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Fighting the Cyberwar

By Benjamin Shepherd on May 31, 2016

Memorial Day is one day past and hopefully we all took time to remember those who gave their lives in defense of our country. Since 1776, more than 1.3 million Americans have fallen to not only protect our own freedoms, but to liberate our friends and allies around the world.

With that remembrance fresh in our minds, today’s a good day to think about how war and conflict is evolving. A century and a half ago, wars were largely set-piece affairs, throwing one line of soldiers into another. When World War II began 75 years ago, huge armies were broken down and maneuvered in smaller mechanized units that covered countries.

These days, battlefields aren’t always fought on the land, in the water or in the air. Increasingly, nations are turning to the Internet to fight their battles and achieve their goals.

One of the most recent – and most dramatic – examples of that came in February. What are now believed to be state-sanctioned North Korean hackers compromised the SWIFT messaging system, which banks use to move roughly $6 trillion around the banking system every day. While three Asian central banks were targeted, the attackers made off with about $81 million from the central bank of Bangladesh’s account with the U.S. Federal Reserve.

That’s pretty scary since SWIFT is widely acknowledged as the world’s most secure financial messaging system. Even scarier: this marks the first time one country has tried to steal money from another in a cyber attack, and some are arguing that the attack could be considered an act of war. The same thing was said when the Stuxnet virus emerged about six years ago. That virus is now widely believed by security researchers to have been a U.S.-Israeli creation, aimed at disabling Iran’s nuclear program and which just happened to escape into the “wild.”

It’s not hard to imagine a scenario where these cyber attacks could spark a shooting war, especially if two large, prosperous countries are involved.

While state sanctioning of these kinds of attacks is considered relatively rare, it’s believed that there are 80 to 90 million cyberattacks each year. Governments and businesses around the world spent about $75 billion fighting them in 2015 and that price tag is expected to swell to $170 billion by the end of this decade. Before too much longer, we’re going to see cyber-security firms included in the ranks of the traditional defense companies as key hedges against conflict.

Since the Bangladeshi bank cyber-heist became known February, the NASDAQ Composite has risen roughly 15%. Over that same period the PureFunds ISE Cyber Security ETF (NSDQ: HACK), which holds a basket of 33 companies whose primary business is Internet security, is up by nearly 22%. People are clearly worried about cyber security and cyber security firms are increasingly profitable investments.

When you’re building a portfolio of technology stocks, you can’t afford to ignore the security side of the sector anymore. Not only do cyber security companies help protect us from the more mundane hackers who try to steal our identities and our bank accounts, they could soon be front-line defenders in a time of war.


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Obscure Tax Law Forces This Company to Pay Out 90% of its Profits

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