National Intelligence Bulletin for 07 September 2018

Major Trends

• Nation-state and criminal hacking groups pose persistent threat to critical infrastructure
• Natural disasters pose sporadic but enduring threat to critical infrastructure

Tropical Storm/Hurricane Florence looms off Atlantic coast

Hurricane Florence was downgraded to a tropical storm by the National Hurricane Center, but watchers expect it regain strength and turn into a hurricane again before making landfall. Right now, NHC is forecasting Florence to hit the Atlantic Coast late next week. Keep up to date at the NHC website (here) or with our daily Early Warning emails (Mon-Fri).

NORTHCOM: Homeland “no longer a sanctuary”

Speaking last month, the head of U.S. Northern Command told National Guard troops that the U.S. homeland is no longer the sanctuary from threats it once was. “We’re in a changing security environment,” O’Shaughnessy said. “We used to think about the sanctuary we had with oceans and friendly countries to our north and south, but that’s changing with adversaries that are actually able to reach out and touch us now.” In today’s environment where cyber attacks target critical infrastructure and where space weapons could target satellites to disrupt communications, the U.S. is reacting to foreseen yet rapidly developing threats. “We have to think about our defense in different ways than we have in the past. That means we need to fundamentally re-think when we say homeland defense how we’re going to do that against a peer competitor.” The Air Force Chief of Staff drove the point home even further: “It’s probably dangerous for us to think we can physically be a sanctuary when we’re in competition below a level of armed conflict, and we have a couple of new domains that our adversaries are operating in: cyber and space.” [source] Analyst Comment: Right now, the largest foreign threat of systems disruption would come from nation-state or nationalist hacking groups. Nation-state groups could target domestic vulnerabilities, like communications or the power grid, as an asymmetric response in a conflict with the U.S. military. But we also run the risk of coming under attack from nationalist groups in Russia and China, with or without their nation’s permission. Pro-Russia or pro-China nationalist groups, consisting of criminal enterprises and patriotic hackers, could target the U.S. with cyber attacks to accomplish nation-state objectives and still remain below a level of nation-state conflict.

IECA: Natural gas pipeline ‘weak link’ in U.S. energy

Last year the Transportation Security Agency (TSA), which is responsible for commercial air traffic, rail lines and highways, said it had only six full-time employees tasked with securing more than 2.7 million miles of U.S. natural gas, oil, and hazardous materials pipelines. The Industrial Energy Consumers of America (IECA) sent letters on Wednesday to the Senate Committee on Energy and Natural Resources and the House Committee on Energy and Commerce calling for hearings and “appropriate action to ensure that Congress has done all that is reasonable and cost-effective to ensure the security of natural gas pipelines.” It has been suggested that natural gas pipeline security should be shifted from the TSA to the Department of Energy (DOE). While electricity grid operators are required to comply with Federal Energy Regulatory Commission security standards, no such standards currently exist for the nation’s natural gas pipelines. [source]

Lawmakers want cyber vulnerabilities registry improved

The Common Vulnerabilities and Exposures (CVE) program is a database that applies a common naming and numbering system to computer vulnerabilities so that the organizations that discover and patch these vulnerabilities are speaking a common language when referring to specific vulnerabilities. According to congressional investigators, the Department of Homeland Security should conduct audits of the CVE program every other year. Additionally, a dedicated source of funding should be sought so “the program’s goals would no longer be dominated by short-term projects that could be accomplished within the small window of time a single contract is active.” Currently, the program is funded by ad hoc contract payments, which leads to a focus on short-term goals and results in security researchers waiting for weeks or months for newfound vulnerabilities to be added to the CVE register. This delay represents additional time for hackers to exploit these unregistered vulnerabilities. [source]

GAO: FEMA overwhelmed by disasters in 2017

A new report from the Government Accountability Office (GAO) shows that FEMA was underprepared for 2017’s onslaught of natural disasters. Ranging from wildfires to hurricanes, last year’s 692 federally-declared disasters overwhelmed FEMA. “They were 30% understaffed when Harvey hit. By the time Maria hit Puerto Rico, they were down to the bottom of the barrel,” wrote the GAO report’s author. [source]

Drought conditions persist across much of Southwest U.S.

