Survival Archives - GUJRAT INDIA

The Most Dangerous Threat to Your Staff and Business Survival

Being involved with technology solutions professionals see things that could be a real threat to you, your staff or even your business; while the internet can be seen as a wonderful tool (cloud based communications and solutions for example) and all of the other great achievements that the internet has created there is a far darker side to it all; of that there is no doubt and it can be a real threat.

And factually you have in your business nowhere to run or nowhere to hide; sooner or later it becomes a high odd’s bet that employee, you or your company will suffer and in severe cases the effects could even close your company overnight.

Don’t believe this? Read on where examples of actual major threats are shown below. Not worried? You should be!

It’s so dangerous that Deloitte opened a cyber threat hunting service!

But on an everyday level to ordinary SME’s just like your business there really is no amount of anti virus this or anti malware that available that is really going to help; the examples below show you exactly why; things these days have moved on exponentially to levels that you may not believe, but some are revealed that are actual examples highlighting just how bad these threats have become. There will be casualties no doubt but you don’t want to be one of them!

Email has been a driving force that has moved forward communications between every aspect of business that anyone could imagine, from sales, customers, support, management, publicity and many more important areas; but it’s obvious that the underlying technology of email servers are flawed and because it’s now a worldwide transport for communications that’s hard to fix; these communications channels have to be compatible with every other email server in the world and that creates massive inherent vulnerabilities.

In almost every town, city or country, government bodies are working towards combating fraud and other nasty things from many areas, but email is one of the most widely abused platforms there is because of the ease of abuse by non-experts. And if you’re not an expert it does not take long to learn how to be one!

One organisation in the UK is Action Fraud operated by the police and while they handle other areas of fraud, email scams are very high on their list.

But here’s where things start to get nasty. Since the advent of cryptocurrency worldwide fraud has increased exponentially. And in the USA SEC Rejects Bitcoin Exchange Traded Fund because they are very concerned about investor losses in Bitcoin.

However, this article is specific; Bitcoin is being used fraudulently and in both of the cases shown below Bitcoin is clearly involved in the transportation of monies to the perpetrators of these illegal demands on you, your staff or even your business. It’s no joke and anyone ignoring these really bad potential harms to their organisation will sooner or later come unstuck in maybe a really big way. The results could be catostrophic.

The first example shown below included personal details of the recipient that have been removed for security reasons. But this email (that passed every check through a company’s infrastructure) is threatening the life of an employee and should never be ignored.

Note that bitcoin and email addresses are edited for security purposes throughout this article.

HERE IS EXAMPLE ONE VERBATIM:

“From: kristin*********

Sent: ******

To: *********

Subject: How to save themself

Read this warn carefully, since it can be the last in your life.

People are by nature envious. Given the fact of successful development of your business, people (your contestant ) paid me 30,000 Pound Sterling for your head on a stick.

It’s not the first time I’ve done this kind of work, but I’m already tired of these envious bastards and your life will be the last one I’ll take or will not do, it’s up to you.

Under normal circumstances, I would just do the work for which I was paid without going into the details, but I’m going to get away from it and go on a long-awaited vacation.

You have 2 versions for deciding this problem.

Adopt my proposal or refuse.

You pay me 5 thousand GBP for safe your life and you receive all the information about the customer with whom you apply to the police and thus you save your life and the lives of your relatives.

The second option is you ignore my proposal and turn to the police, but by the same token you will only postpone your judgment day, even if I can not do the work, then somebody else will do it, not within a week and say in a month or half a year, but order for your head will be fulfilled sooner or later.

Thus, you will be afraid of every rustle, walk around looking and thinking that you are being persecuted.

If you want such a life, your choice, but if I were you, I would think very well.

Tickets to England have been taken for July **, and you have exactly 3 days to transfer money to an anonymous account bitcoin 1QJNjRmon3iD3RwdjaGomFLHs25B******.

I can check the last time receipt of money before the flight to you, on the **th

In the event of receiving a reward, I will not come to take your life, but will also pass all the information about your customer (Let the bastards get what they deserve) and you can protect yourself, otherwise you know the consequences.

The well-being of the future life depends on your choice.

Think about your life, you family.

on all will of Allah”

END OF EMAIL MESSAGE ONE

The above email is unedited except for recipients details and Bitcoin account numbers. It can be clearly seen in this email that there is a threat on the life of the recipient. While some recipients would simply brush this type of email off, others become extremely concerned; it’s easy to see exactly why. Indeed some recipients will go and pay the demanded money and not think twice. Imagine that a key employee received this email and they completely believed its contents? The resultant downfall of the employee could be extreme. This email threatens the recipients life and mentions their family etc.

Notice that the spelling is incorrect for English on this example (undisclosed but its in the content) and somehow the writer suggests that the email is the ‘will of Allah’. Probably not. But the user identified the recipient was in ‘England’ likely from the email address so the recipient could believe some of the contents.

