Gathering Webbot Interpretations:
This list of possible descriptors of the next attack - and remember this is a highly speculative and un-tested technique - was posted with the hope that someone other than the people running the web bots and me would offer some input on how to interpret this. Some people sent in two scenarios, but each scenario was reported individually in the analysis that I built in MS Excel. If you would like to look at the data, it's in the Excel workbook at http://www.urbansurvival.com/inside/terror.xls . If you have MS Excel installed properly, you should be able to click on this link and open the spreadsheet and charts yourself.
Data Groupings:
The data input was lumped into the most prominent geographic highlight within 50 miles. So, when a couple of people said Disneyland and some said Hollywood, this was lumped into the city name LA in the data under "City". The original geographic aspect as submitted by the sender is shown as "Place". For reporting purposes, I have also grouped things like "plague" and "smallpox" under the general Type of attack as biological. Similarly, the "Conventional" type includes things like truck bombs and plastic explosive where mentioned in the survey. Last, this is the raw data summary. In the section following, we'll get into the analysis of targets and try to look at things through the terrorist mind. That said, here's the summary view of the data:
Place: If the Webbot output is correct, where do readers think the attack will come?
Place Results
66
Pct
Orlando
10
15.15%
Las Vegas
9
13.64%
Chicago
7
10.61%
SF
7
10.61%
NYC
5
7.58%
WDC
5
7.58%
LA
3
4.55%
New Orleans
3
4.55%
Salt Lake
2
3.03%
Seattle
2
3.03%
Afghanistan
1
1.52%
Alberta
1
1.52%
Atlanta
1
1.52%
Boston
1
1.52%
Brittany France
1
1.52%
Denver
1
1.52%
Houston
1
1.52%
India
1
1.52%
Israel
1
1.52%
Kentucky
1
1.52%
Niagara
1
1.52%
Phoenix
1
1.52%
Tahoe
1
1.52%
Type: If the web bots output is correct, what type of weapon do readers think will be employed?
Type
44
Pct
Nuclear
32
72.73%
Conventional
4
9.09%
Biological
3
6.82%
Explosive
3
6.82%
Fire
1
2.27%
Natural Dis
1
2.27%
When: If the web bots output is correct, what data is most likely?
Date
18
Pct
29-Oct
1
5.56%
30-Oct
1
5.56%
31-Oct
6
33.33%
1-Nov
4
22.22%
5-Nov
1
5.56%
14-Nov
1
5.56%
17-Nov
3
16.67%
1/1/02
1
5.56%
Interpreting the Data
Now comes the most difficult part of the task. Assessing what all the data could mean. Before we get into specifics, you need to remember that there is some natural distortion that occurs when dealing with what the Webbot output means and how it is to be interpreted. I shared some of the data with the think tank, and they made the cogent comment that
Every one is thinking that these are like some secret code from the bad guys. What they may not perceive is that this [Webbot data] is more like the 'reading' one might get from chicken bones or fortune tellers using runes or something. SO they must be interpreted very allegorically.
And these are anomalous readings that in the past were a LOT easier to relate. But for these I tend to think an attack (west AND south showing up repeatedly) that hits a place known for its lights (Las Vegas, and Disneyland, and even Palm Springs as you pointed out). And the exaggerated sense of beauty deal that narrows it further.But the how, might well be something like a fuel bomb. If created in with a crop duster (like no bio, just spray fuel from a height, and ignite at roof top level) could be devastating. So all kinds of things fit, but nothing is clear. I will redo the queries this weekend. We'll see.