PIR2: What are the new indicators of potentially disruptive social, cultural or political conditions or events?

Major Trends

• Ongoing political instability due to the Russia collusion investigation
• Simmering social grievances based on race, class, and political ideology
• Sporadic political violence
• Ongoing culture war featuring information operations and expanding to economic warfare

Twitter bans Alex Jones

On Thursday afternoon, Twitter announced that the platform had banned accounts for Alex Jones and Infowars. They cited that Jones had violated terms of service. “Today, we permanently suspended @realalexjones and @infowars from Twitter and Periscope. We took this action based on new reports of Tweets and videos posted yesterday that violate our abusive behavior policy, in addition to the accounts’ past violations. Twitter also said they were reviewing other accounts associated with Infowars. [source] Analyst Comment: Twitter Safety cited a video Jones posted that contained what they allege was “abusive behavior” between Jones and CNN report Oliver Darcy. [source] Darcy allegedly lobbied to have Alex Jones and Infoward de-platformed. Charles Johnson, who has also been banned by Twitter, appears in the video criticizing Darcy over his attacks on Jones. The incredible thing is that Twitter often cites off-Twitter behavior as a reason to justify banning accounts. That’s why white nationalist Jared Taylor and others have been banned. Yet Twitter continues to allow dozens of antifascist accounts which glorify violence and engage in abusive behavior off-Twitter. Based on the available information, there absolutely has been a concerted effort to target Jones, who is often derided as a conspiracy theorist. Yes, Jones does engage in conspiracy talk, but since the 2016 campaign for Donald Trump, Jones has increasingly turned towards political commentary. Alex Jones, who previous reached millions through his website and social media, has undoubtedly been a significant part of America’s culture war, and his de-platforming will have an effect on news consumption ahead of the 2018 and 2020 elections.

Reich: Trump must be impeached, annulled

While admitting that Trump is unlikely to be removed by the Senate, even if impeached by the House, Robert Reich writes in a Newsweek op-ed that something more than impeachment must be done if Mueller finds evidence of Russian collusion. “The only response to an unconstitutional presidency is to annul it. Annulment would repeal all of an unconstitutional president’s appointments and executive actions, and would eliminate the official record of the presidency. Annulment would recognize that all such appointments, actions and records were made without constitutional authority.” At the end of the op-ed, Reich doubles down on his belief that President Trump will remain in office until at least through 2020, unless Mueller finds “indisputable evidence” the 2016 election was rigged. [source] Analyst Comment: While it’s an unlikely scenario, there may be a large movement to erase Donald Trump and Trump-era policies and appointments should he be impeached due to results of the Mueller investigation.

Sears closing 46 more stores

Following a large trend of department store closures (Macy’s, J.C. Penny’s, etc.), Sears announced another round of store closures — this time 46 across the nation. [source] Analyst Comment: Competition from online retailers is a large reason why many of these stores are closing, but also it’s because Millennials just aren’t going to the mall as much as previous generations. The problem that we’ve been following is that these department stores are often ‘anchors’ for other stores in large shopping centers. Smaller retailers would open a store in the same center as a Sears or Macy’s because of the big draw of shoppers already going there. But as these anchor stores close, smaller retailers are also likely to feel the pinch. This has a host of consequences as some of these stores sit empty or are replaced by discount retailers or other stores that attract an entirely different customer demographic. That’s led to an increase in crime in and around shopping centers that were once considered high-end. And that opens up the question of just how far commercial real estate will fall during the next recession, as many of these stores won’t be able to find new tenants.

Poll: Few Democrats actually favor abolishing ICE

Opinions about Immigration and Customs Enforcement (ICE) are divided along partisan lines, with a majority of Democrats viewing the agency negatively and the majority of Republicans viewing it positively. What may be less apparent according to a poll released on Monday by The Associated Press-NORC Center for Public Affairs Research is that only a quarter of Democrats support eliminating the agency. Some potential Democratic presidential contenders have recently maligned the agency for carrying out Trump administration immigration policy, including the separation of immigrant children from their parents. While some have called for unspecified changes to the agency, others have called for its outright abolition.