The above email passed numerous checks throughout the receiving companies infrastructure. Now it’s easy to see if you are tech savvy, but most email users are not. And if you’re a small SME then things could happen that could literally create very serious effects on your business even though the email targeted an employee. But if you’re not tech savvy and a company owner, would you believe the above? and send money? Many will have and that ‘feeds’ the criminals for millions of pounds or in this case $US.

Bitcoin in the above example is used because Bitcoin CANNOT be traced to the ultimate recipient of the payment. This is a major flaw in crypto currency and one reason (irrespective of some suggesting it’s an easy way to make money) you really should have nothing to do with it. Criminals use Bitcoin all the time.

As suggested, you just might not believe the above email if you received it, but there is no doubt that you might well believe the next example because it has information in it that is only known by you!

HERE IS EXAMPLE TWO VERBATIM:

From: “Gloriana Feany”

To: *********************

Date: *********

Subject: (HERE WAS THE USERS NAME AND THEIR PASSWORD)

I know ****** is your password. Lets get right to the purpose. You may not know me and you are most likely thinking why you are getting this email? Nobody has paid me to check you.

actually, I actually setup a malware on the X videos (porn material) web site and you know what, you visited this site to have fun (you know what I mean). While you were viewing videos, your web browser initiated operating as a RDP that has a key logger which gave me access to your display and webcam. Immediately after that, my software program gathered every one of your contacts from your Messenger, social networks, and emailaccount. And then I created a video. First part displays the video you were watching (you’ve got a fine taste hehe), and 2nd part displays the recording of your web camera, yea it is u.

There are two different possibilities. Let us take a look at each one of these options in details:

1st alternative is to skip this message. In this case, I most certainly will send your very own video clip to all your your contacts and visualize concerning the humiliation you will see. Moreover if you happen to be in a committed relationship, how it will affect?

Next choice should be to give me $3000. We are going to call it a donation. In this scenario, I most certainly will quickly remove your videotape. You will continue your way of life like this never took place and you will never hear back again from me.

You will make the payment through Bitcoin (if you do not know this, search for “how to buy bitcoin” in Google search engine).

BTC Address: 18PvdmxemjDkNxHF3p3Fu9wkaAZ********

[CASE sensitive, copy & paste it]

In case you are thinking about going to the law enforcement officials, very well, this e-mail can not be traced back to me. I have covered my actions. I am also not trying to charge you a lot, I simply want to be rewarded. I’ve a unique pixel in this e-mail, and at this moment I know that you have read through this email message. You have one day in order to pay. If I don’t get the BitCoins, I will certainly send your video to all of your contacts including family members, colleagues, etc. Having said that, if I receive the payment, I’ll erase the recording right away. If you really want evidence, reply Yup! then I will send out your video to your 7 friends. This is the non-negotiable offer, and thus please do not waste my personal time & yours by responding to this e mail.

END OF EXAMPLE TWO EMAIL:

This is an entirely different threat. The recipient picked this email up because of a multitude of reasons that were simply incorrect and not representative of their actions on the internet; however, the stated password was about 80% shown (and it would be reasonable to assume the perpetrator knew the rest of the password). This could be seen by many as a factual document and it’s credibility is created in the recipients mind by the inclusion of the password in to the threat.

Imagine owning a SME business that might indeed be a larger business, the threat demanded much more money and the recipient had viewed what was suggested in the email? People do. It could be seen as likely or at;east a possibility that the recipient might well pay the money to the perpetrator through Bitcoin. And again Bitcoin rears its ugly head.

Again in this second email instance shown the email passed all checks and tests in the company where the email was received. So these are real threats to individuals or business.

But consider this; how did the perpetrator get the recipients password? (it was an old password but nevertheless was mostly valid). The perpetrator suggested key logging on a site known for pornographic video and images. But that is most likely not where the perp got the details from.

When reading about companies like Facebook, TalkTalk, Dixons Carphone Warehouse, Equifax, Adobe, AOL, Apple, AT&T, British Airways, Mastercard and Visa, Compass Bank, Dominos Pizza, DVLA UK, Dropbox, Kmart, Hewlett Packard, eBay, Experian, Trump Hotels, Gmail, Vodaphone, Walmart, Morgan Stanley, NHS, Ofcom, SnapChat, Adidas, Macys, Sony Pictures (and the list goes on) is it really no wonder that most personal details of importance (even financially) of individuals and businesses are all over the internet. There is a Wikipedia about these breaches of data that is extremely concerning reading as these breaches involve all kinds of information that will no doubt be available to buy on the internet. With the incredible reductions in share prices at Facebook maybe that might be the start of a mass exodus from those sort of ‘social media’ sites; but of course Facebook is merely one of the very long list of companies that have let you down through not protecting your data properly as the list above clearly demonstrates.

Its easy to see why GDPR has become law and countries will continue to pass GDPR legislation accordingly. Thank all of the companies mentioned above and many more for allowing this ridiculous situation that could be the start of the downfall of the internet as it is known today.

But is it time to go back and retrospectively fine each and every company involved in the dispersal of personal details? Are those companies any less ‘guilty’ now? It seems for many companies that the only thing they understand is when they are faced with very large fines; and even the fines might be irrelevant to organisations like Facebook and Google because large fines seem to be ‘petty cash’ to some of those companies. But shere price reduction wakes them up.

