It’s not just a huge overhang of debt, a lack of confidence, or a bank run that poses a risk to the banking system.
Read on to discover what perhaps the biggest ongoing threat is to the banking system…
By Justin Spittler
The banking system is under attack.
This might sound like a familiar warning if you’ve been reading the Dispatch.
All year, we’ve been saying that low interest rates are killing banks. We’ve also shown you that borrowers are falling behind on their debts at the fastest pace since the financial crisis. If this continues, some of the world’s biggest lenders could take heavy losses.
These are serious problems. But there’s an even bigger threat to the banking system…one that could erase your life savings overnight…
We’re talking about cyberattacks.
• To understand why this is such a danger, think about the money in your bank account…
What is it really?
It’s certainly not a claim to gold or other hard assets. It’s not even cash. Your local bank branch probably has less than $100,000 in its vault right now. That’s not nearly enough to cover everyone’s deposits.
Your “money” is just bytes in a computer. It’s backed by nothing but confidence in the banking system.
That’s good enough for most folks. They assume the banking system is safe…but that’s a dangerous assumption.
Hackers have already stolen millions of dollars from the world’s biggest banks. They’ve even broken into the world’s most powerful central bank. If these “sophisticated” institutions can’t protect their own money, there’s no way they can protect your money.
The good news is that there are simple, proven ways to protect yourself from a cyberattack. You can even profit from this new “global epidemic”…as many Casey readers have done this year.
• Millions of cyberattacks happen every day…
JPMorgan Chase (JPM) recently said it receives more than 200 million malicious emails every month. That’s almost 7 million a day.
And that’s just one bank. According to the 2016 Norton Cybersecurity Insights Report, 19 cybercrimes happen around the world every second. That’s 594 million victims per year—nearly twice the population of the U.S.
• Hackers have even infiltrated the Federal Reserve…
In February, hackers exploited a critical weakness in the Fed’s computer system. Basically, they used a virus to hijack SWIFT, a messaging service that banks use to “talk” to each other. They then wired money from the Fed to an offshore bank account.
The hackers tried to steal $951 million. They “only” got away with $81 million, which came from Bangladesh’s account at the Fed.
• It was one of the biggest bank robberies in history…
But it certainly won’t be the last.
You see, central banks and other major financial institutions use SWIFT to communicate with each other. The service has about 11,000 members. It’s a critical part of the global financial system.
This week, SWIFT admitted that there have been numerous successful cyberattacks on its system since the infamous Bangladesh hack. Reuters reported on Wednesday:
In a private letter to clients, SWIFT said that new cyber-theft attempts – some of them successful – have surfaced since June, when it last updated customers on a string of attacks discovered after the attack on the Bangladesh central bank.
“Customers’ environments have been compromised, and subsequent attempts (were) made to send fraudulent payment instructions,” according to a copy of the letter reviewed by Reuters. “The threat is persistent, adaptive and sophisticated – and it is here to stay.”
According to Reuters, hackers are preying on the most vulnerable banks:
The disclosure suggests that cyber thieves may have ramped up their efforts following the Bangladesh Bank heist, and that they specifically targeted banks with lax security procedures for SWIFT-enabled transfers.
• Hackers stole money in some of these attacks…
SWIFT didn’t say how many attacks were successful, or name which banks were hit. It didn’t say how much money was lost either.
Here’s what we know, according to Reuters:
All the victims shared one thing in common: Weaknesses in local security that attackers exploited to compromise local networks and send fraudulent messages requesting money transfers, according to the letter.
In other words, there’s a fatal flaw in the financial system, and hackers are exploiting it.
• SWIFT has urged banks to step up their defenses…
SWIFT has repeatedly pushed banks to implement new security measures rolled out after the Bangladesh heist, including stronger systems for authenticating users and updates to its software for sending and receiving messages. But it has been difficult for SWIFT to force banks to comply because the nonprofit cooperative lacks regulatory authority over its members.
According to Reuters, regulators are also pressuring banks to improve their defenses:
The Bank of England in April ordered UK firms to detail actions to secure computers connected to the SWIFT system, while the European Banking Authority in May said domestic authorities should stress test banks for cyber risks.
The Federal Reserve and other U.S. agencies told banks in June to review protections against fraudulent money transfers.