President Trump accuses AG Sessions of hurting GOP candidates

President Trump took to Twitter on Monday to once again to criticize U.S. Attorney General Jeff Sessions, this time for bringing criminal charges against two Republican congressmen who are seeking re-election in November. On August 8, Congressman Christopher Collins was charged with insider trading involving an Australian biotechnology company. On August 23, Congressman Duncan Hunter was indicted for using hundreds of thousands of dollars in campaign funds for vacations and other personal expenses and filing false campaign finance reports. The President criticized the Attorney General for jeopardizing “two easy wins” for Republicans in the November congressional elections. Analysts are giving the Democratic Party a 50 percent chance of taking control of the House in November. Both Democrats and Republicans criticized the President for favoring politics over the rule of law. [source]

Heritage: U.S. facing a doctor shortage

Leading with three takeaways, conservative think-tank Heritage Foundation is warning of a doctor shortage in America. Those summarized takeaways are:

1. Within a decade, the projected number of doctors in the U.S. will be insufficient for the healthcare needs of Americans.
2. Americans are living longer with more complex health issues, so this is a “life and death” problem.
3. Policy makers should address regulations that caused this doctor shortage. [source]

Analyst Comment: This is something we first reported on last year, and the threat is realistic. I would look for Congress and the Trump administration to respond by making immigration for foreign physicians easier and perhaps employing incentives to bring doctors in. Additionally, reducing the regulations imposed on physicians and the healthcare industry might lure more American students into medicine.

Duke study: local news coverage declining

According to a study from Duke University out last month, “news deserts” are becoming more frequent in America. These areas show a decline in local reporting, in favor of syndicated reporting on non-local issues. In a study of 100 randomly-selected areas, the study found that 20 percent of them had no local news stories. [source] Other studies show that voter turnout and government transparency are harmed by a lack of original local news reporting. [source] Analyst Comment: I typically shy away from encouraging solutions, however, local news is very similar to intelligence reporting. If the trend is that access to local reporting is decreasing, citizens could undertake an effort to start a local news blog and engage in citizen journalism.

PIR3: How are state and federal agencies preparing for domestic conflict, emergencies, or other instability?

Major Trends

• Large scale efforts to increase election security
• Large scale efforts to increase national cyber security

DHS launching ‘risk radar’ to see cyber threats

The latest plan from the Department of Homeland Security to combine information from public and private sectors to protect critical infrastructure includes a “risk radar”. Building off last week’s announcement that DHS would be ordering agencies government-wide to comply with new standards, this new plan would bolster those directives. “When we see some threat occurring across the government, DHS has the authority to put binding operational directives out to all agencies. Basically, ‘you shall do, within this timeframe and you need to report that you are doing it.’ That could be seen as heavy-handed at times… [but we’re] working very closely with the agencies and identifying future binding operational directives to make sure that they can be successful, but also where else can we partner with them to ensure there’s success.” [source] Analyst Comment: The federal government is failing in cyber security. It didn’t appear to be a top priority for the last administration (missed deadlines, the lack of action on developing and then implementing the national cyber security strategy), but there are efforts underway to catch up. In previous years, the DHS has also been involved in billion-dollar cybersecurity projects that failed to do the tasks what they were intended to do. Recently, DHS created the National Risk Management Center, which appears set on correcting previous deficiencies in the federal government’s enterprise cybersecurity programs.

DHS to pursue ‘hit-back-harder’ strategy

In a speech at George Washington University, DHS Secretary Kirstjen Nielsen said that the “days of cyber surrender are over” and that the U.S. would pursue a more forceful course of action. “Some of that will be seen, some of that will be unseen to make sure that adversary knows that there are consequences. And I think the response needs to be more than commensurate [with the original attack]. By the time a country is attacking civilian networks, civilian assets, it’s not a fair fight. That’s not how the international world has created norms and standards, and I don’t think it should be commensurate. I think it should be more.” [source] Analyst Comment: If implemented, this strategy could decrease the volume and intensity of cyber attacks and exploitation against the United States. Just how significant a change would largely depend on the specifics of the strategy and how dedicated the Trump administration and U.S. cyber arms are to carry out tit-for-tat attacks. It should be pointed out that the Obama administration’s response to cyber espionage and exploitation was so weak that adversaries were obviously not deterred from continuing their attacks. There’s absolutely a sharper focus at DHS over cyber policy, and while U.S. counter-targeting in cyberspace runs the risk of escalation and unintended consequences, it should pose a hurdle to state-backed hacking groups who would run a greater risk for their cyber activities.