If anyone is concerned about a ‘key logger’ from the above email example getting your information Kaspersky latest offering of internet security includes software that stops key loggers from logging your information as you type.

A third example of fraud covered in this article relates to a company that received an email pro-forma invoice to pay from one of its regular suppliers. One day the finance department received a pro-forma invoice that needed to be paid immediately. The email address and the invoice itself looked entirely unremarkable. The sending company advised the finance department that they had recently changed banks and that the new details were on the invoice attached. Finance paid the £60,000+ ( $US 80,000) invoice.

The only problem was, that the invoice was completely fraudulent, the email address did read correctly unless you looked close (instead of wonderful.com it was wonderfull.com (just made up example to illustrate the methodology used) and the recipient in the finance department saw and read what they were used to seeing. The real question is, how did the perpetrators get all that information about what an invoice should be like, the real suppliers details, etc., their website and email addresses and more; it’s food for thought and make no mistake it can be so easy to allow one of these scams through your business; the chances are pretty high and the consequences could be dire and even bankrupt your business if taken to the extreme.

There is no doubt that the underlying email systems are no longer fit for purpose in general and have not been for some time. Notice that in the first example the scammer sent mail from ‘mail.bg’ and the second one (even more concerning) was from ‘outlook.com’. While the sending email addresses can be ‘replaced’ with any email address upon examination those two shown emails seemed to be real; indeed one of the perps even used Google to advise how to use Bitcoin for payment. But there are multiples of very large companies that every day offer a service but allow their email servers and systems to send out such threatening emails to users. Maybe it’s time to pressure these organisations (outlook.com, gmail.com and there are multiples of others) to actually filter their emails properly as well as the sendersbefore these sort of threats go out and create serious harm that these sort of messages could easily do.

Of course there are millions of other examples of fraud through an outdated abused email system (and other related internet technologies) that could be shown here, but the aim of this article is to educate readers so that they don’t fall foul to these sort of appalling scams.

One company, Network Systems has seen many of these sort of internet related issues and offers a cybercrime service to SME’s to help to create a safe environment for empolyees and business as they work on the internet today.

Hopefully this article will at least make the reader think very hard about how they are going to ensure protection of employees and their company and if nothing else that is a wothwhile objective. Using specialist companies will always help more than by just trying to put solutions in place created by someone without experience in this area and could actually save your company.

Digital Marketing Means Business Survival During COVID-19

Even during the thick of the pandemic, we saw businesses struggling to change operations enough to stay afloat. Now, the name of the game is “adapt,” and we are all players trying to find out where we fit into the larger picture. Even if it means stepping out of our comfort zone, we are forced to move past the traditions we built and forward into the digital age.

Contact-Less Service
Before COVID-19, some businesses didn’t even have a social media page. These businesses relied on loyal customers, word of mouth, and in-store marketing endeavors. You know the shops I’m talking about, mom and pop shops who use printed flyers, bulletin boards and give the 100th customer of the day a prize.

For some, this type of business model set them apart from the mainstream shops and made them popular. For others, it was a general lack of enthusiasm for technology (or the inability to pay for pricey digital marketing campaigns). Then, with a snap of the fingers – it was gone. Nobody could come through the doors, and like that, the entire structure of the business folded.

You couldn’t rely on word of mouth, flyers, or bulletin boards. A rise in online shopping for a contactless experience became the thing to do. What did this mean for those who didn’t even have social media?

Dive Head-First Into Digital
Pride has to be replaced by necessity in terms of entering the digital world with your business. You have to be mindful of social media, you have to have a website, and you can’t rely on physical customers to do your bidding. Forget about getting used to the water. Jump in and hope you to swim and stay afloat.

If you want your business to survive now and in the future with the pandemic at large, you can’t wait for things to go back to normal. You have to move forward and adapt to the changes, and they need to be made now.

Transitioning to Digital Marketing
Everything seems to be done on a smartphone or computer device, including making purchases for everyday needs. To expand your clientele and remain in full operational order, the use of digital marketing is more than a requirement. It is the only lifeline that most businesses have. Business owners cannot expect to survive during COVID-19 if they don’t transition to a digital marketing strategy. Make sure your business has an adequate, modern website that is mobile-friendly and user-friendly. Customers should be able to easily contact you or buy through your website on all devices so that you do not miss out on any potential sales.

Business practices and catering to the customer have not changed in your marketing structure, only the method in which it is delivered. Customers need to feel safe during their purchases, and they feel better doing things online. Businesses will not survive this new age if they do not turn to the digital marketing platforms required to reach these customers.

World War I – The Threat to Survival

While travelling on a train to the West, Leon Tucker spoke to a Jew about Israel. The Jew said he was perfectly satisfied in the United States. His home was there, his business was there, and his family had become established there. He was not interested in Jerusalem of the building of the nation of Israel.

“Stretch out your right hand,” Tucker said. The Jew held out his right hand and Tucker looked at it. Then he said, “Stick out your tongue, please.”

