18 NOV 16 – Executive Intelligence Summary

EXECUTIVE INTELLIGENCE SUMMARY – 18 November 16 🔒

In this EXSUM… (3755 words)

• Russia & China SITREPs
• Leftist insurgency: evidence of 7 out of 20 indicators
• Michigan utility pays $25k to ransomware hackers
• Chinese tech poses security, privacy threats to US consumers
• BAH: Cyber intrusions against ICS steadily increasing
• Outgoing Obama warns of the potential for WW3, US civil war
• Soros & Co plot future of political resistance
• DHS likely to grow as government shrinks under Trump
• And more…

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Bottom Line Up Front:  As expected, we’re seeing the left ramp up protests, riots, and political resistance in response to Trump’s election victory.  Based on a few instances of Black Lives Matter groups advising their members to purchase firearms, I flipped open one of my old manuals on insurgency to see a list of early warning indicators of revolution.  Of the 20 indicators listed, I’ve identified evidence of seven in the past week.

Are we headed towards a domestic conflict?  I do expect a low-level conflict of mass protests and widespread unrest.  Inauguration day is set up for large protests in Washington, D.C., and the Secret Service and other agencies are likely to have their hands full.  I’ll continue to monitor indicators that lead to organized political violence, but I’d like to ask for your help.  I’ll be announcing this project after Thanksgiving, and will be taking volunteers who want to pitch in, similar to Operations Urban Charger (Ferguson riots) and North Coast (GOP Convention riots).  Our job specifically will be to search out evidence of indicators that increasingly could lead to organized political violence, which is the polite way of saying insurgency, resistance, or revolution.

Until then, here are the seven indicators I’m seeing, to one degree or another:

• Dissatisfaction with political, economic, social administrative, and/or other conditions; national aspiration (independence) or desire for ideological and other changes
• Creation of atmosphere of wider discontent through propaganda, lies, and political and psychological effort; discrediting government, police, and military authorities
• Forming favorable public opinion (advocating national cause), creation of distrust of established institutions
• Increased agitation, unrest, and disaffection; infiltration of administration, police, and military and national organizations, and slowdowns and strikes
• Recruitment of like-minded individuals and others; indoctrination and use of these for organizational purposes
• Penetration into professional, social, and political organizations and into all parts of society
• Spreading subversive organizations into all sectors of life in a country/region

We will probably observe many of these indicators grow in intensity as we move closer to 20 January 2017.  Until then, I’ll be at my desk tracking this burgeoning potential insurgency.  If I see it moving towards organized political violence, then you’ll be the first to know.  If this movement begins making significant strides towards the remaining 13 indicators, which include overt military or para-military actions, then I’ll start filing regular reports.

Thank you for your support.  – SC

 

Priority Intelligence Requirements:

PIR1: What are the current indicators of systems disruption that could lead to a SHTF event?

PIR2: What are the current indicators of an outbreak of global conflict?

PIR3: What are the current indicators of military, government, political, or social-related instability or violence that leads to widespread domestic conflict?

PIR4: What are the current indicators of economic, financial, or monetary instability that leads to civil unrest?

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PIR1: What are the current indicators of systems disruption that could lead to a SHTF event?

Michigan utility pays $25k to ransomware hackers

The Lansing Board of Water & Light paid $25,000 to hackers that took control of internal communications computers using ransomware.  Ransomware is a popular method for hackers to extort payments from organizations (like schools and hospitals, as we’ve reported in this EXSUM) after computers are infected.  Typically, an employee opens an email attachment containing the malware, which begins the process of encrypting a computer.  Users are then presented with a message to pay the ransom through a Bitcoin payment, and then hackers will decrypt the computer.  Typically, paying the ransom is more time- and cost-efficient than waiting weeks or longer for the FBI to come up with a solution.  According to the Lansing Board of Water & Light, services to customers were not disrupted during the ordeal, however, major systems disruption could occur in a future case of ransomware.

