The Race to Secure Voting Tech Gets an Urgent Jumpstart

Numerous electronic voting machines used in United States elections have critical exposures that could make them vulnerable to hacking. Security experts have known that for a decade. But it wasn’t until Russia meddled in the 2016 US presidential campaigns and began probing digital voting systems that the topic took on pressing urgency. Now hackers, researchers, diplomats, and national security experts are pushing to effect real change in Washington. The latest update? It’s working, but maybe not fast enough.

On Tuesday, representatives from the hacking conference DefCon and partners at the Atlantic Council think tank shared findings from a report about DefCon’s Voting Village, where hundreds of hackers got to physically interact with—and compromise—actual US voting machines for the first time ever at the conference in July. Work over three days at the Village underscored the fundamental vulnerability of the devices, and raised questions about important issues, like the trustworthiness of hardware parts manufactured in other countries, including China. But most importantly, the report highlights the dire urgency of securing US voting systems before the 2018 midterm elections.

“The technical community … has attempted to raise alarms about these threats for some years,” said Frederick Kempe, president and CEO of the Atlantic Council, in a panel discussion. “Recent revelations have made clear how vulnerable the very technologies we use to manage our records, cast our votes, and tally our results really are … These findings from the Voting Village are incredibly disconcerting.”

Fortunately, the past few months have seen signs of progress. The Department of Homeland Security is moving forward with its critical infrastructure designation for voting systems, which frees up resources for helping states secure their platforms. The Texas Supreme Court is currently considering a lawsuit challenging the state’s use of digital voting machines. And in Virginia, state officials are converting voting systems to use paper ballots and electronic scanners before the November 7 elections. They say the change was motivated by the findings at DefCon’s Voting Village.

Susan Greenhalgh, an elections specialist for the vote-security group Verified Voting, which worked with Virginia officials this fall, applauded the “transition into real-world change” that had transpired in just the last few months.

Virginia and Texas represent important progress, but plenty of work remains. Five states still rely solely on digital voting machines without paper backups, and at least 10 states have mixed voting infrastructure, with certain counties that use digital voting without paper. These systems are the most vulnerable to manipulation, because you can’t audit them afterward to confirm or dispute the digital vote count in the case of suspected tampering.

“The one core point that election security experts and others have been making about why our votes are safe was that the decentralized nature of our voting systems, the thousands and thousands of voting offices around the country that administer the election, is what kept us safe,” Jake Braun, a DefCon Voting Village organizer and University of Chicago researcher said. “Because Russians [or other attackers] would need to have tens of thousands of operatives go get physical access to machines to actually infiltrate the election. We now know that’s false.”

With only a handful of companies manufacturing electronic voting machines, a single compromised supply chain could impact elections across multiple states at once. The Voting Village report emphasizes that there is a huge amount of change required in the US to address security issues at every point in the election workflow, from developing more secure voting machines to sourcing trustworthy hardware, and then actually setting up voting system devices and software for use in a secure way. DefCon founder Jeff Moss says that the goal for next year’s Voting Village is to have a full election network set up so hackers can evaluate and find weaknesses in a complete system, not just individual machines.

The Department of Homeland Security recently confirmed that Russia infiltrated various election-related systems in 21 states during 2016, and access to a full voting-system setup would give security researchers additional real world insight into defending US voting infrastructure. But as was the case with acquiring real voting machines for last summer’s conference, Moss says it has been extremely difficult to gain access to the third-party proprietary systems that states use to coordinate voting.

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“I would love to be able to create any kind of a complete system, that’s what we’re aiming for,” he said during the panel. “The part that’s really hard to get our hands on is the backend software that ties the voting machines together to tabulate and accumulate votes, to provision voting ballots, to run the election, and to figure out a winner. And boy do we want to have a complete voting system for people to attack. There’s never been a test of a complete system—it’s just mind boggling.”

DefCon’s voting village and interdisciplinary partnerships are certainly raising awareness about election security and motivating change, but with some elections just a few weeks away and the midterms rapidly approaching, experts agree that change may not be coming quickly enough.

