Tag Archives: Risk

China's Leshi questioned by bourse over trade suspension risk
May 9, 2018 6:00 am|Comments (0)

HONG KONG (Reuters) – Leshi Internet Information & Technology Corp Beijing has been formally asked whether its assets, which have fallen 98 percent over the past year, are at risk of turning negative and triggering a share trading halt and possible eventual delisting.

The logo of of Leshi Internet Information & Technology Corp is seen on its building in Beijing, China March 15, 2018. REUTERS/Stringer

The Shenzhen Stock Exchange’s website on Wednesday showed the bourse had sent Leshi 33 questions, including about its assets. Under its rules, a year of negative net assets results in “suspension from being a listed company”, with two years ending in delisting.

Leshi, a video-streaming company that also makes internet-connected television sets, has seen revenue and profit dwindle since mid-2017 amid a funding crisis involving parent conglomerate LeEco and its founder Jia Yueting.

Net assets attributable to shareholders stood at 304 million yuan ($ 47.70 million) at the end of March, from 13.6 billion yuan a year earlier. It reported a net loss of 307 million yuan for January-March 2018 and a loss of 13.9 billion yuan for all of 2017.

The Shenzhen bourse also questioned Leshi about its operations, asset impairment and auditing. It asked the firm to detail its debts, explain slumping performance at subsidiaries, and disclose ownership relations with other companies as well as whether units conduct transactions with other group companies.

It also asked for an update on Jia and his related parties’ repayment of debt to Leshi, and whether there has been a change in the company’s decision-making personnel.

Leshi, which since July has been managed by second-largest shareholder Sunac China Holdings Ltd, in January said Jia and LeEco owed it 7.5 billion yuan. LeEco disputed the figure.

Jia, who remains Leshi’s largest shareholder, has been residing in the United States to work on his electric vehicle start-up company, though Chinese regulators have requested his return.

The Shenzhen exchange has also asked Leshi to explain how its salary expense rose in 2017 though headcount dropped.

It has requested a reply from Leshi by May 18.

A Leshi spokeswoman said the company had no immediate comment when contacted by Reuters.

Leshi’s shares were down 2.6 percent in morning trade in a flat broader market.

Reporting by Sijia Jiang and Hong Kong newsroom; Editing by Christopher Cushing


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The Risk Of The Roth IRA Revolution
January 29, 2018 6:16 pm|Comments (0)

Source: Google from Retirement Planning website

Bulls Make Money, Bears Make Money, Pigs Get Slaughtered”

Nothing is truer than the above when people start to believe they gain an advantage by converting their IRA losers into Roth winners. If you read my previous article on the Myths of Roth IRAs, which you can find here, you may already know the answer. In the light of the new tax laws that have done away with the Roth recharacterization there may be a new emphasis on trying to gain more spendable money in retirement by being concerned with tax-free growth in the Roth. Once again I will show, through demonstration why it doesn’t matter where the growth occurs. What matters is the tax rate you pay on the front end versus the tax rate you pay in retirement when you spend the money.

My wish is not to try and make you an IRS or tax expert but to at least give you enough information for you to understand some of the challenges in trying to navigate the environment of what are called tax-advantaged retirement accounts. In doing so I hope to dispel some myths or at least provoke you to investigate on your own some of the math surrounding these tax-advantaged accounts.

Ground rules

First, some definitions and abbreviations are in order:

I will use the term Roth to indicate any number of what are typically tax-advantaged retirement accounts funded with after-tax dollars for which you can withdraw all contributions and earnings tax-free later. These come in many different forms such as the Roth IRA, Roth 401k, Roth 403b, and others. I will use the term IRA to indicate any number of tax-advantaged retirement accounts funded with pre-tax dollars for which you withdraw all contributions and earnings paying ordinary income tax on them at the time of withdrawal. You could find many types of these such as Traditional IRA, Traditional 401k, 403b, SEP-IRA, 457b, SIMPLE IRA, and others. It should be noted that it is possible to have a mix of after-tax and pre-tax dollars in most of these accounts, but when I use the term IRA from now on, I will only be considering these accounts will all pre-tax dollars in them.