 

Chinese tech poses security, privacy threats to US consumers

A few weeks ago I reported that Chinese tech giant Huawei announced its plans to introduce a smart phone to US consumers.  The overall trend was that, as China grows, we can expect more competition in US markets from Chinese companies vying to expand their global market share.  As is often the case, anything produced by Chinese companies comes with significant caveats.  In the electronics sector, that increasingly includes backdoors and other measures to increase their access to data coming from the US.  The NY Times reported that, “Security contractors recently discovered preinstalled software in some Android phones that monitors where users go, whom they talk to and what they write in text messages. The American authorities say it is not clear whether this represents secretive data mining for advertising purposes or a Chinese government effort to collect intelligence.”  The bottom line is that if it comes out of China — a nation that directs one-half to two-thirds of its espionage activities towards economic and industrial targets — it’s a safe bet that its electronics are supporting more than the Chinese economy.

 

BAH: Cyber intrusions against ICS steadily increasing

According to a Booze Allen Hamilton presentation published over the summer, there was a 20 percent yearly increase in the number of cyber exploitation cases against industrial control systems (ICS).  These ICS components control everything from power plants and water systems, to steel mills, factories, and other critical infrastructure.  There were 295 such reported US cases in 2015, and that number is expected to grow.  The danger here is that state-sponsored or criminal hacker groups can sit inside these ICS computers to monitor and collect operations traffic.  When a conflict does heat up, such as a war with China or Iran, these groups can take control of or shut down ICS components to disrupt critical infrastructure.  And we know that state-sponsored hacking groups from Russia, China, and Iran are currently sitting on these systems, although in most instances they go undetected.  That forms a large basis for my opinion that we’re likely to incur domestic systems disruption in the event of a conflict with those powers.  Systems disruption is the number one domestic threat we face right now.

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PIR2: What are the current indicators of an outbreak of global conflict?

The prospects of global conflict continue to revolve around the usual players: Russia, China, and the Middle East. The ways in which global conflict could cause or contribute to a SHTF scenario in America are myriad and they largely depend on which conflict is initiated. We’re certainly at risk of cyber attack in the event of conflict in any of the three regions. Systems disruption, like the price and availability of fuel, is also a top concern that could cause a SHTF event.

NATO-Russia Situation Report (SITREP)

As talks of World War III cool in the wake of a Trump victory, Europe’s nerves are certainly still on edge.  First, there’s the big question over just how dedicated Trump is to NATO, and second, NATO member states still believe they’re staring a Russian conflict in the face (which they undoubtedly are).  NATO’s secretary general this week stated his confidence that President-elect Trump was still ‘committed’ to NATO; that presumably includes fulfilling US obligations under the mutual defense pact referred to as Article V.  And NATO member nations, especially those within Russia’s striking distance in eastern Europe, are continuing on as if America had not had an election.  The trend of defense acquisitions and strategic troop placement continues unabated.

In the past month, we’ve seen Baltic nations increase their irregular defense components, such as militias and partisans, to resist Russian invasion.  And this week, Poland announced the creation of a new defense force, similar to the US National Guard, numbering around 53,000 volunteers to be operational by 2019.  NATO member states are still serious in their expectations of a conflict with Russia, and for good reason.  I can understand mixed emotions about Russia; whether they’re a friend or foe.  The truth is more nuanced because they’re likely both simultaneously.

We shouldn’t forget that one of Vladimir Putin’s end state goals is the dissolution of NATO and the ejection of US military power and influence from Eurasia.  Putin is overseeing Russia’s aspiring rise to global superpower status, and that doesn’t happen with a US superpower still sitting in their backyard.  European nations like Germany, France and others will be challenged to limit or prevent Russian influence in their upcoming 2017 elections.  My particular opinion is that Russia did influence US elections through the release of damning information about the Clinton cabal.  And Russia has a storied history of manipulating public opinion across Europe to ensure election outcomes favorable to Russian interests.  (As does the US; turnabout is fair play.)  The Kremlin actively funds French nationalist political party, National Front, and there are likely others across Europe also receiving funding and positive media coverage from Russian information arms.

