It may be time for investors to go bird-watching—and black swans, specifically, should be in their sights.
With the 13th anniversary of 9/11 coming up, reports that ISIS or al Qaeda are planning a terrorist attack on the southern U.S. border circulated rapidly on the Internet ahead of the Labor Day holiday weekend.
Judicial Watch, a conservative group, cited “high-level federal law enforcement, intelligence and other sources” as having picked up chatter about attack plans by Islamic terror networks operating in the Mexican border town of Ciudad Juarez.
The citation of U.S. intelligence sources seemed credible in light of previous official statements by the likes of Secretary of Defense Chuck Hagel and chairman of the Joint Chiefs of Staff Martin Dempsey warning of the severity of the ISIS threat.
“They marry ideology, a sophistication of strategic and tactical military prowess. They are tremendously well-funded,” Hagel is quoted as saying. “This is beyond anything that we’ve seen. So we must prepare for everything.”
Dempsey, who at the same press conference warned that ISIS had to be defeated, later walked back his comments, apparently under pressure from the White House, downgrading ISIS to a mere “regional threat” that “is not plotting or planning attacks against either the U.S. or Europe.”
Let’s hope this more hopeful view prevails.
But it bears mentioning that ISIS itself has threatened the U.S., with malevolent tweets showing photos of the black flag of ISIS in front of the White House and the Old Republic Building of Chicago along with the warning: "We are in your state. We are in your cities. We are in your streets."
Ultimately, what gives these charges their eerie chill is not just the savagery with which the Islamist terror group cut off the head of U.S. journalist James Foley but the fact confirmed by experts and seen in recent events that ISIS is a more powerful and resourceful organization than al Qaeda was 13 years ago.
The terror group captured one-third of the territory of Iraq in a single week, immediately putting the country’s ancient Christian community on notice they had to convert to Islam, flee the country or be put to death.
Enabling ISIS aggression are economic assets: the terror group sells the oil under its control; they loot banks, Christians and other minorities in territory they’ve taken over; they collect ransom to the tune of tens of millions of dollars for the return of captured Westerners; and they receive private donations from European and Middle Eastern sources and possibly from Qatar, which has close connections with ISIS and other extremist groups.
So ISIS has the will and very plausibly the means to strike at the U.S.—and this at a time of growing U.S. retrenchment, not just from the world, but even along our own southern border, where hundreds of thousands of migrants have been apprehended since October. While news reports have focused on the surge of unaccompanied minors, a leaked document from the Customs and Border Protection agency suggests some of those apprehended have come from terror nests like Syria and Somalia, not to mention countries plagued by the outbreak of the ebola.
ISIS’s rise to power coincided with the Obama Administration’s dithering over Syria and retreat from Iraq. But it was the president’s Republican predecessor George W. Bush who in December 2008 signed the status of forces agreement with Iraq, laying the way for all U.S. forces to leave the country by 2011.
So U.S. global retreat has bipartisan fingerprints, and looks to have staying power. Democratic presidential candidate Hillary Clinton is currently posing as a security hawk, but the record of her four years as Secretary of State is not distinguished by any notable successes. Meanwhile, Republican favorite Rand Paul is vocal about the need for scaling down U.S. foreign policy engagement at a time of increasing danger.
And bipartisan retrenchment only makes sense given isolationism's growing popularity with the American public.
Whether Democrat or Republican, all Americans attend the same universities, where foreign policy strategic thinking seems not to be overemphasized. The current administration has been cozying up with terror-backers Qatar and Turkey while running out the clock on Iran's nuclear-bomb building, and its predecessor fought a war in Iraq while pretending away Iran’s role in supplying the improvised explosive devices that were killing U.S. troops.
History suggests that such an environment—one of growing threat and shrinking resolve—provokes our enemies.
And so it is time—despite a record-high stock market—to think more about black swans.
Hedge fund billionaire Paul Singer of Elliot Capital Management was surely onto something in a letter he wrote to investors warning that an electromagnetic pulse (EMP) attack was the biggest threat today.
A rogue terror group like ISIS or a terror state like Iran need not precisely hit a military target like the Pentagon but can shoot a dirty nuclear bomb blindly into the atmosphere and incapacitate our electric systems.
“It could not only bring down the grid, but also lay down a very intense, very fast pulse across the continent, damaging or destroying electronic switches, devices, computers and transformers across America," Singer wrote.
A EMP Commission established by Congress reported on this threat in 2008, and yet its warnings have gone largely unheeded.
In its 2009 stimulus plan, the government spent close to a trillion dollars on political pork that is little remembered today for any lasting value, when it could have used the funds to build redundant utility systems that would have secured our power networks in the face of an attack—funds that could have put people to work across the country for a real need.
Shockingly, a little heralded and still unidentified incursion of a Silicon Valley power plant last year was breached a second time on Wednesday—despite a security upgrade since the previous armed attack.
Experts say that disabling as few as nine U.S. power substations could trigger blackouts across the entire country, with devastating consequences.
The U.S. public and politicians of both parties are not currently poised to seriously address global threats. It’s just not part of the zeitgeist, and may not be unless another homeland attack were to occur.
For now, concerted efforts to keep terrorists from penetrating our borders and a commitment to defending our vital infrastructure may be the best we can do today to stave off the dark menace of black swans in our midst.