FBI face ‘recruiting challenge’ for data scientists

While the FBI has secured funding to hire data experts at all 56 of its field offices, it is encountering challenges recruiting this talent. The executive assistant director of the FBI’s information technology branch, John Adams, says the agency has increased its outreach to students with IT skills, although “recruiting to a federal government salary is a challenge,” says Adams. The FBI is struggling to compete with the private sector’s offerings of higher salaries for top IT talent, says another FBI cyber division spokesperson. In order to overcome such obstacles, the agency started a pilot program this summer that aims at recruiting high school students for cyber security-focused internships. It has also conducted other recruiting events, which has included going to colleges and universities with strong data science programs in search of talent. [source]

Michigan National Guard runs a chemical attack exercise in Detroit

Military Police soldiers from the Michigan National Guard recently participated in a table top exercise so that leaders could learn how their troops would fit into an urban disaster response mission. The task force’s mission is to respond to a chemical, biological, radiological, or nuclear (CBRN) attack, where they’ll conduct decontamination and search and rescue missions. The three-year learning effort will also include soldiers from U.S. Army North conducting simulations in Atlanta, Chicago, Phoenix, and Cleveland. [source] Analyst Comment: As always, we can identify the concerns of FEMA and DHS by the exercises it runs. Since National Guard units in multiple states will be participating in these CBRN exercises, be aware that FEMA and DHS likely consider it a realistic threat, however unlikely it may be.

NBC ordering new ‘Law & Order: Hate Crimes’ show

This week, NBC executives ordered 13 episodes of “Law & Order: Hate Crimes,” yet another spin-off of its hit Law & Order franchise. The series is inspired by the Hate Crimes Task Force in New York City, and is sure to touch on some sensitive issues in an insensitive way. Already, Law and Order has tackled the Alt-Right, as well as other right wing groups. “As with all of my crime shows, I want to depict what’s really going on in our cities and shine a light on the wide-ranging victims and show that justice can prevail,” said executive producer and show creator Dick Wolf. [source]

PIR4: What are the new indicators of systems disruption and threats to the economic or financial industry?

Major Trends

• Trade war with China poses risk to U.S. farmers and manufacturers, emerging markets
• Unsustainable national debt to increase due to trillion dollar budget deficits in 2019+
• High potential for an economic recession around 2019-2020 that causes significant financial disruption

Reich: Conditions are ripe for economic crash

Robert Reich had another op-ed this week, where he opines that the U.S. could be “careening toward the same sort of crash we had in 2008, and possibly as bad as 1929.” Citing a Federal Reserve survey showing that “40 percent of Americans wouldn’t be able to pay their bills if faced with a $400 emergency,” Reich writes that the problem with the U.S. economy is that most economic gains are going “to the top,” and the U.S. economy is increasingly top heavy. Because the U.S. economy depends on consumer spending to expand, and working- and middle-class incomes are not keeping pace with the growing economy, he writes that we’re nearing another crash. [source] Analyst Comment: Reich is an admitted Leftist, but I believe he’s fundamentally correct where it concerns growth prospects in our consumer-driven economy. I used to roll my eyes when the topic of wealth and income inequality came up, mainly because of the connotations on how to solve those problems. But they are undoubtedly problems driving domestic instability — to the point of worrying numerous billionaires about a ‘lamps and pitchforks’ type of revolt against the rich. If Reich is correct that the next economic crisis will resemble something in between 2008 and 1929, then we should be preparing for a years-long downturn made worse by the toxic political climate.

