online brokerages like Charles Schwab and commission-free upstarts like Robinhood. FT


Construction & Real Estate

Infrastructure: A tale of two harbours tells best and worst of China’s ‘Belt and Road’

The story of two ports oceans apart captures the conflicting narratives of the Belt and Road Initiative, China’s scheme to finance and build infrastructure in more than 80 countries. The benign storyline comes from Piraeus, a Greek harbour so revitalised by Chinese investment it has leapt from the world’s 93rd largest container port in 2010 to 38th last year. Not content with these results, Cosco Shipping, the Chinese company that bought Piraeus, now intends to make it the largest port in the Mediterranean in 18 months, overtaking Spain’s Algeciras and Valencia.

But on the south coast of Sri Lanka, a darker narrative is evident. The port of Hambantota, which cost $1.3bn to build using finance from Chinese state-owned lenders, struggled for years under losses so heavy the Sri Lankan government eventually gave up bankrolling it. In 2017, Colombo handed it over to Chinese control on a 99-year lease in spite of public protests. As the deal went through, Namal Rajapaksa, Hambantota’s MP and son of former president Mahinda Rajapaksa, tweeted: “Government is playing geopolitics with national assets? #stopsellingSL.”=

Hambantota and Piraeus represent extremes of the grand design that Xi Jinping, China’s leader, describes as “the project of the century”. The ports’ divergent fates frame the BRI experiences of many countries, dividing opinion between those that see the scheme as furnishing much-needed infrastructure and others who view it more as a geostrategic ploy by China to gain influence by plunging developing countries into debt. FT


Services

Delivery Apps: food app revolution will eat its drivers 

Uber Eats drivers protested outside its office in east London last week at a reduction in the basic rate for delivering each meal. Since the platforms treat drivers as self-employed contractors rather than as direct employees, they can change terms easily. Casting off responsibility is, as the technology industry would say, a feature not a bug. GrubHub, the US food platform, defeated a claim from a former driver for employment rights in a California court in February by proving that it exercised little control over him.

Not offering employment benefits such as sick pay and paid leave reduces labour costs by an estimated 20 to 30 per cent, but the industry remains ripe for cost-cutting and rationalisation. One obvious inefficiency is the need to collect meals from widely dispersed restaurants rather than placing kitchens in hub and spoke networks, as Amazon does with warehouses. The next step is “dark kitchens”— facilities detached from restaurants that prepare meals centrally. Deliveroo has been building these in car parks and offices, calling them “hubs where we host collections of handpicked restaurants”. But the ultimate cost-efficient dream of delivery companies is large logistics hubs, with meals cooked by robots and delivered by air in drones. FT


Manufacturing & Logistics

Automation: A robot that can peel lettuce takes us closer to automating delicate farm work

There are lots of barriers to automating agricultural work. The cost of robots is one and the difficulty of integrating them into supply chains is another. But a particularly big stumbling block is just how clumsy machine labor can be. That’s why new research from Cambridge University showing a robot that can peel a lettuce is a small but significant step forward.

Interestingly, unlike other work we’ve seen improving robot dexterity, this doesn’t rely on any research breakthroughs per se, but instead combines existing robotics and AI elements into a new pipeline. Machine vision algorithms are used to identify the stem of the lettuce; a robot arm nudges it into the correct position if its off-center; and a 3D-printed suction nozzle then peels off the outer layer of leaves.

However, this robot is still going to need some upgrades before it hits the fields. It’s slow, taking 27 seconds to peel each lettuce (compared to just a few seconds for a human) and sloppy (it successfully removes the outer shell only 50 percent of the time). Still, the future is coming, and faster than ever. Verge


Technology

Cybersecurity: Trump Administration Moves to Address Cybersecurity Concerns, Congress Funds Cyber Programs

On September 21, 2018, the Trump Administration released a National Cybersecurity Strategy (“Strategy”), to define its national cybersecurity policy and implement efforts to streamline responsibilities for mitigation and responses to cybersecurity events across federal agencies.  This Strategy also addresses working with the private sector to protect assets, train the workforce and mitigate any future cyber-attacks.

The National Cybersecurity Strategy, a statement of Administration policy rather than a Presidential directive, builds on prior efforts by the Obama Administration to develop a comprehensive and coherent nationwide strategy to promote cybersecurity across multiple levels of government and among myriad industries.  While other agencies—notably the Departments of Defense and Homeland Security—have issued more narrowly-tailored plans and policies, this is the first major cybersecurity document to apply to the entire federal government.   The Strategy provides an important glimpse into the current Administration’s plan to address the ever-increasing cyber threats to national security imposed by malicious nation-state, non-state, and independent actors.

Specifically, the Strategy identifies four major areas of focus that may be of interest to stakeholders: Supply Chain Risk Management; Strengthening Information Sharing Efforts; Building a Robust Cybersecurity Workforce; Deterrence and Offensive Capabilities.