In military news, the Russian Ministry of Defense deployed a regiment of Sukhoi-35C fighters to its Western Military District, which borders Scandinavian and Baltic nations.  (The Sukhoi-35C is Russia’s lower-tier version of the American F-35 Joint Strike Fighter.)  In addition to continuing the placement of air assets to combat NATO, Putin announced this week the formation of a combined joint force with Armenia, which sits strategically south of the Republic of Georgia and east of Turkey, further cementing Russian force projection in the region.  This follows the deployment of Iskander short-range ballistic missiles to Armenia, which can be armed with nuclear warheads, and a joint Russian-Armenian air defense cooperation pact.  And Ukrainian president Lukashenko was quoted this week as saying he was concerned about reports of arms smuggling from Ukraine to Belarus, another Russian ally in the potential NATO-Russia conflict.

At this point, Russia not only seems to have the upper hand militarily in eastern Europe, but they’re also expanding their influence over Turkey, a “NATO member” and “ally”, and building up military power in some central Asian states.  This military expansion is every bit as reminiscent of the Cold War and Russia is setting up NATO for a Herculean fight if Eastern and Western powers ever go to war.

 

South China Sea SITREP

China announced this week that its first aircraft carrier is ready for combat in the South China Sea.  Although it’s expected to underperform against US carriers, this is still a significant development for the Chinese People’s Liberation Army Navy (PLAN), as China is already building its second aircraft carrier.

The Marxist government of Vietnam continues to align itself with the US against Chinese claims on the South China Sea.  This week, satellite photos confirmed that the Vietnamese government had built two airplane hangars and extended a runway in the contested Spratly Islands for the operation of US spy planes in the region.  Three months previous, Vietnam deployed mobile rocket launchers to several bases in the Spratly chain.

 

Meanwhile in the Philippines, President Duterte announced that Filipino and US Special Forces would hold annual drills together.  Despite Duterte’s explicit and implied threats of removing US Forces from the Philippines, this week the US Navy admiral in charge of the Pacific was quoted as saying that there have been no changes to the use of US bases or facilities located in the nation, even if some joint military exercises have been modified or cancelled.  Since those threats, Duterte has walked back some of those statements to allow some joint military exercises to continue.

 

Outgoing Obama warns of potential for WW3, US civil war

Speaking at a press conference in Greece, Barack Obama warned, “We are going to have to guard against a rise in a crude sort of nationalism or ethnic identity or tribalism that is built around an ‘us’ and a ‘them,’” referencing what happened with Europe divided against itself in World Wars I and II.  He also spoke about the same trends in the US that could lead to a domestic conflict, saying, “In the United States, we know what happens when we start dividing ourselves along lines of race or religion or ethnicity.  It’s dangerous…”  Which is ironic because his divisive rhetoric that marginalized the concerns of conservatives and working class whites is the same trend against which he’s warning.  As mentioned in previous EXSUMs, I do expect Obama to leave office and get back to his work of community organizing.  There’s a long-standing tradition for former presidents to avoid commenting or editorializing the policies of current presidents.  I wouldn’t be surprised if Obama is more vocal in his criticisms of the Trump administration, especially if Obama’s own legacy is dismantled.