Unfortunately, many banks have been slow to update their systems. If you have a bank account, your money could be at serious risk.
• We encourage you to move money outside the digital financial system immediately…
You could start by withdrawing enough paper cash for you and your family to live on for six months. You could store the money in a safe, storage unit, or even under your mattress.
We also encourage you to own physical gold. Gold is a tangible asset. Hackers can’t erase or steal your gold coins with a click of a mouse.
These are simple, effective ways to protect yourself from a cyberattack. Still, most people will never take these steps.
Despite obvious red flags, most people still trust the banking system. Or they think the government will take care of them. Don’t make that mistake.
• If a hacker robbed your bank account, there’s no guarantee you’ll get your money back…
Even if your bank returns your money, the process could take weeks, even months. Most Americans couldn’t go that long without access to their money.
Setting aside cash and owning physical gold will prepare you should the “unthinkable” happen.
You can learn other easy ways to protect yourself by reading our new special report. Hundreds of hours of research went into this guide. It includes insights from top cybersecurity experts, plus seven essential steps to protect your money from a cyberattack. Click here to grab your copy now.
• Cybercrime may be a huge threat to your wealth, but it’s also an opportunity…
According to British insurance company Lloyd’s, businesses lost about $400 million last year due to cybercrime. It expects cybercrime to cost businesses $2 trillion a year by 2019.
In other words, banks have huge incentive to upgrade their defenses.
According to Bloomberg Technology, the string of recent highly publicized attacks has “spurred financial firms to try to fend off attacks by hiring thousands of employees to monitor threats and upgrading their technology.” Bank of America has committed an “unconstrained budget” to securing its system.
Banks aren’t the only companies who have to defend themselves either. The CEO of tech giant IBM recently called cybercrime “the greatest threat to every profession, every industry, every company in the world.”
The rise in cyberattacks is a huge problem for most businesses. But it’s a giant opportunity for companies that sell cybersecurity solutions.
• A cybersecurity company helps your bank, stockbroker, and credit card company fend off hackers…
They keep your money and personal information safe.
Chris Wood, editor of Extraordinary Technology, says business is booming for these companies. The market is expected to grow at a compound annual growth rate of 18% over the next five years. By 2020, it’s expected to be a $170 billion market.
To take advantage of this opportunity, Chris recommended two cybersecurity stocks this year.
One of those stocks, Qualys (QLYS), has surged 39% since Chris recommended it in April. The other, Varonis Systems (VRNS), is up 45% since he recommended it in May.
Chris says both stocks should head much higher in the coming years. But he doesn’t think you should buy them at current prices, after their big runs.
The good news is that Chris has other exciting technology companies in his portfolio right now.
Yesterday, he told his readers about a semiconductor company that could “safely make you 200% gains” in the coming years. Opportunities to safely triple your money don’t come along often. When they do, you have to take advantage of them.
You can learn more about this big money-making opportunity by signing up for Extraordinary Technology. Click here to begin your risk-free trial.
Chart of the Day
The jobs market isn’t as strong as economists thought…
Today, the Bureau of Labor released its monthly jobs report. You can see in the chart below that the U.S. economy added 151,000 jobs last month. That’s 29,000 fewer than economists expected. Wages also grew less than forecasted.
News of the bad jobs report rippled across financial markets.
As we go to press, the S&P 500 is up 0.3% on the day. The U.S. dollar is up 0.2%, after being down 0.4% in early trading. Meanwhile, gold is up 0.7% while silver’s up 1.8%.
These moves suggest the Federal Reserve could keep interest rates low for longer. As you probably know, the Fed has held its key rate near zero since 2008. Last December, the Fed raised rates (by 0.25%) for the first time in almost a decade. It’s been saying all year that it plans to keep raising rates.
Going into today, many traders thought the Fed would raise rates at its next meeting, which takes place on September 20–21. After today’s weak jobs report, it looks like the Fed could wait until December.
MarketWatch reported this morning:
The Federal Reserve could still raise interest rates in September but a move at the last meeting of the year is more likely, experts said Friday in the wake of the August jobs report.
Keep in mind, the Fed’s key rate is at 0.39% right now. That’s well below its historic average of 5.0%.
If the economy was actually doing well, the Fed would bring rates back to normal. Instead, it’s holding rates near zero because it knows our fragile economy can’t stomach higher rates.