The Strategy is the first step for the Administration to define broader cybersecurity threats and begin to develop a cohesive plan to combat cyber-attacks.  The document itself does not contain many specific imminent actions that the Administration will take and questions remain over who within the Trump Administration is personally responsible for coordinating these and other cybersecurity efforts. NLR

Cybersecurity: Britain preparing to launch new cyber warfare unit

The UK is preparing to launch a new cyber warfare unit to counter the increasingly hostile online actions of adversaries including Russia, North Korea and Iran. The plans have been held up for months amid wrangling over funding and which part of the government should have ultimate command of the unit, but officials said final agreement on the proposed cyber force was close. Two people with knowledge of the plans said the unit would involve more than 2,000 operatives drawn from the UK’s spying agency GCHQ and Britain’s armed forces.

The new unit would expand on the UK’s national offensive cyber programme, a joint initiative comprising about 500 officers from the Ministry of Defence and GCHQ, and run out of the spying agency’s Cheltenham headquarters. The cyber force would be funded to the tune of “hundreds of millions of pounds”, said one official, although others stressed the final details were still being worked on.

Prime minister Theresa May and her national security adviser Mark Sedwill have made cyber a priority, especially in the wake of a nerve agent attack on the Russian double agent Sergei Skripal in Salisbury.

Analysts said the UK was one of the most effective players in cyber warfare, even without the proposed new unit. FT

Cybersecurity: Israel emphasizes role as international cybersecurity hub 

Israeli Ambassador to Italy Ofer Sachs, speaking at the Cybertech Europe conference, said his country is among those receiving the most cyberattacks worldwide. "It's no secret who our main enemies are.” ”Two years ago the Israeli government decided to make cybersecurity an important part of our efforts," Sachs said, adding that Israel has become a very important international hub for cybersecurity over the past 20 years. The press conference was sponsored by the Israeli Embassy, the Israeli Economy Ministry, and the Israel Export Institute.

Yaara Sabzerou of the Israel Export Institute said 2017 data showed that the industry in Israel is worth 1.4 billion dollars, with a slight increase expected in 2018. In the first six months of 2018, Israel led the pack in cybersecurity investments from international venture capital funds, in the millions, foreshadowing a growing trend.

Israeli computer-security startups raised 801 million dollars in 2017, representing a 40% increase in terms of money raised and a 19% growth in terms of the number of investments on 2016, when investments totaled 571 million. Three Israeli startups - Be-Strategic Solutions, Pcysys and Silverfort - were presented during the press conference. The startups represent diverse strategic solutions in terms of identifying and mitigating cyber threats and defence in critical infrastructures. ANSA

Cybersecurity: Cryptocurrency mining malware increases 86%

McAfee released its McAfee Labs Threats Report September 2018, examining the growth and trends of new cyber threats in Q2 2018. In the second quarter, they saw the surge in cryptomining malware growth that began in Q4 2017 continue through the first half of 2018. McAfee also saw the continued adaptation of the type of malware vulnerability exploits used in the WannaCry and NotPetya outbreaks of 2017.

Although less common than ransomware, cryptomining malware has quickly emerged as a factor on the threat landscape. After growing around 400,000 in the fourth quarter of 2017, new cryptomining malware samples grew a stunning 629% to more than 2.9 million samples in Q1 2018. This trend continued in Q2 as total samples grew by 86% with more than 2.5 million new samples. McAfee Labs has even identified what appear to be older malware such as ransomware newly retooled with mining capabilities.

A few years ago, we wouldn’t think of internet routers, video-recording devices, and other Internet of Things devices as platforms for cryptomining because their CPU speeds were too insufficient to support such productivity. Today, the tremendous volume of such devices online and their propensity for weak passwords present a very attractive platform for this activity. It would cost a cybercriminal who owns a botnet of 100,000 such IoT devices next to nothing financially to produce enough cryptocurrency to create a new, profitable revenue stream. HNSec

Cybersecurity: The dark web is where hackers buy the tools to subvert elections              

Voter data and the digital weapons hackers use to subvert elections are bought and sold daily on a corner of the internet known as the dark web. It is a network of websites that is tough to access but functions much like the internet we use every day. You can buy everything from guns and drugs to botnets and ransomware. And cyber-criminals can purchase voter records and hacking tools.

"Voter and consumer data ends up on the dark web through a number of paths," says TechRepublic staff writer Alison DeNisco Rayome. "Sometimes it's after the breach of a major company, as we saw with Equifax, when a criminal takes advantage of security flaws in a corporate system and gains access to employees' or customers' personally identifiable information, including names, Social Security numbers, and addresses." When companies like Equifax or government agencies like the Office of Personnel Management (OPM) are hacked, the data is usually sold in dark web forums. Voter data is particularly cheap, says Rayome.