Neo-con John Bolton lays out Iran foreign policy strategy

Former US Ambassador to the UN (under George W. Bush) took to the NY Post this week to explain his policy positions on Iran, in hopes that he gets to implement them as potentially a part of the Trump administration.  The crux of his op-ed was that Obama has left the world more dangerous, and that a strategy needs to be in place for once the Islamic State is defeated.  There’s no doubt that Iran and its proxies are already winning the poll position in Iraq and Syria, and to great effect as they are likely to permanently station Hezbollah and Iranian Revolutionary Guard Corps fighters in Syria, within striking distance of Israel.  Perhaps one of the greatest shifts over the past ten years is the increase in Iranian influence across the Middle East.  One of Bolton’s more salient points is that because of this he believes a new Sunni nation should be carved out of Syria and Iraq in order to avoid decades of Sunni struggle into the future under Shia rule.  Bolton also wants Russian military bases ejected from Syria (and presumably wants to derail the new Russian base planned in Egypt, as well).  If Bolton plays a significant role in the Trump administration, and we should know by early December, then I believe we can expect the US to once again become embroiled in Middle East politics.

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PIR3: What are the current indicators of military, government, political, or social-related instability or violence that leads to widespread domestic conflict?

Soros & Co plot future of political resistance

Highlighted by such seminars and panels as, “What’s Next: Playing Progressive Offense in 2017-2018” and “Combatting [sic] the Massive Threats from Trump and Congress in 2017,” socialist progressive financier George Soros, other donors, and strategists from the Democratic Alliance met for a three-day, closed-door session to plot their political resistance against President Trump and the Congress.  (DOWNLOAD THE AGENDA)

Combing over the meeting’s agenda, which was leaked to the press, we do see some good indicators of future activity.  Members of the Democratic Alliance will:

• “intervene in national and state politics beginning in early 2017”
• “shift the terms of debate and build… candidate pipelines for 2018 and 2020”
• focus on “next-generation voting rights”
• identify “how to fight back” against the repeal of Obamacare
• focus on becoming ‘progressive states, not just blue states’
• build “a bolder progressive national movement”
• prepare a “progressive defense” of “health care, immigration, taxes and the economy, climate, LGBT rights, the Supreme Court, and so much more.”
• identify what needs to be done to “hold the press and politicians accountable” in the Trump administration
• develop a plan to “call out sexism and racism when they stand in the way of our important policy goals”
• focus on “turning out black voters in the post-Obama era”
• focus on electing prosecutors with the goal of impacting state and national politics
• “advance wage and leave policy, financial reform, and greater public investment in early care and education”
• employing “intersectional organizing strategies” to mobilize minorities of all kinds

On Tuesday morning, session organizers held a panel entitled, “Was the 2016 Election Hacked?  Why We Need to Verify the Outcome of the Election,” and is probably a good indicator of a renewed focus to “secure” election systems during the mid-term elections.  I think that’s one to keep an eye on, especially if these activities might give progressives an unfair advantage in future elections.

As an aside, Politico quoted one dissenting Democrat strategist as saying, “The [Democratic Alliance] itself should be called into question.  You can make a very good case it’s nothing more than a social club for a handful wealthy white donors and labor union officials to drink wine and read memos, as the Democratic Party burns down around them.”

 

Chicago and other major cities defiant over Trump’s ‘sanctuary cities’ plan

One significant political battle early in 2017 will be between the Trump administration and leftist “sanctuary cities” which harbor illegal immigrants. Under those laws, city officials cannot inquire about anyone’s citizenship status (even of those arrested for crimes), nor do they report to immigration authorities when an illegal immigrant is about to be released from custody (i.e., jail).  On one side, President-elect Trump has pledged to withhold federal funding from sanctuary cities on his first day in office until those laws are changed.  On the other side, there are currently sanctuary laws in some 300 jurisdictions, some of which are among the largest cities in the US: New York City, Los Angeles, Chicago, Houston, Dallas, Washington-DC, and others.  And while we have no reason to doubt the Trump administration’s plans, Democrats across the country are defiant.  This is a battle that’s likely to mobilize protestors and lead to riots.  Ultimately, the decision to restrict federal funds is left with the Congress.  As a result, we’re likely to see those sanctuary cities engage in litigation, which could tie up the decision for months or years.  As long as Trump can push through a conservative on the Supreme Court, the Trump administration should come out ahead in the end.  Either way, that’s going to be a significant battle that likely leads to a lot of political gridlock and civil unrest.