Let’s review what I call the 3 most common levels of tax advantage that you can receive when investing. With the new tax code, it is slightly different now so I will restate it here.

Level one-half: This typically comes out of what is called a taxable account from the generation of long-term capital gains or qualified dividends. Our current progressive tax code gives these gains a reduced tax rate that results in a reduction in the taxes paid. For instance, if your income is otherwise in the 10-12% tax bracket, dividends and long-term capital gains will fall to the 0% tax bracket, until they fill up that bracket. If your qualified dividends and other income are high enough to move you into the 22-35% bracket, the dividends and capital gains will be taxed at 15% for those brackets. I call it level one-half because there is no reduction on taxes for the deposits put in the account to start. The reductions for even the qualified earnings, while some can be essentially tax-free, this only occurs if you keep your total income and earnings below the 22% bracket point.

Level one: This level is occupied by both the IRA and Roth accounts which get either a tax break when you put the money in the account or a tax break when you take the money out. As I explained in my previous article these accounts are on equal footing for equal tax rates in and out.

Level two: This is occupied by the Health Savings Account which is known as the HSA. This account when used properly for medical expenses and accompanied by a high deductible health insurance plan will result in two levels of tax savings, one on the money contributed and a second on the tax-free withdrawals when the money is used for IRS approved medical expenses.

This article is only concerned with the level one retirement accounts and how the IRA and Roth can be thought of in most cases as equals. It is true that the Roth and IRA each have unique characteristics that may be appropriate or at least appealing to different investors. The short list of some of these is described below.


Tax deferral on all earnings inside the Roth if you follow IRS guidelines. Tax-free withdrawal of all contributions and earnings (subject to 5-year holding period plus age restriction of 59½). Tax-free withdrawal of your contributions at any time or age from a Roth IRA. A note on this as it applies to employer sponsored plans is that you should check with your plan administrator as each plan has their own set of rules as to when withdrawals are allowed. Tax planning flexibility – Since there are no forced withdrawals by age 70½, you have more tax-planning flexibility during retirement. If a Roth IRA owner dies, certain of the minimum distribution rules that apply to traditional IRAs will apply to the Roth.


Tax deferral on contributions during working years will lower your taxable income while working and can increase some tax credits. Increasing some tax credits could actually allow you to save more. The required minimum withdrawals must begin prior to April 1st of the year after you turn 70½. The RMD for any year after the year you turn 70½ must be made by December 31st of that later year. If these are not made you can incur a 50% penalty on any amount not taken that was due. Inherited IRAs have a complete set of RMD tables and rules which will not be discussed here.

There are many other nuances to the above two types of accounts and even within different types of Roth or IRA accounts, most of which can be found in the IRS publication 590, which has now been split into two parts – pub 590-A (contributions) and pub 590-B (distributions).

Assumptions for Roth Conversion

In order to make what is commonly called an apples-to-apples comparison of these Roth and IRA accounts we must use the following assumptions:

Because we can never know what future tax rates will be, each evaluation must be done at the same tax rate for each account, both at the start of the test period and the end of the test period. Each evaluation must be done from the aspect of how much money did the investor need to earn to fill the account to begin with. For all evaluations I will assume that the investor earned an extra $ 10,000 to put towards retirement savings. The tax rate was always 22% now and in the future. That the taxpayer is greater than 59.5 years old so that a penalty-free conversion is possible. See my previous article for how to do this conversion if you are less than 59.5, but why it is exactly equal to what I am illustrating here in an apples-to-apples comparison.

Let’s now continue on to see if we can bust up the notion of why it doesn’t matter how much tax you pay on the conversion, other than the obvious fact that it limits the size of conversion you do.

