"U-123" took part in the opening of "Unternehmen Paukenschlag" ("Operation Drumbeat"), also called the "Second Happy Time" in January 1942. She began by sinking the cargo ship about southeast of Cape Sable, Nova Scotia on the 12th. Moving down the coast, she sank "Norness", "Coimbra", "Norvana", "City of Atlanta" and the Latvian "Ciltvaira". She approached New York's Lower Bay on the evening of 14th Jan and viewed an illuminated New York City. She was also credited with sinking "San Jose" on 17 January, although this ship was actually lost in a collision. The "Malay" was only damaged because Hardegen had under-estimated her size and chose to use the deck gun rather than a torpedo. In a reference to American unpreparedness, he commented after sinking "Norvana": "These are some pretty buoys we are leaving for the Yankees in the harbor approaches as replacement for the lightships."