“Are you trying to make a fool of me?” the Jew asked.

“No,” Tucker replied, “but I would like to see your tongue.” The Jew stuck out his tongue.

Tucker looked at it and quoted from Psalm 137:5, 6: “If I forget thee, O Jerusalem, let my right hand forget her cunning. If I do not remember thee, let my tongue cleave to the roof of my mouth; if I prefer not Jerusalem above my chief joy.”

The Jew bowed his head and with tears said, “I have never been so rebuked in my life.”

The Young Idealists

The years following the founding of Zionism demonstrated that many Jews had indeed forgotten Jerusalem. Having become comfortable, especially in the West, most Jews preferred to stay in the nations to which they had wandered.

Just before the turn of the century, however, there was a wave of Jewish immigrants to Palestine. Moved by Herzl’s book and his eloquence, a number of young idealists came as pioneers to the land of Abraham, Isaac, and Jacob.

Many of these new arrivals were students. The education they were to receive in their chosen land was to be a difficult one. Palestine was under the control of Turkey, a nation hostile to Jews. The land was denuded of forests and most of it had returned to desert. Ancient terraces that had once protected the soil of Israel had long been destroyed, and erosion had conquered much of the area. The vital partnership of soil and farmer, so needed for agricultural success, had been broken for centuries and conditions were deplorable.

Mark Twain, who visited Palestine in 1867, described it as:

…a desolate country whose soil is rich enough, but is given over wholly to weeds — a silent mournful expanse. …A desolation is here that not even imagination can grace with the pomp of life and action…. We never saw a human being on the whole route…. There was hardly a tree or a shrub anywhere. Even the olive and the cactus, those fast friends of a worthless soil, had almost deserted the country.

Even as late as 1913, the report of the Palestine Royal Commission quotes an eyewitness account of the Maritime Plain as follows:

The road leading from Gaza to the north was only a summer track suitable for transport by camels and carts. …No orange groves, orchards or vineyards were to be seen until one reached Yabna village…. Not in a single village in all this area was water used for irrigation…. Houses were all of mud. No windows were anywhere to be seen…. The ploughs used were of wood…. The yields were very poor…. The sanitary conditions in the village were horrible. Schools did not exist…. The rate of infant mortality was very high…. The western part, towards the sea, was almost a desert…. The villages in this area were few and thinly populated. Many ruins of villages were scattered over the area, as owing to the prevalence of malaria; many villages were deserted by their inhabitants.

But this hostile land would be tamed. The desert would yet blossom as the rose.

As the years passed, trained people would arrive — scientific farmers, irrigation experts, builders of factories and cities, educators, and thinkers. These immigrants of diverse abilities and interests would in the next three- quarters of a century bring the dead land to life a gain. But what a task lay before them!

By 1914 there were about 100,000 Jews in Palestine, mostly in the area of Jerusalem. Though Herzl was no longer living, his dream was beginning to materialize. Foundations were being laid. Preparations were being made for the birth of a nation. Then World War I broke out.

Caught in the Middle

World conflict was especially unwanted by the Jews. Being small in number and finding themselves caught in the middle of strategic territory held by Turkey and desired by Great Britain, many Jews feared the worst — death of their nation before its birth, the abortion of Israel, the destruction of Zionism.

Turkey’s alliance with Germany threatened disaster to Jews in Palestine. Work had to be halted on the homeland. Jews with citizenship in any of the Allied nations were deported. Some Jews were forced to accept Turkish citizenship. Dozens were executed, accused of spying for the Allies.

Another problem for Jews in World War I was a division of loyalties. Jews fought on both sides of the conflict, and with equal patriotism. Unlike World War II, when Germany was an enemy of all Jewish people and thus unified them, World War I offered no such clear-cut decision. Jews in Germany were generally loyal to that land and served with devotion.

War Does Not Take God by Surprise

Although World War I brought great difficulties to the Jews and made the development of their homeland precarious, there were some important positive results from that tragic conflict.

Students of the Bible understand that all events work out God’s great plan. Even war does not take God by surprise. The working out of His program is not affected by the violence of man: “Surely the wrath of man shall praise thee: the remainder of wrath shalt thou restrain” (Ps. 76:10).

The first positive spin-off from World War I was the issuing of what is known as the Balfour Declaration. Eager to involve the Jews on the side of the Allies and being especially concerned about their strategic location near the Suez Canal, British foreign secretary Arthur James Balfour, on November 2, 1917, sent the following declaration to Lord Rothschild expressing British sympathy with the cause of Zionism:

His Majesty’s Government views with favour the establishment in Palestine of a national home for the Jewish people, and will use their best endeavours to facilitate the achievement of this object, it being clearly understood that nothing shall be done which may prejudice the civil and religious rights of existing non-Jewish communities in Palestine or the rights and political status enjoyed by Jews in any other country.

British support for the establishment of the State of Israel was now on paper and declared to the world. If the aim of that move was to gain Jewish participation in the war, it was successful. The publication of the Balfour Declaration produced Jewish volunteers for service from Great Britain and other nations, especially the United States. It appeared now that instead of destroying Zionism, as had been feared, World War I would actually play an important role in establishing the Jews in their land.