I lost 40% on my Netflix (NFLX) why not convert it to a Roth and then hope for the best in my Roth.”

Let’s compare some Netflix stock, which lost almost 40% a few years ago and was converted from an IRA to a Roth at that point in time, to what might have happened if no conversion was done. Below are the results.

While you might think that paying lower taxes is an advantage, the math shows that the tax rate in and tax rate out are what is important. Even though by doing the Roth conversion the investor paid $ 1320 less in lifetime taxes from this investment there was no more spendable income in retirement because of it.

The Roth Revolution

Why do I say Roth conversions are good for the national debt?”

This is easy, according to the Investment Company Institute; there is over $ 15 trillion in IRAs [including Roths] and other Defined Contribution Plans at this point in time. I don’t know the exact Roth / IRA split of this number, but I am pretty sure it will be leaning towards the IRA side of the equation. With the new lower tax brackets most people can do a Roth conversion for less so they may be considering it, without realizing that how much tax they pay now is not the whole story. However, as in my opening bullet point, this is very good for the national debt. In fact the faster millionaires buy into this strategy the better I believe it will be for all of us. With less debt there is less reason to raise taxes in the future. A Roth conversion is a great way to instantly increase government income. If you have read my many articles and comments on this subject you may know that I am not sure it is best for the average investor. It does have its place and I certainly have always maintained that everyone should have some Roth money to diversify their tax situation in retirement. I just don’t think it should be overdone.

Finally, I will explore what I have seen in some publications as a Fear Of Missing Out of tax-free income in retirement. This FOMO of tax-free income has blinded the investing public to what I have recently called in a comment stream the upside and downside risk of getting your future tax rate wrong. In other words, when we make any investing decision based on future events or tax rates that are unknown it is important to know both your possibility for gains to your spendable retirement income or the losses to your spendable income.

I will illustrate this with a few simple examples that a retiree may see during their lifetime. Let’s start out with case number 1, which is for the high-income earner who wishes to convert a large portion of her sizable IRA into a Roth to pass down to her children. Let’s consider she is doing Roth conversions in the 35% bracket because that is where she has been for most of recent history. Let’s shoot for a tax-free Roth benefit to each child of $ 1M and compare that to the options of a taxable IRA distribution. The equivalent size of the IRA at a 35% taxable income level is just $ 1M divided by the decimal created from the subtraction of 1 minus the tax-rate. This math results in $ 1M / .65 or $ 1.538 million.

Below is a table indicating the results from case 1 showing both upside and downside risk to their spendable income at different withdrawal tax rates. Assumption is that the beneficiary is married and spouse is not working and there are no investment returns in the life of the inherited account. Positive investment returns would certainly make the dollars larger in the examples but not on a relative or percentage basis. Also there are no state taxes.

As can be seen from the above, the upside risk if you stay with the IRA is about $ 400,000 (40%) more spending money for someone without a job inheriting the IRA. There is relatively no downside risk at all to staying with the IRA since the original owner converted the Roth in almost the highest marginal bracket. Even if the beneficiary draws the total IRA amount out in one year, the extra $ 1.538 million only caused the child to pay an effective tax rate of 32.8%.

The above highlights one of the reasons that make the Roth conversion or Roth contribution in higher tax brackets so problematic. Conversion taxes are paid on the marginal income in your highest tax bracket at the time. While the money is also spent in your marginal brackets as well, the starting point of this marginal bracket is usually much lower and can actually start out at zero if your other income is less than the standard deduction. Let’s look at another case in a lower tax bracket while working.

In case #2 the worker wants to end up with the same $ 1 million in the Roth account but through most of his career his working tax rate averaged 25%. This means to convert to his desired Roth he needs to have $ 1.333 million in the IRA to convert. Let’s compare the child that inherits the $ 1 million Roth to the one with the $ 1.333 million IRA at various spending rates. Below is a table indicating the results from case 2 showing both upside and downside risk to their spendable income at different withdrawal tax rates.