In 2017, one anonymous hacker offered more than 40 million voter registration records from at least nine states. Hackers sold copies of the Arkansas and Ohio databases for just $2 each. This year, thousands of voter records from a robocall firm were leaked to the dark web. CBS

Cybersecurity: AT&T and Ericsson team up to improve ‘Internet of Things’ security 

IoT devices are often used as entry points for malicious hacks in the corporate sector, so AT&T and Ericsson have teamed up to help improve Internet of Things, or IoT, security across the board. According to a press release issued by AT&T, less than 10 percent of the companies surveyed had proper security measures in place to protect against attacks launched through connected hardware.

The goal of this partnership is to pinpoint weak points in connected devices that could be used to access proprietary information or gain entry into the company network. Once the threat is identified, businesses can respond with the appropriate security measures. AT&T and Ericsson’s service is offered through the Cybersecurity Certification Program from the CTIA, a nonprofit trade organization that represents the wireless communications industry within the United States.

At the moment, Ericsson is the only network equipment provider accredited as a CTIA Test Lab for Cybersecurity Certification. The move to implement better cybersecurity in businesses will cover everything from body cameras to medical devices and utility meters. Any device that can be used as an entry point into a network or that otherwise represents a vulnerability will be tested and safeguarded. DT


Transportation            

Aerospace: Japanese company ispace says it will launch two missions to the Moon in 2020 and 2021

A Japanese company with hopes of exploring the Moon says it has purchased room on two upcoming flights of SpaceX’s Falcon 9 rocket in order to transport spacecraft to the lunar surface. These missions, slated for 2020 and 2021, are meant to serve as crucial technology demonstrations for the company, called ispace, which has grander ambitions of becoming a lunar delivery service one day.

The first of ispace’s two missions entails putting a spacecraft into orbit around the Moon. If that is successful, then the company will launch its second mission — one that includes a lunar lander and rovers to explore the Moon’s surface. All of ispace’s hardware will ride as secondary payloads on the Falcon 9 flights; that means they will hitch rides on the larger vehicles that are launching to space and deploy separately. The rockets will drop off the spacecraft in a high orbit above Earth, and the vehicles will cruise the rest of the way to the Moon.

ispace, which has headquarters in Japan, Luxembourg, and the US, has raised nearly $95 million, and it will use that money to help fund these first two Falcon 9 flights. Eventually, ispace hopes to create a sustainable space infrastructure by delivering instruments to the Moon for customers, as well as utilizing water found on the Moon as a resource for future space travel. Verge

EVs: California Weighs an Additional $2,000 Subsidy for Electric Cars 

California will hold a hearing this week on offering a $4,500 subsidy for each pure electric vehicle sold in the state, up from the current $2,500, even as customers from Tesla Inc. and General Motors Co. face the loss of even bigger federal credits. The federal government now offers a $7,500 tax credit on electric vehicles sold. The credit is designed to start ratcheting downward once the companies have grown enough to sell a total of 200,000 vehicles each. Tesla passed this threshold in July and GM is getting close.

The higher California rebates come as President Donald Trump is arguing that only the federal government can regulate tailpipe emission standards or mandate electric-car sales. Last month, the president also proposed freezing federal fuel economy requirements at 37 miles per gallon in 2020, instead of letting them rise to 47 mpg by 2025 as planned by former President Barack Obama. This would also freeze greenhouse gas limits, but so far, California is refusing to back down.

At this week’s hearing, the board will consider requiring oil companies to cut carbon intensity by 20 percent by 2030, compared with 2010 levels, from a 5 percent reduction mandated this year. B


Commodities

Crops: ‘Big Opportunity’ Looms for Caadian Soybeans in U.S.-China Spat 

Canada, a relatively modest participant in the global soybean market, is poised to leap into the fray with a chance to boost exports to China, which has shunned shipments from the U.S. amid an escalating trade war. The conflict between China, the world’s top soybean consumer, and the U.S., the biggest exporter behind Brazil, means traditional trading patterns have gone haywire. Argentina, the leading shipper of soybean meal, took the unusual step of buying the oilseed from the U.S. to meet domestic demand while shipping its own crop to China. That shift may also occur in North America.

Brokers such as Johnston’s Grain are looking at importing cheap U.S. soybeans into Canada for processing, and exporters may explore ‘arbitrage opportunities’ for shipment overseas. Prices for U.S. soybeans have plunged as demand from China declined and a bumper harvest looms.