Freedom for Jerusalem!

The second important development in the wartime drama was the arrival there of British General Allenby. The conquest of Jerusalem became one of his first objectives, and the success of his effort is well known.

The Balfour Declaration had been issued on November 2, 1917. One month later, General Allenby freed Jerusalem from the Turks. On December 9, 1917, Allenby’s forces liberated Jerusalem without firing a shot. When the Turks had discovered that a general was on the way whose name was Allenby (to them “Allah Bey” — the Prophet of God), they had taken this to mean God was against them and they evacuated the city. It is also said that seeing airplanes in battle for the first time panicked the Turks because they were aware of Isaiah’s promise of Jerusalem’s deliverance: “As birds flying, so will the LORD of hosts defend Jerusalem; defending also he will deliver it; and passing over he will preserve it” (Isaiah 31:5).

Whatever the reasons, Jerusalem was free and the Jews rejoiced. And what a great occasion that victory must have been for General Allenby! He later told how as a boy as he knelt to say his evening prayers he had been taught by his mother to pray: “And 0, Lord, we would not forget thine ancient people, Israel. Hasten the day when Israel shall again be Thy people and shall be restored to Thy favour and to their land.” At a reception given for him in London, Allenby said, “I never knew that God would give me the privilege of helping to answer my own childhood prayers.”

Statehood for Israel

A third benefit resulting from World War I was the public and official appreciation given to Dr. Chaim Weizmann, a Jew, for his contribution to the war effort of the Allies. Weizmann, who was born in Russia in 1874, studied chemistry in Germany and then taught at universities in Switzerland and England. During World War I he devised an improved method of making acetone, which is used in making explosives. This discovery may actually have affected the outcome of the war.

The prime minister of England credited Weizmann with saving the British army because of his work in providing explosives. When Great Britain tried to reward Weizmann for his work, he said, “There is nothing I want for myself, but there is something I would like you to do for my people.” Weizmann requested the establishment in Palestine of a national homeland. It was generally thought that his work had a great deal to do with bringing about the Balfour Declaration. Weizmann later became the first president of the State of Israel.

Following the war, the newly formed League of Nations approved the providing of a national homeland for the Jews as outlined by the Balfour Resolution. President Woodrow Wilson proposed that the land of Palestine be under a British mandate as a temporary arrangement, the ultimate aim being emancipation and independence of that area. The proposal was adopted and the Jews rejoiced.

All seemed ready now for the fulfilling of the words of the Hebrew prophets concerning the return of the Jewish people to their land:

For thus saith the Lord God; Behold, I, even I, will both search my sheep, and seek them out. As a shepherd seeketh out his flock in the day that he is among his sheep that are scattered; so will I seek out my sheep, and w ill deliver them out of all places where they have been scattered in the cloudy and dark day. And I will bring them out from the people, and gather them from the countries, and will bring them to their own land, and feed them upon the mountains of Israel by the rivers, and in all the inhabited places of the country. I will feed them in a good pasture, and upon the high mountains of Israel shall their fold be: there shall they lie in a good fold, and in a fat pasture shall they feed upon the mountains of Israel. I will feed my flock, and I will cause them to lie down, saith the Lord God (Ezekiel 34:11 — 15).

But the battle was far from won. Difficult days were ahead for the Jews. The British mandate in Palestine did not turn out as the Zionists had hoped. Disappointment lingered. The vision of hundreds of thousands of Jews pouring into Palestine would have to wait another generation for fulfillment. Frustrating quotas allowing only small numbers of Jewish immigrants plagued the planners of this new nation. The struggle continued.

But What of the Arabs?

Hoping to keep peace with the Arabs, the British placed ridiculously small immigration quotas on the Jews. In 1930, a Royal Commission of Inquiry under agricultural and settlement expert Sir John Hope Simpson concluded that only 20,000 more settlers could be admitted to the land without forcing the Arabs out. At that time there were approximately 850,000 Arabs and 170,000 Jews living there. Simpson could not foresee that in the years to come millions would occupy the area, enjoying a far higher standard of living then he observed in 1930.

To support their restrictions of Jewish immigration, the British issued a series of “white papers” that supposedly gave good reasons for their action. The most shocking of the policies set forth in these official documents was the declaration that within a specified time a majority vote of the Arabs could halt all Jewish immigration. Of the final of these infamous papers, Winston Churchill said:

There is much in this white paper which is alien to the spirit of the Balfour Declaration, but I will not trouble about that. I will select the one point upon which there is plainly a breach and repudiation of the Balfour Declaration, the decision that Jewish immigration can be stopped in five years time by an Arab majority. This is a plain breach of a solemn obligation.

Others joined Churchill in protesting the injustice, but the British continued their restrictive action throughout their mandate. It would take another global war to finally build Jewish resolution sufficient to break down the barriers that made it illegal for them to reenter the land.