In this case what you see is that the upside to downside risk has changed from a spread of 40% (40% upside to 0% downside) to a spread of 21% upside [gain] to almost 10% downside [loss]. This is still a two to one advantage to the upside.

I will do one final example in which the worker keeps all Roth contributions or conversions in the 15% tax bracket. This case 3 is shown below.

In this final case the upside risk [gain] in staying with the IRA is about 7% for the inherited IRA owner that keeps her AGI within the $ 101,000 income limit. In the worst case, if the whole IRA is withdrawn in one year while working with an addition $ 100k taxable income the downside risk [loss] is almost 20% extra in taxes. However, it is highly unlikely that the taxpayer would need to withdraw the whole amount in one year. If the taxpayer keeps her total AGI at the $ 190k level there is no downside or upside risk and she can draw down the IRA over a number of years.


While RMDs can raise your taxable income and your tax rate in retirement they should not be something that is feared to extremes. In an article I wrote entitled Surviving the Tax Bite of Retirement, I pointed out that over the previous number of years the personal exemption, standard deduction, and the top of each of the tax rate bracket have grown by around 2% per year. With completely revised lower tax brackets for 2018 and the foreseeable future this has only improved the odds of you having a lower tax bracket in retirement, compared to while you were working. Hopefully, you have learned that this favors the IRA owner and the results are not insignificant. Who would not want 10-20% extra money in retirement or for their beneficiaries? I do understand that on the other end you do not want to be seen as the one who increased someone’s taxes with an inheritance. I personally think it is up to you to educate your heirs and make them see that a little bit of tax on a larger sum of many can in many cases be better than no tax on a smaller pool of money.

In my volunteer work helping people with their taxes each season there are always cases where having some of their retirement in a tax-deferred IRA could have resulted in some tax-free withdrawals from that IRA, due to their low income level. The converse is also often true – that with a Roth account it would have been possible to lower how much of their retirement savings goes to the taxman. It is never a bad idea, in my opinion, to have both Roth and IRA funds going into retirement.


For more detailed information on these subjects covered I suggest reading at least a couple of times the two IRS publications mentioned at the outset. Understanding the rules can avoid costly mistakes on the road to retirement as well as later when you are in retirement. I have also written an Instablog article titled Roth Vs. Non Roth (401k, 403b, 457, Etc) & The Time Value Of Money which adds a casino example to the mix that you may find interesting.

I also want to shout out a special thanks to Bruce Miller, who made my job much easier by providing a tax calculator for the new tax law going forward in 2018. He also wrote a good article on the subject which you can find here.

All tax calculations were done using the new 2018 law as best we know at this time.

This study is only as good as the data presented from the sources mentioned in the article, my own calculations, and my ability to apply them. While I have checked results multiple times, I make no further claims and apologize to all if I have misrepresented any of the facts or made any calculation errors.

The information provided here is for educational purposes only. It is not intended to replace your own due diligence or professional financial or tax advice.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.


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Spillover Risk: Cryptocurrencies May Pose A Very Real Threat To Stocks And The Economy
January 29, 2018 6:00 am|Comments (0)

Last month in “It’s A Mad, Mad, Mad World“, I took a stab at explaining how and why cryptocurrencies represent a systemic risk.

Over the last year, I’ve developed a pretty solid understanding of Bitcoin, blockchain, and the cryptosphere in general. But if you’re a regular Heisenberg reader, you know that my definition of “solid understanding” is a bit different from most people’s definition.

Being able to talk intelligently about something isn’t even close to what I would consider sufficient when it comes to putting digital pen to digital paper. That’s why everything I’ve written about cryptocurrencies and Bitcoin over at Heisenberg Report revolves around price action, psychology, the reasons why cryptocurrencies aren’t viable as “money” and the possible knock-on effects for other assets and/or the broader economy (i.e. systemic risk).

