Thursday, October 01, 2009

Well, that was ugly...

Market recap: For the second straight time we turned the calender to a new month and stocks promptly sold off. However, for the first time in recent memory the market took a strong leg down in the last few minutes of the day, much like it did back in Feb/Mar and last fall. Technically we've cracked a few near-term supports and any hint of weakness in tomorrow's jobs report (out at 8:30am tomorrow) might help gather some steam to the downside. However, if the jobs report manages to come in as expected the market could be back off to the races. Fun times!

As of tonight this is still a relatively small story, but this is an enormous risk to our economy and one that needs to be monitored closely.

Banking Trojan steals money from under your nose

"Researchers at security firm Finjan have discovered details of a new type of banking Trojan horse that doesn't just steal your bank log-in credentials but actually steals money from your account while you are logged in and displays a fake balance.

The bank Trojan, dubbed URLZone, has features designed to thwart fraud detection systems which are triggered by unusual transactions, Yuval Ben-Itzhak, chief technology officer at Finjan, said in an interview Tuesday. For instance, the software is programmed to calculate on-the-fly how much money to steal from an account based on how much money is available.

"It's a next generation bank Trojan," he said. "This is part of a new trend of more sophisticated Trojans designed to evade antifraud systems."

Imagine that! You're calmly looking at your bank statement and basking in the glow of your $67.42 while a software code is swiping money out of your account and displaying a fake balance. Given the growth of online banking globally, you can't underestimate the impact this could have on global commerce if this trojan gets perfected.

This analogy at market talk sums up my concerns with the US economy. We're a car without an engine.

There’s a lot of talk of revival and V-shaped recoveries these days. But so far, the only thing holding up the economy is still government support, and I have not yet heard one good explanation of what’s going to come along to replace Uncle Sam’s helping hand.

Essentially, the economy is like a car without an engine, and the government is driving the tow truck. What is going to drive consumer demand, which will drive inventory rebuilding, which will drive hiring and wages, which will drive consumer demand again?

It is very important to understand that the government’s gone far beyond what it usually does to combat recession. Trillions have been thrown into the economy in an all-out effort to stop the slide into depression and restore consumer spending patterns. Bailout schemes that involve hundreds of billions of (borrowed) taxpayer monies have become routine.

At some point, some thing in the private sector is going to have to replace those government supports. It hasn’t come along yet, but a lot of people aren’t waiting for it to appear.

But I have not read or heard anywhere one person explain credibly what’s going to replace government stimulus. What’s going to be the Cabbage Patch doll that gets the economy humming again? Housing? Finance? Tech?

Anybody who thinks government spending somehow can create a self-sustaining recovery should look very closely at the cash-for-clunkers program. The boys down in Washington decided to juice auto sales (not a bad idea in itself, seeing as We the People own two auto companies) by offering a $4,500 rebate on new-car sales. It worked like a charm - until it ended. Auto sales are now trending below the levels they were seeing before the program started.

Clean affordable water, clean energy, clean transportation, safe, healthy food production, nanotech, etc could be the drivers of economic growth as the globe adds another 2.5 billion people in the next 50 years, but I don't see us rushing to lead in any of these industries.

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