Wealth Watch

The markets are trading just as you would expect after having been shut down for two days due to Hurricane Sandy. It looks like all the major systems in New York worked well and we should be back to normal trading tomorrow. Mutual and hedge funds will be adjusting their portfolios today as this is the last day of the month. Normally they would spread the adjustments over a few days to minimize market impact, but with the storm they're forced to do so all in one day. This may cause some dislocations in the market today but nothing we would be concerned with.

Huawei… We'll bet you have never heard of this privately held Chinese company, but is a telecommunications giant and getting bigger by the day. The company is privately owned by its 140,000 employees on a huge campus in Shenzhen outside of Hong Kong, with very little to no transparency. Some are quite concerned that the Chine government could be a large owner.

Huawei is a good example of how America is losing its economic power. Over the last 25 years, Huawei has become the largest producer of telecommunication equipment in the world. They are the leader in building fourth generation (4G) communications networks. They have already penetrated Latin America, Europe and Africa in a large way and are quickly moving into the U.S.

So why is the U.S. Government so concerned? Let's take a look. Take for example Cisco, a very successful company which spends many millions of dollars every year developing networking products. It has been shown that Huawei basically copied Cisco's product lineup and copied at least part of their source code verbatim. Source code is the software program that makes the hardware work. Some think that they may have also engineered backdoor functionality into their routers enabling them to intercept data as it transits the network and to shut down the network upon a command from some central location. It is a huge economic loss if valuable intellectual property can be stolen in a matter of seconds and resold for profit. And just think how scary it could be if top secret Federal government codes, such as the codes to nuclear weapons or critical infrastructure fell into the wrong hands.

The U.S. government is very concerned about the economic implications of the copyright infringement. They are even more concerned that the Chinese government "could exploit Huawei's presence on U.S. networks to intercept high level communications, gather intelligence, wage cyber warfare, and shut down or disrupt critical services in times of national emergency."

Just think… Huawei might have picked up the fact we are writing about them and might be reading the Wealth Watch right now, because their routers recognized their name and sent this file on. It makes you wonder doesn't it?

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