I feel comfortable discussing those aspects of the cryptocurrency phenomenon because those discussions lean heavily on things I am extremely qualified to talk about. That is, when it comes to price action, investor psychology, what it means for something to be a currency (or to be “money”, so to speak) and systemic risk, I have much more than a “solid understanding”. In those matters, I’m a walking encyclopedia. What I do not posses encyclopedic knowledge of are the technological underpinnings of digital currencies. Again, I have a solid understanding of the technological points, but you’re not going to see me penning manifestos about why blockchain is or isn’t going to change the world or why Ripple can or can’t upend SWIFT.

Just to be clear, I don’t think developing that depth of understanding when it comes to the technology is important right now for anyone other than the people who are behind this movement and maybe a handful of academics who can perhaps help discern how the technology can actually be applied in a way that has some utility outside of speculation and/or outside of providing what Nassim Taleb has called “an insurance policy that will remind governments that the last object establishment could control, namely, the currency, is no longer their monopoly.”

The reason I don’t think it’s necessary for the rest of us to get too bogged down in it is precisely because by the time it matters, something bad will have happened that will ultimately force governments to regulate cryptocurrencies so heavily that they will cease to be objects of public fascination and thus vehicles for speculation.

There are a number of things that can go wrong here, some of which obviously have to do with the potential for cryptocurrencies to serve ostensibly nefarious purposes, but what I try to zoom in on are the possible knock-on effects for traditional markets and also for the economy more generally.

One particularly disconcerting development is that according to a LendEDU poll published the day after Bitcoin peaked in December, nearly 20% of people were using a credit card to get in on the craze:


Hilariously (or not, depending on your penchant for dark humor), that actually coincided with a spike in Google searches for “can you buy Bitcoin with a credit card?”:

(Google Trends)

Correlation doesn’t equal causation, but it seems like some coincidence that the publication of the poll cited above, the peak in that Google Trends chart, and Bitcoin’s high at roughly $ 20,000 all came within the same 48-hour window.

The risk there is clear. That effectively represents a high interest loan collateralized by an “asset” that’s depreciated by roughly 50% over the ensuing month. The chances that ends up showing up in, for instance, banks’ losses on credit cards are probably low, but you can’t rule it out.

On top of that, at least one bank recently “went there” by trying to estimate what the “wealth effect” (i.e. an increase in consumers’ propensity to spend based on unrealized gains in financial assets) might be from Bitcoin trading in Japan. The fact that anyone is even talking about that is unnerving. If, for instance, consumers did in fact end up spending more based on gains in their cryptocurrency accounts and that was reflected in high level economic data, the sugar high from that could evaporate in the event those unrealized crypto gains disappear. That could create noise in the data and make q/q and m/m compares more difficult, complicating policymaker reaction functions.

But beyond all of that, it’s becoming increasingly likely that traditional risk assets will begin to take their cues from the crypto market. Deutsche Bank was out with a great note this week describing how, far from the “safe haven” status crypto proponents often ascribe to Bitcoin, cryptocurrencies in fact represent exactly the opposite. That is, they represent the new frontier in risk-taking, replacing short vol. as the proxy for risk sentiment. Here’s the bank’s Masao Muraki:

The current ‘triple-low environment’ of low interest rates, low spreads, and low volatility has given birth to new asset classes like implied volatility (ETFs selling volatility), and cryptocurrencies. The prices of both asset classes have plummeted and rebounded simultaneously and in 2018, correlation between Bitcoin and VIX has increased dramatically.