“We’ve got a lot to do in a short period of time,” said Douglas Lute, a former national security advisor to President George W. Bush and former US ambassador to NATO under President Barack Obama. “In my over 40 years of working on national security issues I don’t believe I’ve seen a more severe threat to American national security than the election hacking experience of 2016. Russia is not going away. This wasn’t a one shot deal.”

Tech

Sell-Off In Tech – Cramer's Mad Money (9/26/17)

Stocks discussed on the in-depth session of Jim Cramer’s Mad Money TV Program, Tuesday, September 26.

Many investors are wondering what’s wrong with the high flying tech stocks. “Let me give you my take on the dramatic see-saw-like action in the leaders of this market. First, let’s tackle the real cause of the weakness that started last week: technology. Come on, you all know the epicenter here. It’s Apple (NASDAQ:AAPL).” The talk about tepid iPhone 8 sales along with iPhone X coming in November, Apple and its suppliers stocks fell on this news.

Cramer reiterated, “Buy Apple, don’t trade it.” Betting against Apple means getting odds of losing in your favor. Apple makes the best consumer products and is cheap trading at 14 times 2018 earnings compared to consumer product companies and the average stock of the S&P500. It’s worth noting that they have $ 260B in cash as well.

“So, the proximate sell-off cause, at least number one? Apple. Now, I am saying it’s been pretty neutralized. Sure, the stock can go lower, but at these levels, it’s beginning to reflect the failure of the iPhone 9, and that product doesn’t exist,” said Cramer.

The second concern of the tech stocks is the cloud. After Adobe (NASDAQ:ADBE) reported a surprise disappointing quarter, CEO Shantanu Narayen said on the conference call that cloud growth is slowing temporarily. This led to investor panic. Which led to a sell-off in everything cloud-related.

“Remember, the cloud lives in the data center. So if the cloud’s slowing, the data center should be slowing, too. Yet last night Nvidia (NASDAQ:NVDA) announced that its new line of chips won business from three of the largest Chinese data center operators out there: Alibaba, TenCent and Baidu, which are growing like mad. I’ll match those orders against a defeat at Tesla any day of the week,” added Cramer.

“Bottom line? We’re at the end of a good quarter in a good year, and we’re seeing profit-taking and forced selling of the winners while some money’s going into cheaper stocks and, when you put it that way, there’s a kernel of rationality to the entire move,” concluded Cramer. This does not mean selling is over, but the weakness should be used as a buying opportunity.

CFO interview – Red Hat (NYSE:RHT)

The stock of open source software solutions provider Red Hat went up on better than expected earnings and guidance. Cramer interviewed CFO Eric Shander to find out more about the quarter.

Shander said that the cloud world is changing. “Everybody’s talking about it being a hybrid cloud world; I can tell you, whether it’s on-premise, off-premise, they’re looking for optionality, they’re looking for multiple cloud providers, they’re looking for flexibility,” he added.

The company has been investing in application development and emerging technologies which made them $ 150M in the last quarter. The result of their investments can be seen in the strong growth. “Every single industry is transforming. And not only that – there is an IT implication related to that. They’re looking for agile development and that’s where a lot of our technologies are helping enable that,” he added.

Their sales to the Federal government have been strong and not capped as thought by many. Apart from that, Europe is a growing category for the company’s business. Bottom line is that Red Hat has all the components to enable companies to run successfully in the cloud.

Carnival Corp (NYSE:CCL)

The stock of cruise-liner Carnival went down on fears of hurricane damage. However, after the solid earnings and hurricane-adjusted guidance, the stock rallied.

“The most valuable currency in this business isn’t dollars. It’s not gold. It’s not even bitcoin. It’s the benefit of the doubt. When the market realizes that a CEO deserves it, their stock tends to catch fire. If there’s one thing we can bank on, it’s that he’s not going to be tripped up by some storms, even really bad ones,” said Cramer referring to Carnival CEO Arnold Donald.

Donald held the Costa Concordia catastrophe, which resulted in 32 deaths, really well. Apart from that, they got through the Ebola and Zika crisis as well. “Donald seems ready for any disaster and he always seems to have a back-up plan,” said Cramer.

Donald raised the lower end of the guidance despite the hurricane and said that there is only 1% cancellation rate. Cramer calls the weakness in the stock a chance to buy it.