There's one more dimension beside bias, language, personal experiences, and such that must be considered. It's the issue of what the terrorist have as an objective. More than any other single factor, this is one that you need to focus on as it will change the target rankings. Let's suppose that the terrorists have four coequal objectives: causing as much panic as possible, killing as many Americans as possible, ease of carrying out the attack, and inflicting economic damage. We could then develop a matrix for "target sifting" that would take our top-10 interpretations and then "filter" them by assigning an arbitrary score, 0 (low) to 100 (high) and then add target scores:
| Target | Degree of Panic % | Number Killed | Econ Damage % | Ease %* | Total Score |
| Orlando/Disneyworld | 35 | 50,000 | 17 | 70 | 2,082 |
| Las Vegas | 47 | 100,000 | 20 | 89 | 8,366 |
| Chicago | 78 | 300,000 | 80 | 97 | 181,584 |
| San Francisco | 75 | 250,000 | 78 | 90 | 131,625 |
| New York | 88 | 400,000 | 88 | 100 | 309760 |
| Washington DC | 75 | 100,000 | 50 | 88 | 33,000 |
| Los Angeles | 80 | 200,000 | 67 | 100 | 107,200 |
| New Orleans | 72 | 80,000 | 48 | 80 | 22,118 |
| Salt Lake City | 77 | 150,000 | 35 | 70 | 28,297 |
| Seattle | 80 | 150,00 | 67 | 97 | 77,988 |
I've made a wild guess at the relative ease of pulling off a small SADM (small atomic device - mobile) attack with a 5-man team. The "ease" assessment is based on the kind of forces and observation such a group would likely encounter. Such a group would still out like a sore thumb someplace like Salt Lake City, but would blend right in in NYC, LA or Chicago, but to a slightly lesser degree in Chicago. Seattle and Chicago seem at higher risk though because of their proximity and access to Canada. In either case, a light plane or high speed pleasure boat would be able to deliver a WMD with only a small chance of interception.
Headlines
There are two headlines that popped up this week that seem very significant to the kind of analysis that I've been presenting on this site. Here are the headlines and links to the underlying articles that seem pertinent to our efforts to "peer into the future".
San Diego Agents Head To Canadian Border http://dailynews.yahoo.com/h/kgtv/20011025/lo/934714_1.html
'USA against Islam' idea is growing, Turkey's Cem says http://asia.dailynews.yahoo.com/headlines/world/afp/article.html?s=asia/headlines/011025/world/afp/_USA_against_Islam__idea_is_growing__Turkey_s_Cem_says.html
Let's deal with the border threat to our north first. Earlier this week, there was a story on the wires than a fair number of Border Patrol agents was being moved from the Mexico border to temporary duty on the Canadian border. Now that we've got a couple of "threat plans" to look at, actions like these now start to make sense. I don't think the government would move resources to reinforce the Canadian border unless there was a credible threat. You may remember that a couple of years ago a middle east terrorist was stopped coming across the B.C.-Washington border at Port Angeles, and had apparently been targeting the Space Needle.
One other story you should read as a "context" piece is: Thousands in Pakistan 'Million Man' U.S. Protest. The link to this story is
http://dailynews.yahoo.com/h/nm/20011026/wl/attack_pakistan_protest_dc_4.html
The reason this story is worthy of recall is that it fits in with the notion expressed in detail in the first issue of "Inside Report"; namely that the Taliban is itching to increase polarization between the West and Islam, particularly moderate Islamic states to dilute or withdraw support from the Bush Administration's War on Terrorism. They're trying to recast it as a War on Islam.
Target Analysis
We don't really know what the terrorists are up to, although I think it's safe to assume that they are attacking "the West" on all fronts they can think of, and the Taliban would like moderate states to be swung to their point of view. One could argue that from the Taliban's viewpoint, a decline of the West would be a good thing even in the oil-dependent middle east. Why? Because most of the Oil is controlled by moderate states. As the price of oil drops, the moderates in power will have less money to spend on their supporters. If the price of oil collapses, then moderate governments and in trouble and the fundamentalists will have an easier time coming to power, which is clearly their goal. The World Tribune online had a story on Saturday morning headlined: "OPEC struggles as oil prices remain low". When you read OPEC, read "moderate Islamic forces".
It's for this reason that I don't think we will see attacks on energy, at least in the short term. More likely in my view will be attacks on governance, economic, and media infrastructures. What do you say we look at each of the top-10 mentioned targets submitted by readers who see them as fitting the terms the web bots have put out:
Orlando/Disneyland. This is clearly a "hit 'em in the heart" kind of target, but in terms of attacking governance, media, or economy (let's call it GME for short), it fails the test. However, the fit with the bots is good if you think the "mountain" reference applies to Magic Mountain and the exaggerated sense of beauty applies to the Magic Kingdom. A nuclear attack on Orlando would be difficult, but the other side of this is that some terrorists were known to operate in Florida before 9/11. Timing is expected to be on October 31st or November 1st. I ran into a buddy on the dock on Friday morning, and he told me an interesting story. Seems one of his kids has a friend who knew an Arab man who disappeared about 2-months ago. He supposedly left behind a note for his friends that said something to the effect "Don't travel on September 11th of October 31st". I'm not sure if I should put this in the "Urban Legends" department, but you're welcome to throw it into your own assessments. My friend is a credible engineer and has a home in Florida, so the Florida part seems to fit.