Winning the War but Losing the Peace

Hindsight declares that in World War I the Allies won the war but lost the peace. One of the reasons for this tragedy was the bitterness born in a young Austrian corporal in the German army named Adolf Hitler.

Angered at the humiliation brought to his people by the Treaty of Versailles that ended World War I and bitter about society in general, Hitler set out to get revenge. He found a sympathetic following among many of the veterans of the defeated German army and later, in the economic chaos that befell Germany, among a good portion of the population. His ultimate political success, making him dictator of Germany, became one of the most regrettable developments of the twentieth century.

Though volumes have been written attempting to analyze the troubled mind of Adolf Hitler, his hatred of the Jews found expression in such inhuman policies and practices that they can only be attributed to satanic influence.

Taking the reins of the German government, he would embark on a binge of bloodshed that would victimize all nations. But none would suffer as the Jews. Six million of the children of Israel would die at the hands of Hitler and his henchmen. The world would never be the same again, and Jews everywhere would be determined to settle for nothing less than a land of their own — the land of their fathers.

Economic Survival in the 21st Century – the Three Key Questions to Ask

In this “special report”, I want to pose a few important “philosophical questions” to my readers. Firstly — our Federal Reserve Chairman, Alan Greenspan, addressed the effects and implications of our aging population on things such as Social Security again in a speech [http://news.yahoo.com/news?tmpl=story&u=/ap/20040828/ap_on_bi_ge/greenspan_32] that he made last Friday. Readers may remember that I also briefly mentioned this issue in my June 24th commentary. I urge you to keep this worldwide phenomenon of the aging population firmly on the back of your minds. If you are like most people, then you earn you living by producing a certain thing – such as a consumer good, or a service that the masses want. Let’s face it – how many people really “struck it rich” by being pure traders or investment managers? The stock market and other financial markets are definitely very important to us investors/traders but this “super secular trend” of the aging of the worldwide population will impact every aspect of our lives, whether it is losing our relative competitiveness on the world arena, increasing pension and healthcare costs, or even a potential fundamental change of our political system.

The second question that I want my readers to think about is the potential end to the era of cheap energy prices – an era which we have basically enjoyed for the last two decades without thinking of the long-term repercussions. The United States, with less than five percent of the world’s population, currently consume approximately 25% of the world’s energy each year. Supply is maturing while demand continues to surge – as exemplified by the surging in demand from China and India. In the meantime, spare energy-producing capacity and inventory levels have been at all-time lows – potential for a perfect storm?

Finally, I want to ask my readers the following question: What kind of investor are you? What investing style do you adopt and what investing style are you most comfortable with? Can you be a contrarian and buy when the crowd is selling or are you merely a follower who is only comfortable if you fit in? These are straightforward questions – but these are questions that you really need to ask yourselves in order to truly make money in investing over the long run. If my readers take the time out to thinking about these three questions or issues – and ultimately have a firm grasp of even just one of the issues – then you will be in a much better economic situation than most Americans five to ten years from now.

To begin, what are the potential implications of the “aging population” phenomenon? Readers my recall that in my June 24th commentary, I stated: “Assuming that the current level of benefits remain into the future and assuming the level of taxes is not raised, then public benefits to retirees would dramatically increase going forward. On the extreme end, Japan and Spain will see a more than 100% increase in their outlays to retirees. Clearly, this is not sustainable. Either things such as defense or education spending will need to be cut, or the above countries will need to raise their taxes. Neither of the two scenarios is optimal. Borrowing more of their funds is not a long-term solution. Cutting funding in defense and education will comprise a country’s future, and raising taxes will place a huge social and financial burden on the population of the developed world – where taxes are already at a historically high level. Think about this: If you were a bright, young, French industrialist and you were forced to pay 60% of your income as taxes to support the elderly, what would you do? Why, you would vote with your feet and relocate to another country that is more tax-friendly and business-friendly – and so will other great talent that may have been a great contribution to the French economy. The governments of the developed world recognize this – but there are no easy solutions.

“This picture gets grimmer when one takes note of a study that was done by the Bank Credit Analyst. In that study, the BCA predicts that by the year 2050, the percentage share of the developed countries of the global population will drop from over 30% in 1950 to less than 14% — or about equal to the population of the Islamic nations of the world. Similarly, Yemen will be more populous than Germany in 2050; while Iraq will be 30% more populous than Italy (Iraq is less than 40% the size of Italy today). Russia’s population is projected to continue to decrease – at a rate such that the population of Iran will be even higher to that of Russia’s in 2050. India will be the most populous nation in the world, and Pakistan will only lag the U.S. by approximately 50 million people. If the developed countries of today do not choose to work harder or become more efficient, then they will ultimately lose their comparative advantage, as the younger population of the world is inherently more hard-working, energetic, innovative, and creative. In today’s globalized world, this will be a killer for the average worker in the developed countries – the more so once the language barrier is eliminated (the successful commercialization of universal language translators is projected to happen in ten to fifteen years). I am generally more optimistic, as the elimination of the language barrier will greatly enhance business opportunities and efficiencies, but a person such as the average American worker will loss his or her comparative advantage in the global workforce. The availability of a huge supply of labor should also drive down wages in the global marketplace – and most probably increase the maldistribution of wealth in today’s developed countries.”