The problem here is that just as the proliferation of strategies that explicitly or implicitly rely on the low-volatility environment continuing has the potential to create a “tail wagging the dog” dynamic whereby vol. spikes force selling in the underlying, if cryptocurrencies are increasingly viewed by larger investors as a proxy for risk sentiment, sharp moves have the potential to spill over. Here’s Deutsche again:

Cryptocurrencies are closely watched by retail investors, affecting their risk preferences for stocks and other risk assets. Although institutional investors recognize that stocks and other asset valuations may have entered bubble territory (US equities’ average P/E is around 20x), they cannot help but continue their risk-taking. Now, a growing number of institutional investors are watching cryptocurrencies as the frontier of risk-taking to evaluate the sustainability of asset prices. The result is that institutional investors, who are supposed to value assets using their sophisticated financial literacy, analysis, and information-gathering strengths, are actually seeking feedback about the market from cryptocurrency prices (which are mainly formed by retail investors). We believe the correlation between Bitcoin and VIX can increase as more institutional investors begin trading Bitcoin futures.

Underscoring that is a new piece out in the Wall Street Journal that documents the extent to which retail brokerages are seeing an avalanche of inflows from what they say are first-time investors (millennials are specifically named) attempting to capitalize off the gains in crypto-related stocks and, when they’re allowed to trade them, Bitcoin futures. Here’s the Journal:

Discount brokerages TD Ameritrade Holdings Corp., E*Trade Financial Corp. and Charles Schwab Corp. reported surges in client activity at the end of 2017 that have accelerated in January. The firms attributed much of the activity to retail, or individual, investors who are opening brokerage accounts for the first time, some of them lured by the boom in cryptocurrency and cannabis investments.


“Crypto and cannabis…volumes have been up big,” E*Trade Chief Executive Karl Roessner said Friday on the firm’s fourth-quarter earnings call with analysts and investors. Despite the bitcoin-futures offering not being “a material offering,” Mr. Roessner said about a 10th of daily average revenue trades—a key metric for brokerages—has so far this month been blockchain- or pot-related.

Keep in mind that the obvious risks in inherent in all of that come on top of the risk associated with clearing crypto derivatives with other assets. Those risks were laid out in an open letter to the CFTC penned by Thomas Peterffy, the billionaire founder and chairman of Interactive Brokers, back in November.

Earlier this month, the Cboe’s suggested that futures on other cryptocurrencies could eventually be in the cards. To wit, from comments Chris Concannon, Cboe’s president and chief operating officer, made at a press briefing in New York:

You look at the entire crypto space and you look at what other products have the liquidity and the notional size, a derivative makes sense.

I guess that depends on your definition of “makes sense”. For now, crypto ETFs are still getting quite a bit of pushback from the SEC, but it’s probably just a matter of time before we cross that bridge as well.

But irrespective of how this develops, crypto risk is already embedded in markets and to a lesser extent in the broader economy as detailed above. And I could give you a long list of other arguments to support the same contention.

To be clear, more and more people are starting to voice concerns about spillover effects. For instance, Wells Fargo’s Chris Harvey has been very vocal about the risk to stocks over the past couple of months. Here’s what he told CNBC in his latest appearance on the network:

We see a lot of froth in that market. If and when it comes out, it will spill over to equities. I don’t think people are really ready for that.

No, people are probably not “ready for that”. And part of the reason no one is ready is because it’s not clear that everyone understands the points Deutsche Bank made in the note cited and excerpted above.

What all of this suggests for investors is that you’re going to have to start watching cryptocurrencies the same way you might watch the VIX. If it’s true that larger investors are going to start using cryptocurrencies as a proxy for risk sentiment, well then you might want to start asking yourself what that might mean in terms of the potential for a large drawdown in the space to impact what you previously assumed were unrelated assets.

I’m not saying you should obsess over every tick in Ripple, but when you see things like that $ 400 million theft from Coincheck on Friday, you should consider that fair warning about how unstable that market really is.

One last thing: I’m not sure the flipside of everything said above is ever going to be true. That is, even if Bitcoin and other cryptocurrencies have another year like 2017, you’re never going to be able to reliably extrapolate anything from that about a positive wealth effect for the economy or for increased risk appetite in equities. Why? Simple: because cryptocurrencies are so volatile that any of the positive externalities from a sharp rally have to be discounted because they can all be negated virtually overnight. You cannot extrapolate anything on the positive side from appreciation in an asset that, like Bitcoin, is 15-25x as volatile as the S&P, 20x-40x as volatile as gold, and 5x-11x as volatile as oil (according to Barclays and as measured by the coefficient of variation):


Nothing further. For now.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor’s Note: This article covers one or more stocks trading at less than $ 1 per share and/or with less than a $ 100 million market cap. Please be aware of the risks associated with these stocks.