Las Vegas/Hoover Damn: Hoover Damn would be an attack on American expertise and technology, but it's not a perfect fit with the GME criteria that may be in place. Even a small nuclear device would likely not completely take out Hoover Dam, which is some 300-feet thick at its base. Although the damage to the Imperial Valley's agricultural output would be huge for several years, an attack in this region would still probably be more for "splash" value. I've got one sidebar worth reporting. I've got a credible second-hand report that 5 foreign me ordered a large commercial freeze for an upscale apartment building last week and that when the delivery person showed up, the men had nothing in this apartment except "wall to wall computers". The delivery person reported this to the FBI and the place was raided within the hour. This supposedly happened at a second location as well. What's interesting is that this story has been completely unreported in the local news. It's a credible 2-nd hand report, where the person who is reporting it to me has a good military background, land personally knows the family of the delivery person. Maybe this will surface in time, however.
Chicago: Here, we have a number of problems. First, it's away from the Northeast, so it spread the terror. It's close enough to the Canadian border that a small WMD could easily be brought in aboard a pleasure craft on the Great Lakes. Then, there's that big Red Flyer Wagon near Navy Pier at Chicago's inner harbor that fits with "wagon (about to be) overloaded". It fits well with GME. Chicago is the home of the Chicago Mercantile Exchange and the Chicago Board of Trade. The options world would be severely damaged. A nuclear device in Chicago on the 31st would be one of my top three expectations.
San Francisco: Like Chicago, this city meets the GME criteria. A WMD at just the wrong place would wipe out the Golden Gate bridge, destroy the city's computer infrastructure along with vaporizing the financial district, and the blast effects would cripple the Port of Oakland, which as I recall is either the biggest or second biggest container port on the West coast. What's worse is that San Francisco "leaks like a sieve" from the terrorist perspective. There was a story on one of the wire services Saturday morning about how a man had sealed himself in a container to escape from the Middle East (I think he was captured in Greece, but just by accident). He was in a container with a toilet, food, drill for air holes, several cell phones and even a satellite phone. His story didn't check out, so authorities are going into this in some detail. But you have the idea. Containers are not checked before coming into our most critical ports. True of Seattle also.
New York: Several readers thought NYC would be hit again, or it would be something over on the Jersey side, perhaps with the soggy marsh referring to the Meadowlands, or as another reader suggested, the Harlem Meer was a marsh once upon a time. But NYC has been through so much and has shared so much time on television, that another attack on NYC seems dubious. Yes, a WMD would rack up a huge body count here, but it just doesn't spread fear around like an attack on some other city would.
Washington D.C. Again, several readers saw a very good fit with the Webbot output, but they also saw some things that I hadn't considered. One, for example, took the city name and then turned it into Wagon by bracketing letters this way: WA(shin)G(t)ON. Interesting notion. Meantime, Washington D.C. does fit the GME trend although it already has so much attention that it doesn't seem to rate another attack yet, if causing panic is the objective.
Los Angeles: LA is a good target for any number of reasons. First, it's on the West coast and would spread terror throughout the country. Secondly, there is a Disneyland Here (and perhaps significantly, a Conestoga [wagon] hotel a block or two from it. It's got Hollywood and that is where a lot of our media imagery comes from. It's also so big as to be virtually indefensible and like San Francisco, there's enough container traffic coming into the Port of Long Beach that getting a WMD in is almost a non-issue. The body count would be high, depending on whether it was a fairly clean device, or a uranium jacketed device and whether it was done at ground level or at altitude.
New Orleans: This came up from a couple of readers because it is located at a strategic choke point. But, if the objective is GME - and not to drive up the price of energy - then New Orleans is a bad pick. It does, however, have streets that are laid out in "wagon-spoke" fashion. Still, the body count would be low and it doesn't seem big enough.