Like I have mentioned before, there are no easy solutions. If the average American sees an increase of 10 years in his or her life expectancy, can he or she reasonably or logically retire at the current normal retirement age of 65 (which was determined during the Roosevelt administration during the 1930s) without placing an undue burden on the system? The answer is most probably “no.” Applying the same working-years-to-retirement-years ratio to his or her new life expectancy, then the average American should probably work around five to six years more – thus giving a revised normal retirement age of 70 or so. Moreover, all this analysis is based on the outdated population distribution in the form of a pyramid – where the younger and more able workers represent a majority of the population (and where the elderly represents only a small minority of the general population). The pyramid distribution has historically facilitated government support of the elderly – as the monetary and social burdens have been shouldered by a relatively large younger population. The current experience of Europe and Japan suggests a more uniform distribution in the population of those countries going forward – as the birthrate in those countries are now dismally below the replacement rate of the population. The situation in the United States is not currently as drastic (given our relatively lax immigration policy) but we are heading towards the same direction. Thus to maintain the current standard of living at retirement, my guess is that the general population will not only have to work longer, but work longer hours in the present (and save more) as well.

The situation is more alarming when one considers that the combined population of China and India makes up over 1/3 of the world’s population. The number of unemployed workers in China is greater than the entire labor force of the United States. The competition for relatively unskilled jobs will continue, and it promises to accelerate going forward. The average American who does not stay ahead of the curve or does not keep pace of the trend will find his or her job being outsourced – not to mention the average wage being driven down by global competition. I, for one, believe that this continuing trend of globalization will make the world a better place, as hundreds of thousands of people will finally be empowered as they climb out of absolute poverty (again, over half of the world’s population currently live on less than two dollars a day) – and as the prices of consumer goods are driven down still further. The average American will probably disagree, but the trend of globalization and “offshoring” will not stop. The last time the United States adopted economic and military isolationism we had a Great Depression and subsequently, World War II. I sincerely do not think that this was a coincidence.

The trend of the general aging population and globalization will have a profound impact on all Americans. Ultimately, I think all Americans will benefit – although it may not be clear to people who are losing their jobs today. For the initiated and nimble, you will not only survive but thrive in these “interesting new times.” Imagine a market for your product that is over ten times the size of the population in the United States. China and India has historically disappointed – as the citizens of those countries have historically been too poor to consume much U.S. goods and services. Globalization and offshoring will change all these. A world more equalized economically will also mean a much more secure and less conflictive world.

Now, I want to address a similar concern of all Americans – as the era of cheap energy (basically the cheap energy prices as experienced by Americans for the last twenty years) comes to a close. While I think oil prices will decline in the short-term (i.e. for the next few months), I am longer-term bullish on both oil and natural gas prices (I will only discuss oil in this commentary). Consider the following:

The world supply of oil is flattening out. Readers may not know this, but the United States today still produce enough oil to satisfy approximately 40% of total domestic demand. The United States also had 22.7 billion barrels of proved oil reserves as of January 1, 2004, eleventh highest in the world. According to the Energy Information Administration (EIA), the United States produced around 7.9 million barrels per day during 2003. This is down sharply from the 10.6 million barrels averaged in 1985. The peak of domestic oil supply occurred sometime during the 1970s. Today, total domestic production is at 50-year lows – and still falling.
While Saudi Arabia (the world’s top exporter and contains 25% of the world’s reported reserves) has claimed that there are and will be no supply problems for the next few decades, they have not been transparent with their reserves data. According to Simmons & Company International, five to seven key fields in Saudi Arabia produce 90% to 95% of its total oil output – all but two fields are extremely old – with the last major find reported in 1968. The last publicized reserves data was in 1975 – when Saudi Aramco was still managed by Exxon, Mobil, Chevron and Texaco. In that report, the world’s best experts determined that all the key fields at that time contained 108 billion barrels of oil in recoverable reserves. If this holds true, then the peak of supply in Saudi Arabia will come soon. Moreover, if the report is correct, then there is really no “plan B” (unlike during the 1970s when the center of power shifted from the Texas Railroad Commission to OPEC due to the peaking of supply in the United States) – crude oil prices will soar.
The “last frontier” for the production of oil (namely the North Sea, Siberia, and Alaska) is now aging. Most companies are now struggling in order to even maintain their current production levels.
World oil demand continues to grow. Oil demand in the early 1990s stayed relatively flat (at around 66 to 68 million barrels per day) but over the next ten years to today, world oil demand increased 14 million barrels per day. Today, total world oil demand is greater than 82 million barrels per day. The energy “experts” who in the early 1990s predicted a flattening of oil demand growth and who wrote off demand growth in developing countries were dead wrong.
No new refineries have been built in the United States for the past two decades, even as refineries have been closing every year during that same time period. Refining capacity from 1981 to the mid 1990s also dropped drastically (this author estimates a drop of approximately 6 million barrels per day in refining capacity during that time period). Since 1994, however, an expansion in refining capacity at existing refineries has contributed to an increase in refining capacity from 15.0 million barrels per day to 16.7 million barrels per day (as of today). Despite this expansion, however, domestic refining capacity is still stretched to the limit, as utilization at U.S. refineries is now averaging nearly 90% — leaving no cushion room if something unforeseen happens.