COO interview – VMware (NYSE:VMW)

VMware is the virtualization infrastructure solutions provider which reported a good last quarter and its stock is down just $ 4 from its recent highs. Cramer interviewed COO Sanjay Poonen to hear what lies ahead.

Poonen said that more companies turn to cloud-based solutions in order to cut costs and connect with the digital world. Many companies are adopting to the hybrid approach to the cloud. “As you think about companies and their future, they have to decide how much data center capacity they want to use now. Some people feel they run a data center very well. We can help them modernize it with software, and that’s what we do very well. Some of the companies say, ‘Listen, I don’t want to expand a lot of my data centers. I want to use the new hardware economy.’ The new hardware economy is not just the traditonal players, but Amazon Web Services, Microsoft Azure, Google, IBM,” he added.

VMware is an important name in data center business and they have saved enough energy with their virtualization to power 40% of US homes for a year. They have partnered with AWS to bring scalable solutions to the public and private cloud.

“If you could get the benefit of both worlds, the same tools that you’ve known at VMware for managing and automating that, but get the data center capacity on the fly, that’s what we’ve brilliantly innovated here,” said Poonen. Their aim is to help high-profile customers on-premise and private cloud operations, pair those functions with public cloud etc.

“We think there’s going to be a good amount of spending in the private cloud on-premise and into the public cloud. And we feel we’re one of those quintessential companies that can bridge both sides of that chasm. I think there’s innovation to be had in tech,” concluded Poonen.

Viewer calls taken by Cramer

Emerge Energy Services (NYSE:EMES): Cramer thinks the entire fracking group is a sell.

Supernus Pharma (NASDAQ:SUPN): The migraine business is very competitive.

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Tech

Tech stocks sell-off deepens fears of shift away from sector

SAN FRANCISCO (Reuters) – Technology stocks including Facebook (FB.O), Microsoft (MSFT.O) and Alphabet (GOOGL.O) dropped sharply on Monday, increasing worries that the top-performing sector is falling out of favor as investors look elsewhere for cheaper opportunities.

Facebook fell 4.6 percent, on track for its worst day in nearly a year and eliminating over $ 20 billion of its market value, while Microsoft, Apple (AAPL.O) and Alphabet each lost more than 1 percent.

Those stocks have helped push the S&P 500 information technology index .SPLRCT 23 percent higher in 2017, making it the top performer among the S&P 500’s main sectors.

Underscoring growing concerns about a shift in investor focus, a quarter of the 68 stocks in that technology index have seen recent drops of 10 percent or more, which many on Wall Street define as a correction.

“There’s definitely some panic out there,” said Wedbush trader Joel Kulina. “Everyone is talking about rotation, it’s becoming one of those buzzwords.”

Apple approached correction territory as investors fretted about demand for its newest iPhones.

Trading in a range around 18.4 times expected earnings, the S&P 500 information technology index is near its highest since before the 2008 financial crisis, according to Thomson Reuters Datastream.

“I think we’re seeing more of a rotation out of some hot-flying tech names into small-caps, some of the names that may well benefit from tax cuts,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.

Underperforming the broader market so far in 2017, the S&P 600 small-cap index on Monday was up 0.17 percent and on track to close at a record high.

Investors dumped recent tech favorites including Nvidia (NVDA.O), down 4.04 percent, and Applied Materials (AMAT.O), which lost 3.47 percent.

Videogame makers were also hard hit: Activision Blizzard (ATVI.O) and Electronic Arts (EA.O) both lost more than 3 percent.

Stirring investor pessimism, Facebook is grappling with how to handle paid political advertisements following threats by U.S. lawmakers to regulate the world’s largest social network over secretive ads that run during election campaigns.

Netflix (NFLX.O) lost 5 percent, giving back some of its 43-percent rally in 2017 that valued the stock at 103 times expected earnings.

“Any time we get a bit of profit-taking in technology there’s a bit of a follow-on trade, a bit of a herd trade, people look at it and see a place to take profits and rebalance their portfolio into other areas,” said Jason Ware, chief investment officer at Albion Financial in Salt lake City, Utah.

Additional reporting by Chuck Mikolajczak and Rodrigo Campos in New York, aeporting by Noel Randewich; Editing by Susan Thomas

Our Standards:The Thomson Reuters Trust Principles.

Tech