Salt Lake City: A foreign terrorist would stick out like a sore thumb in Salt Lake City. Not only that, but the body count would be low because the place isn't that big. Although it would be interesting because of the Olympics, getting a WMD into Salt Lake would also be difficult. There's no port with handy containerships. The predominant mode of Salt Lake businesses is not media or tinsel and glitter driven. Toledo, Cleveland, and cities where guns could be better manufactured and where rail lines are significant would be better targets.
Seattle: A sizeable bomb set off as an air blast (around 3,000 feet) would devastate a lot of America's technology and export capability. Not to mention taking out at least some of our country's ability to wage a war by eliminating aircraft production facilities. Seattle leaks like a sieve to the north, although the vigilant Border Patrol was very lucky when they caught the bomber headed for the Space Needle. A bit less luck, or a container being opened uninspected in Canada, then loaded on a big Bayliner and heading into the U.S. would be virtually un-noticed. It would also end the discussion of the value of Windows XP. It marginally meets the GME criteria and it would also disrupt ocean shipping through the ports of Seattle and Tacoma. With a very large military community including Ft. Lewis, McChord AFB, nuclear subs at Bangor, WA and Bremerton, WA, not to mention the Navy's Everett home port, NOAA and others, an attack on Seattle would make strategic sense.
My Personal Assessment
After going through the dozens of emails I believe the highest risk time and place is on October 31st about 9 AM local time in either LA, Chicago, or San Francisco. I expect LA would be the primary target, and I would put every police officer on duty on the 31st and 1st. I would pay particular attention to the area around Disneyland. I would use a several small groups of undercover officers to pay particular attention to the area around the Conestoga hotel near Disneyland, focus on the side streets, and be especially ready to inspect small trucks and minivans that even begin to feel "out of place".
Having does the exercise, let us all pray that nothing happens and this is just an exercise in understanding how security threats can be evaluated. If there is an attack, and especially if it fits the phrasing picked up by the web bots, believe me, we won't be happy about it.
How Do You Play It?
If I lived in any of the top 10 cities in the threat list, I would probably think about not going to work on the 31st or the 1st. Those might be good days to be "sick" and catch up on some personal time. I wouldn't make a big deal about it with anyone because the odds are that you would be wrong and if you're wrong, you'd look foolish and we're not into that. On the other hand, if you do go to work, and don't come home, do you have all your affairs in order? Got a will in another city where no matter what your heirs will get their benefits?
OK, so staying home is too extreme. What next? Well, I would make sure I had plenty of food and water for a week if I lived anywhere near a target city along with a plan to leave town instantly should there be an attack - especially if you live down wind of the downtown or target area. Oakland is downwind of San Francisco. I would have 5-gallons of water and some Top Shelf meals in the back of the car and a full gas tank - just in case.
Still too gloom and doomy for you? Well, how about closing long positions in the market on Monday morning? Lock in some of those nice gains.
Gold is really cheap again. I may buy a few more Maple Leafs Monday early. I don't see any development were gold would drop precipitously. One reader even said if there was an attack of Ft. Knox, we would never know if the gold of the U.S.A. has been stolen or not! Fortunately, another good case for gold is that it's easy to sterilize.
Wanna real wild card? Buy some puts at the open on Monday. I'm not doing that, but if you wanted to take a shot at a downside ride, this might be one. Of course, with puts, people can and do lose all of their investment.
That's it: be ready. Pray we're wrong, but the cost of being ready is really low in advance.
Recommended Background Readings:
"The Challenge of Biological Terrorism - Part One" Chemical and Biological Arms Control Institute at http://www.cbaci.org/PDFCDCPartOne.pdf
This paper includes a very good discussion of threat matrix development and threat-pathway analysis that my be useful concept reading as this approach is extensible to market/trading decisions. Although cumbersome, and more unwieldy than conventional technical analysis, the approach could obviously augment fundamental analysis.
War: How to Skip a Depression?
I wrote a rather long (3-4 page) piece this week that was an effort to tie together all the loose pieces into a single "unified theory" of what's going on in the world so that we could use it as a model and do some forecasting with it. It was in the form of a "letter I never want to receive" and in it, the fictional author claimed that there was a super-government that really had a much bigger agenda for all of us, and then went on to explain everything from the Oil Crisis to the next round of terrorism and the planned escalation. Fortunately, I had the sense to submit it to one subscriber as a trial balloon and he nixed the idea. He didn't think it was in good taste - and even if right, while it would be interesting to know the why's and where fore's of the conspiracy, why not just make the assumption that it's a valid scenario and ask "Where does this lead us?"