There are currently three factors at work which should contribute to a continued increase in the world oil price – the maturing of supply, growing demand, and the lack of a cushion in refining capacity and low inventories. The “culprit” has usually been labeled as China, but it is interesting to note that the United States has had virtually no domestic energy policy (in terms of conservation and encouraging the development of alternative fuels) for the last twenty-something years. China demand, however, has soared over the last few years. It is now the second biggest oil consumer, having just surpassed Japan for the title. Demand for oil in China has more than doubled over the last 10 years (to today’s 6 million barrels per day), and this amazing increase is projected to continue, especially given the fact that oil demand in China is still a lowly 2 barrels per person per year (compared to 25 barrels per person here in the United States). Furthermore, it is interesting to note that the number of cars in China only totaled 700,000 as late as 1993 and 1.8 million as late as 2001. Today, the number of cars in China totaled more than 7 million – and this number could potentially have been much higher if not for the Chinese government intervention in limiting the number of cars that could be sold and driven each year. Now the most scary part: Current oil demand in India is only 0.7 barrels per person per year – given this fact, oil demand in India could potentially explode over the next decade – barring a huge worldwide economic recession or depression.

I believe my readers should be made aware of the current energy supply/demand situation. Given the above, what is the best course of action for the average American? How about the best course of action if you were the head of a motor company like GM or an airline pilot employed by a legacy airline like Delta? How about the best course of action for a mutual fund manager or a commodity fund manager? Since there are no easy solutions, there should be no easy answers either. In the short-run (three to five years), Americans will have to pay up if we want to drive gas-guzzling SUVs, and legacy airlines like Delta will have to continue to cut costs by probably further slashing labor costs as their first priority. A further improvement in extraction technology should help, but the serious development of alternative fuels will have to start now. I also believe that the next serious decline will be induced by a combination of an “oil shock” and a rise in interest rates. Readers may recall the relative strength chart that I developed in my August 15th commentary showing the AMEX Oil Index vs. the S&P 500 and the huge potential inverse heads and shoulders pattern in that chart. For now, the relative strength line should bounce around the neckline (the line drawn on that chart) – possibly even for a few years – but once the relative strength line convincingly breaks above the neckline, crude oil prices could rise to $80 or even $100 a barrel. I sure hope that my readers would not be taken by surprise if gas prices at the pump soars to $4.00 a gallon five to six years from now.

Finally, I want to pose to my readers the following question: Have you taken the time out to learn more about your psychological makeup and how it has affected your investment or trading decisions? What type of person are you when it comes to the market? Are you a so-called buy-and-holder, a swing trader, or a day trader? An independent thinker, a contrarian, a momentum investor or merely a follower? I am asking you these questions because of my following considerations:

This author believes that we are currently in a secular bear market in domestic common stocks. While I believe that this current rally still have more room to go, I believe that a cyclical bear market will emerge in due time – this upcoming cyclical bear market may even take us back or below the lows that we hit during October 2002. If this is true, then a buy-and-hold portfolio would definitely not work – unless you were in natural resources or precious metals mining stocks.
When this cyclical bull market tops out, all your friends, relatives, and the popular media will be telling you to buy more or to hold your common stocks. The bears and all bearish thoughts will be ostracized and frowned upon. This has happened in every bull market in everything in all human history. If you are in cash now, would you be able to remain in cash when the top finally comes or will you be unable to resist and buy in because you are afraid of “the train leaving the station without you,” so to speak?
Most people are inherently not good day traders or even swing traders. To be good in even the latter, you need a huge amount of dedication and discipline.

Investing or trading has always been dominated by emotions and always will be. My thinking in starting www.marketthoughts.com has always been that that if I can get my readers to buy in now, it will be a much easier decision for them to sell and hold cash once the DJIA reaches 11,000 or 12,000 or so – as opposed to being in cash and staying out for the rest of this secular bear market. 99% of Americans are just not disciplined or dedicated enough to stay in cash during a secular bear market – not to mention staying in cash during the entirety of a secular bear market and buying and holding common stocks during the entirety of a subsequent secular bull market. The average human psyche is just not capable of doing this. Because of this, I sincerely believe that success in the stock market (for most people) during the next five to ten years would involve catching the swings at the right or near-right times. For readers who just cannot resist, I am also going to continue to recommend some common stocks at opportune times, but in no way should my readers take my recommendations as gospel and in no way should my readers put all their eggs in one basket. If you are a person who can stay in cash for the next ten years and wait until the Dow Industrials has a P/E below 10 and a dividend yield of over 5%, then more power to you – you are either already rich who have no need to make money in the market anyway or you are a very disciplined and independent-thinking person. Most Americans just cannot do that – but I am here to help.