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Shopify: Risk Alert And The Inconceivable Depths Of Trickery
October 22, 2017 12:00 pm|Comments (0)

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93 Percent Of Public Companies Face Climate Risk; Only 12 Percent Have Disclosed It
July 13, 2016 4:40 am|Comments (0)

Almost all U.S. publicly traded companies face risk either from climate change itself or from the changes needed to fend it off, experts agreed Monday at the S&P Global offices in New York—but few companies have warned their investors.

Cloud Computing

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Use Prescriptive Analytics to Reduce the Risk of Decisions
March 24, 2016 9:30 pm|Comments (0)

By Jim Hare Gartner, Inc.

Cloud Computing

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NSA director just admitted that government copies of encryption keys are a big security risk
October 23, 2015 12:40 am|Comments (0)

NSA chief Michael S. Rogers speaks at Fort Meade.

The director of the NSA, Admiral Michael Rogers, just admitted at a Senate hearing that when Internet companies provide copies of encryption keys to law enforcement, the risk of hacks and data theft goes way up.

The government has been pressuring technology companies to provide the encryption keys that it can use to access data from suspected bad actors. The keys allow the government “front door access,” as Rogers has termed it, to secure data on any device, including cell phones and tablets.

Rogers made the statement in answer to a question from Senator Ron Wyden at the Senate Intelligence Committee hearing Thursday.

Screen Shot 2015-09-24 at 2.06.46 PMWyden:  “As a general matter, is it correct that anytime there are copies of an encryption key — and they exist in multiple places — that also creates more opportunities for malicious actors or foreign hackers to get access to the keys?

Screen Shot 2015-09-24 at 2.07.12 PMRogers: Again, it depends on the circumstances, but if you want to paint it very broadly like that for a yes and no, then i would probably say yes.”

View the exchange in this video.

Security researchers have been saying for some time that the existence of multiple copies of encryption keys creates huge security vulnerabilities. But instead of heeding the advice and abandoning the idea, Rogers has suggested that tech companies deliver the encryption key copies in multiple pieces that must be reassembled.

From VentureBeat

Get faster turnaround on creative, more testing, smarter improvements and better results. Learn how to apply agile marketing at our roadshow in SF.

“The NSA chief Admiral Rogers today confirmed what encryption experts and data scientists have been saying all along: if the government requires companies to provide copies of encryption keys, that will only weaken data protection and open the door for malicious actors and hackers,” said Morgan Reed of the App Association in a note to VentureBeat.

Cybersecurity has taken center stage in the halls of power this week, as Chinese president Xi Jinping is in the U.S. meeting with tech leaders and President Obama.

The Chinese government itself has been linked with various large data hacks on U.S. corporations and on U.S. government agencies. By some estimates, U.S. businesses lose $ 300 billion a year from Chinese intellectual property theft.

One June 2nd, the Senate approved a bill called the USA Freedom Act, meant to reform the government surveillance authorizations in the Patriot Act. The Patriot Act expired at midnight on June 1st.

But the NSA has continued to push for increased latitude to access the data of private citizens, both foreign and domestic.

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SEC’s 2nd Push on Cyber Security Focuses on Risk Assessment
September 19, 2015 9:15 am|Comments (0)

The SEC’s Office of Compliance Inspections and Examinations issued a risk alert this week to give some guidance about the areas of focus the second round of their cyber security examination initiative…

(PRWeb September 19, 2015)

Read the full story at http://www.prweb.com/releases/2015-Cyber-Security/SEC-alert/prweb12972002.htm

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