Point taken.
So let me back up to the beginning and then lay the idea - and a chart or two - on you.
First, the notion is that we were spiraling into a depression. Secondly, we have just started fighting a war. E
Now, because we all know wars are good for the economy, the war now going should stimulate the economy, but there are two unanswered questions. Will it be large enough to destroy a significant amount of capacity? And, will it "fast-forward" the rest of the country past the Depression?
It's especially appropriate to ask the question now, because as you can see in this week's Aggregate Index chart, the market is poised for an upside breakout.
Looking at this chart got me wondering what would happen if we ended the Aggregate Index tracking to 1929-33 on the date of the attack on NYC? What would a "splice" to the Dow in the period right after4 the attack on Pearl Harbor look like? Could it be that the way history is working out (or being made to work out ) is to jump to the next war to avoid the painful wringing out process?
We obviously can't draw any conclusions yet. This "war" is still in its infancy, however, if it begins to expand, if it becomes cast in world public opinion as a showdown between the West and Islam, then it might quickly turn into a world war, and that would fulfill many of the economic consequence of war. Specifically, a war needs to destroy production capacity (to restore pricing power) and it needs to erect barriers to entry through either government control or artificial means to restore pricing power.
The situation the world is in today is one of being flooded with low priced goods with razor think margins - if any indeed exist at all.
Speaking of Margins and Money
Along this line, it has been very interesting seeing knowledgeable leaders like Arthur Levitt speaking out about how companies are now issuing two kinds of financial reports: One for the reporting agencies like his own former SEC and the other for the "public". He noted in a Bloomberg interview this past week that companies are calling such things are acquisitions, investments in new plants, and write off's on inventory as "special one time adjustments". But that is not what Generally Accepted Accounting Principles (GAAP) is about, is it? No, they are about having a uniform approach to the question "Did you make or lose money?"
To the extent that companies use phrases like "before one-time charges" or "before one-time expenses" you would do well to assume they are lying about the underlying issue (whether they are making money) and are just trying to pull some wool over folks eyes.
This market is ridiculously -even more than it was a week ago - overpriced against historical norms with a 26 times PE for the S&P 500.
From the Poop Deck:
Transportation: There's not much new on the transportation front this week except that pilots are lobbying congress for additional funding for unemployment and retraining. It's a shame to see so many good pilots looking at layoffs. This gets to the question about whether any airline or auto stocks are cheap yet. I don't think so.
Shelter: You saw the housing numbers were running in the 850-thousand unit per year rate, right? What struck me as odd was how the markets had shrugged off the bad news and managed to rally. Housing looks like it has entered a long-term decline driven by layoffs though, so if you're thinking about buying a new house, either build it yourself and have no mortgage, or maybe now is a good time to rent.
Communication: Television coverage of terrorism is starting to look very stale. I have never seen so many experts.
Finance: The market continues defying gravity, although we're still looking at more downside risk than upside at this point.
Energy: Low oil prices are one of the underpinnings of the present rally. OPEC is more worried about having money at home to pay supporters than worries about how the U.S. economy is doing. Look for them to grumble, but prices to stay low. This is especially true if we're right about the GME focus of terrorists. If they continue to focus on GME then driving a high gas consumption car won't kill your pocketbook for a while. Gas here in San Diego can be had for $1.75 a gallon so distributors are doing just fine. in fact better than fine.
Environment: Very little going on here, except for the unusual number of tornados for the year. Perhaps an outcome from global warming.
Security: There appears to be a slight chance of a terrorist strike on the 31st or 1st US time, once past this, reader perceive low risk during Ramadan
Stability: All systems are relatively stable until the next terrorist attack. The Fed continues applying tons of money to the economy to give the appearance that "things are all right" but it's a replay of the 1930's. The only question if whether we will really "jump ahead" to the analog of WWII.
Next week: The Reality Ratio - Revisited. Unless, of course the web bots were right, in which case we will be seeing how far down is. Here's hoping they're wrong and just a normal downward adjustment trading is in the days ahead.
-George