In the past two decades, Canada became the fifth-largest soybean exporter as farmers expanded acreage. Overseas sales are a fraction of the 75 million metric tons from Brazil and 56 million tons from the U.S. forecast to be shipped during the 2018-2019 crop year, according to the U.S. Department of Agriculture. B

Steel: Why Trump is reluctant to drop tariffs on Canadian steel — regardless of NAFTA outcome

If landing a new North American Free Trade Agreement has been a tough haul for Canada, securing a permanent exemption from U.S. President Donald Trump’s steel tariffs may prove even harder. Doubts about how the newly-booming American steel industry will fare without tariffs, combined with Trump’s penchant for wielding them as leverage in trade talks suggest the U.S. will be reluctant to simply drop them without insisting on quotas, analysts say.

“It will be very difficult to get rid of those tariffs now especially with a president like Trump who really believes in them,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington, D.C. “That means even if he agrees to remove them he’ll just change them into quotas. Canada won’t like it but it’s better than a kick in the pants.”

Though the U.S. initially exempted Canada and Mexico from blanket tariffs of 25 per cent on steel imports and 10 per cent on aluminum, Trump allowed those reprieves to expire on June 1 pending the outcome of the NAFTA talks. That prompted Canada to immediately hit back with retaliatory tariffs on $16.6 billion worth of American steel, aluminum and a range of other goods. FP


Energy & Environment

Batteries: World Bank plans battery revolution in developing nations 

The World Bank plans to back a “transformative” expansion in the market for batteries used on power grids, with the aim of stimulating new products and applications to meet the need for energy storage in developing countries. The bank said on Wednesday it would lend $1bn from its own resources and draw in a further $4bn from public and private sector investors, to bring about a fourfold increase in developing countries’ battery storage capacity.

Most large lithium-ion batteries produced today go into electric vehicles, but their falling costs have meant they are increasingly becoming economically viable as ways to provide services to electricity grids and consumers.

The cost of battery storage is typically much higher in developing countries, at about $400 to $700 for a kilowatt hour, compared with about $300 a kWh in developed countries. The bank aims to support investment in 17.5GWh of new batteries in developing countries by 2025, roughly quadrupling their capacity.

The bank’s $1bn of lending will be targeted at improving grid connections and regulatory systems, as well as financing the batteries themselves. The storage could be linked to renewable energy developments, connected to electricity networks or “mini-grids”, or in standalone systems. FT


Biotechnology & Healthcare

Pharma: Blockchain Hype May Finally Turn Into Reality in Pharmaceuticals

Blockchain believers have delivered little more than hype, mostly failing to get it deployed outside the cryptocurrency space where the technology was developed. But a little-noticed U.S. law could change that, bringing the ledger system to the pharmaceutical business. The Drug Supply Chain Security Act from 2013 requires drug companies and their supply-chain partners to more closely track where their finished products are shipped, making counterfeit medicines harder to sneak into the system and easing drug recalls.

By 2020, pharmacies and hospitals must be able to verify that the drugs they’re dispensing came from manufacturers or repackagers, which divvy up huge batches of pharmaceuticals into the actual bottles that get distributed in pharmacies or hospitals. While pharma giants are still evaluating how to comply, health-care analysts says the impeding deadline is leading firms to seriously consider the blockchain, since it’s designed to create detailed and immutable databases.

The Center for Supply Chain Studies has been conducting studies and trials with drug manufacturers, distributors and pharmacies since 2017 to assess how blockchain can meet the law’s requirements, according to Robert Celeste, founder of the organization. Plugging tens of thousands of American pharmacies into a drug-tracking database is a huge challenge, and a blockchain is an attractive way to simplify that, Celeste said. B

Pharma: Pharmacists May Soon Be Able to Tell You the Cheapest Way to Get Prescriptions

A bill backed by President Donald Trump that will allow pharmacists to tell patients about the cheapest way to pay for prescription drugs at the counter won approval in the House of Representatives Tuesday. The legislation, already passed by the Senate, bars insurers and pharmacy-benefit managers, or PBMs, from prohibiting pharmacists from telling patients they could potentially save money by paying cash instead of an insurance copayment.

The bill was introduced in response to a PBM industry practice called clawbacks. That happens when a patient goes to pick up a drug at the pharmacy and hands over a copayment set by their PBM that’s bigger than the actual cash cost of the drug. The PBM ultimately pockets the difference. Most patients never realize there’s a cheaper cash price because of clauses in contracts between pharmacies and PBMs that bar the drugstore from telling people there’s a cheaper way to pay. Critics call it a gag clause.

“Insurance is intended to save consumers money,” Senator Susan Collins, a Republican from Maine and a bill co-sponsor, said in a statement Tuesday. “Who would think that using your debit card to buy your prescription drugs would be less expensive than using your insurance card? It’s counterintuitive.” B


Endnote

Trade War: CEOs And Investors Sound Off On Tariffs

As trade wars heat up, execs and analysts are speculating about what the effects could be. Tariff and trade war talk on earnings calls hit an all-time high last quarter. CBI

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