China continues to face economic risks of its own

This week, a Chinese economic official said that hitting goals for consumption and urban disposable income will require a larger effort on the part of the Chinese government. Due to the expectation of falling exports, rising real estate prices, and increasing household debt, there’s been slower growth in disposable income, which creates a negative feedback loop for the Chinese economy. The urban jobless rate has also been rising, most recently ticking up to 5.1 percent in July, as compared to 4.8 percent the month prior. [source] Analyst Comment: The Chinese economy is undoubtedly slowing at a faster pace than the Chinese Communist Party is reporting. In previous reports, we’ve covered China’s exploding public and private debt, which doesn’t include off-the-books loans priced in the trillions (USD). China’s response to economic slowdown has been to print money and infuse its economy with cheap financing, much like the Federal Reserve’s easy money policy from the 1990s that led to the 2008 financial crisis. If Chinese exports to begin to fall, then the Chinese central bank will likely be forced to print more money. China could very well be looking at its own version of 2008. A downturn in the world’s second largest economy will have significant effects, especially in emerging markets which are already being battered.

Economic/Financial Roll-Up

– Trade negotiations with Canada continued this week as the president steers their direction in his usual unorthodox manner. In a tweet on Saturday, President Trump said, “If we don’t make a fair deal for the U.S. after decades of abuse, Canada will be out. Congress should not interfere w/ these negotiations or I will simply terminate NAFTA entirely & we will be far better off.”  [04 SEP]

– The markets were down in pre-hours trading this morning, and some investors and analysts expect a rough September. This month is historically weak. Since 1950, both the Dow Jones Industrial Average and S&P 500, on average, have posted losses. The Kavanaugh hearings, the Mueller investigation, talk of impeachment, and the trade war with China are all weighing on the markets. [04 SEP]

– Recent data from the Atlanta Federal Reserve’s GDPNow shows that Quarter 3 economic growth expectations has increased to 4.5 percent after U.S. factories were shown to be firing on all cylinders. [05 SEP]

– Here’s an updated chart exhibiting a warning sign of recession. The spread on the 2-year and 10-year Treasuries has been a consistent early warning indicator of recession, and we can see that a flattening yield curve is shaping up like previous recessions. It’s difficult (impossible) right now to say exactly when the next recession will start, but I feel confident that we’re staring one in the face. [05 SEP]

– In yesterday’s Senate hearing on political bias in social media, Senator Tom Cotton (R-AR) asked Twitter CEO Jack Dorsey a very pointed question: “Do you prefer to see America remain the world’s dominant global superpower?” Senator Cotton’s question casts some doubt on America’s trajectory. [06 SEP]

– Emerging markets continue to take a hit and some analysts are warning of contagion. Countries like China, Iran, Turkey, and Argentina have all had their currencies significantly devalue this year, as Brazil, South Africa, Indonesia, and other countries experience a stock market sell-off. That poses a risk to banks and other financial institutions with heavy exposure to these countries and regions — hence the concern over contagion. [06 SEP]

– We can expect President Trump to enact another round of tariffs on China — this time on $200 billion worth of goods. The deadline for public input on the tariffs is today, and President Trump is reportedly ready to enact the new tariffs any day now. As usual, China has threatened to retaliate. [06 SEP]

– The president is free to implement another round of tariffs on China, this time on $200 billion of goods. My concern is that there’s no good way out for China unless they escalate. For instance, they could target U.S. multinational corporations operating in China (think Apple, Boeing, or Starbucks) by increasing operating costs. Alternatively, they could pledge to stop buying U.S. debt until the trade war is resolved. The Chinese have to do something to achieve parity with U.S. tariffs because President Trump’s trade policies are hurting China much worse than they’re hurting the U.S. [07 SEP]

– Sure to draw the ire of President Trump, the Fed appears set to raise interest rates again this year. New data showing a sharp rate in wages means another rate hike this year is more likely. The Fed will have a monetary policy meeting later this month. [07 SEP]

– After saying that he might pursue a government shutdown over border wall funding, President Trump reversed course this morning and said that a shutdown is no longer a possibility because it would harm the GOP during the mid-terms. [07 SEP]

These economic/financial briefs appear each morning in the Early Warning intelligence report. You can sign up for this email on your My Account page.

// END REPORT

S.C.

Sam Culper / Mike Shelby

Mike Shelby is a former military intelligence NCO and contract intelligence analyst. He spent three years in Iraq and Afghanistan and is now the intelligence and warfare researcher at Forward Observer.