 

Hacker takes down Democratic Underground

In a post on the popular progressive online hang-out, Democratic Underground, hackers had taken down the website at least twice last week.  “The hacker exploited that vulnerability in what appeared to be a politically-motivated act of vandalism: A large number of posts were removed and replaced with the words “God Emperor” (a reference to Donald Trump), and a ridiculously over-the-top pro-Trump video was served automatically to all of our visitors. If you’re curious you can watch the video on YouTube (WARNING: HATE CONTENT).”

I think there’s a very good chance that hackers attempt to take down the White House website, various Trump websites, and potentially others on or around Inauguration Day.  I also think there could be sustained attacks against government websites for some time.

 

DHS to grow as government shrinks under Trump

President-Elect Trump has proposed increasing the number of border agents by 25 percent and a 300 percent increase in Immigration and Customs Enforcement officers, despite a federal hiring freeze.  A former DHS official also claimed that the Trump administration is talking about “doubling the capabilities of the removal operations.”  DHS cyber capabilities, as well as domestic surveillance operations, are also expected to increase under the administration.

MoveOn.org executive director on Inauguration protests

The Executive Director of leftist activist group MoveOn.org was recently quoted as saying: “I expect mass peaceful protests with hundreds of thousands of people, if not millions, around the Inauguration and in other moments.  I cut my teeth as an organizer in the movement opposing the Iraq war. I feel that that was a smaller trial run for what we’re going to be seeing right now.”  She continues:  “We did three hundred and fifty peaceful gatherings less than twenty-four hours after the election results were announced. Then over the weekend you saw tens of thousands of people marching in the streets.”

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PIR4: What are the current indicators of economic, financial, or monetary instability that leads to civil unrest?

Update on recession outlook

For the past six months, I’ve been reporting that a recession was likely within the next 12 months (with a target date of early to mid-2017).  I had based that belief on two significant indicators.  The first is that every six to eight years the US experiences an economic recession.  The last recession was in 2008, giving us a target range of 2014 to 2016 for the next.  And second, a economic recession has followed a corporate earnings recession 80% of the time over the past several decades.  We just underwent five straight quarters of negative growth in corporate earnings, which historically is a very good indicator.  Additionally, financial analysts at Goldman Sachs, Citibank, and JPMorgan Chase also signaled a significant likelihood of recession in 2017.  (These indicators may still be right.)

The election of Donald Trump, however, has lifted hopes and relieved fears of an immediate recession, at least for a while.  But some interesting research compiled by Raoul Pal, a former fund manager turned trading advisor, shows what he calls a “100% chance” of recession during the Trump presidency.  “I recently noted that since 1910, the US economy is either in recession or enters a recession within twelve months in every single instance at the end of a two-term presidency… effecting a 100% chance of recession for the new President,” Pal writes.

My target date of early to mid-2017 may need to be revised backwards due what economists are calling the “Trump bump,” and I’m unsure exactly how a planned increase in federal spending for domestic energy and infrastructure projects will affect the recession.

Meanwhile, iMarketSignal’s Business Cycle Index score shows that a recession is not likely still for at least another 20 weeks, on average (20 weeks is early April 2017).  They claim to have a model for predicting recessions, proving accuracy for the past seven recessions.  It’s something I’ll keep an eye on; you’ll be seeing BCI scores in future EXSUMs as another economic data point.  And I believe that a US recession could trigger another global financial crisis, especially since central banks have done nothing but expand the monetary base and ensured access to cheap and easy money since the last financial crisis.

The bottom line is that no one knows with any certainty when the next recession will be.  All I can do is look at leading indicators of previous recessions in an attempt to gauge what could happen in the future.  We know that there will be another recession, and there are indicators that the next recession may still happen around mid-2017.