High Note Market Update: Monday, 9.5.22

5 minute read | September 7th, 2022
Happy Labor-YAY, peeps!  Time to get the kiddos back to school and bid adieu to summer.  One that very much started as the Summer of (Market) Love before abruptly finding its own Altamont. We will look at a chart of that in a minute but quickly wanted to address this note’s theme – cyber security. 

It’s easy to forget, so consider this your annual reminder that somewhere out there, in the deepest, darkest places of the internet, cyber criminals are working under the motto of “no days off” to take, steal, and pilfer your personal information for profit. Not a fun thought to share but that’s reality so we are going to focus on that today. But quickly…
Here’s your one chart to rule them all. This is the S&P 500 for the last year. Check out the orange line. It’s the 200-day moving average. A simple, yet powerfully true, statement can be made that good things can happen above that line but nothing good can happen below it. It sounds like a Yogi Berra quote but there is some depth to it. When the stock market is below that orange line (200-day average) it’s in a technical downtrend. While in that trend it can just lay there and do nothing, or it can down further but neither of those outcomes are helpful. So, here’s how we can think about it: regardless of what is going on with interest rates, inflation, unemployment, corporate earnings, US policy, geopolitics, etc., the market price needs to be above the orange line for anything good to happen. The price got to the line on August 16th but couldn’t cross it. The last time it was hanging out above it was in early April. After last week’s move down, it needs quite a climb. That said, we know it will get there again. Because downtrends only continue, until they don’t (Yogi! Again!). 
As teased above, we want to spend some time discussing cybersecurity and the garbage piling up on the internet streets (h/t MT). Twenty-five plus years of internet implementation and things are still changing on the reg. Most of us get it. You have to be careful. Very true but it’s also necessary to recognize that it continues to be harder to do so today, and will be in the future, as the cat-and-mouse game evolves. And unfortunately, that won’t change. Think of it this way: the trillion-dollar illegal global drug trade is that big because the market demand for drugs is a trillion dollars. If cyber-scamming is about free-money, consider the market size of free-money on the global stage…endless. Econ 101 teaches us that enterprises will deploy endless resources to capture an endless total addressable market. 

Just a couple of years ago it was fun to laugh at the “Nigerian King” emails that were sent by hackers informing the recipient that they were set to receive a royal inheritance if they simply provided their personal details. Call it the good old days because we have noticed the attempts today look and feel more legitimate. Whether it’s a fake claiming to be from Google or Netflix, they definitely seem more polished than before. That makes sense because more resources have been deployed (simple things like getting help from native English speakers to clean up language can boost legitimacy). As such, there isn’t a magic tool to prevent falling for one of these traps. Our best advice is to use your “phone a friend” card. If you ever get an email asking for personal information from anyone for any reason, stop. Take a deep breathe. Read it again. Then, and only then, if you are still excited to happily provide the requestor with the information, get a second opinion. Worst case scenario is you have to share part of your royal inheritance with them for helping you. 

It’s important to do a quick refresher on the security around the investment accounts at High Note. Many of you have experienced the annoyance of having to speak with one of us if we are transferring money to you. While we certainly don’t like to waste your time when a simple email request could work, talking to people in real life is still one of the best security measures at our disposal. So rest assured, we always call to confirm when we get requests from clients for money.
As we said, the game will continue to change so what works to be safe today might not be enough tomorrow so staying current is the way. For now, UC Berkeley put together a nice list of security tips we should all be practicing. You can view that list here

The one thing we would add to the list is to clean your cyber room. It’s so easy to get signed up for a zillion promotional emails from every single company you’ve ever even considered purchasing from. Unsubscribe that s%*#! Yes, keep some of your favorites that notify you of new items/sales you are REALLY interested in but otherwise, move on. Take the time (once or twice a year) to go through the trouble of “unsubscribing” from any unneeded emails. This helps to slow down the volume of information we get bombarded with, making oddities stand out. 

To no one’s surprise, millions of people around the globe hanging out online while on pandemic lock down, has led to an increase of online scams. Here is an article with some of the more recent numbers reported. And yes, the student loan forgiveness program is already ripe with scammers. Read more on that here

State-Sponsored Cyberists

It’s easy to imagine a cyber criminal as a nameless/faceless person shut-in some dark basement or a depressing apartment building somewhere far, far away. There are those, sure, but a great deal of crime comes from large, sophisticated organization and governments. We’ve heard countless stories of “Russian bots” trying to flame the fires of the culture war online. Using the single most powerful communication tool ever created for political espionage? Probably not the worst idea. But what about state-sponsored stealing? 

*North Korea has entered the chat*

For those that don’t follow the day-to-day in the Hermit Kingdom, let’s just say it’s not great. For the last thirty years, it’s been a struggle for the country to feed its people. Their economy is closed and focuses significant resources to their military which leaves very little else so they need other sources of foreign capital to fund the Kim Regime. And where might one go looking for an endless source of free-money? You got it.  

There’s a recently published book by Geoff White called, “The Lazarus Heist”, that details a wing of the North Korean army known to the outside world as, The Lazarus Group. This isn’t a group of techies that work in concert with the government but rather, a full-scale hacking and cyber warfare department where soldiers are recruited, trained, and employed to work on raising money for the regime through cyber-crime. In a country with otherwise dim career opportunities, it’s a prestigious path that offers a chance at social mobility. This group has been identified as the culprits in the attack on Sony Pictures in 2014 and the Bangladesh Bank heist of 2016 which are both massive in scale, complication, and sophistication. Remarkable, really. Luckily for us minor end-users, their focus isn’t on us but on large institutions. It is a startling example of what length enterprises will go to chase endless free-money. The cat and mouse game will continue to evolve.