Steps to Take Following the Equifax Breach

by Michael Garcia
Chief Technology Officer

Equifax, one of three credit reporting agencies in the United States, reported on Thursday that the company experienced a cybersecurity incident potentially impacting approximately 143 million U.S. consumers.

Ferguson Wellman and West Bearing recognize that many of our clients may have questions as a result of the announcement. While it is still early in the process, we would like to share a few thoughts:

• Equifax has established a website to assist clients in understanding the incident and to allow consumers to determine if they are known to be impacted. The website is www.equifaxecurity2017.com. To determine if you have been impacted, select the, “Potential Impact” link
• Whether or not you are reported to have been impacted, you may want to consider enrolling in an identity monitoring and credit protection program. While our firm does not endorse any program, here are the names of several offerings rated by Consumer Affairs:

www.creditsesame.com
www.lifelock.com
www.identityguard.com

• As reported on the website, Equifax is offering complimentary access to an identity theft protection and credit file monitoring product called TrustedID Premier. However, by enrolling in the complimentary program, you may be agreeing to settle grievances through arbitration. There is a link to enroll in the program on the website referenced above 
• No Ferguson Wellman nor West Bearing clients own Equifax stock (ticker EFX) in portfolios managed by our firm, with the exception of a few clients who transferred the position in from other managers. Not surprisingly, the stock dropped 13.66 percent on Friday following the news

As always, now is an excellent time to use complex and unique passwords for all of your accounts. We recommend:

• Changing your password immediately if you know of data breach and any like passwords on other sites
• Create strong passwords everywhere and do not use the same password on different sites
• Use a password manager to do the heavy lifting of creating strong passwords. Many are free
• Enable two-step or even multi-step verification if available. Even if your credentials are compromised, they are useless without additional verification
• Monitor any financial accounts associated with any breach that you believe have been associated with fraud. Your liability may be impacted by how quickly you identify fraudulent activity
• Be aware of “phishing” attacks that may increase shortly after news of a breach. They may pose as the affected company to trick consumer

Should you have any questions, don’t hesitate to contact me at mgarcia@fergwell.com. 
 

Disclosures

Somebody’s Watching Me

by Jason Norris, CFA Executive Vice President of Research

There were two high profile data breaches this week which highlighted the importance of cyber security, as well as “implied privacy.” Home Depot announced that they had a breach where credit and debit cards used at its stores may have been compromised. Initial speculation was that this may have just happened within the last few weeks; however, some reports indicate the breach may extend back to April of 2014. There were also reports from Goodwill, Dairy Queen and Supervalu that some of their locations may have experienced a data breach. What this shines a light on is the importance of corporate security, as well as vigilant consumers. One potential solution to this problem would be the implementation of “chip and pin” debit/credit cards. Most of the world has already implemented this means of transaction, but the U.S. has not. The main difference between “chip and pin” cards and standard debit cards is, when using a chip card, there is no magnetic strip to swipe. The card is put in a Point of Sale (POS) terminal, the chip is read, and the consumer has to input a PIN number. The security for these transactions is much more reliable. The chip cannot be copied like a magnetic strip can (as we saw in the Target case, and it looks like the Home Depot breach as well.) Visa and MasterCard are big proponents of this technology; however, it has been very slow to roll out in the U.S. The Netherlands company NXP Semiconductor is a key player in the technology for these cards.

The distribution of several celebrities’ nude pictures this week has also highlighted the importance of personal cyber security. Over the weekend, more than 100 personal iCloud accounts were hacked and private photos were leaked to the media, with several prominent actresses being victimized. Apparently, this was a case of hackers easily decoding individuals’ passwords. While this action is not condoned, individuals have to remember that any material that is stored in the cloud runs the risk of being compromised.

Less Than Zero

The European Central Bank continued to take rates lower this week by reducing its deposit rate to -0.2 percent from -0.1 percent. You are reading that correctly, that is a negative number. This seems to be more symbolic, rather than having much of an impact on the market. The market impact decision came in the same announcement that the ECB will increase its purchase of ABS (Asset-Backed Securities). This is very similar to what the U.S. Fed had been doing with its purchase of mortgage-backed securities. The key item missing is that the ECB did not announce a plan to purchase sovereign debt. The ECB is hoping banks will sell their ABS to them and in its place, make loans. Europe continues to sputter out of recession with expectations of GDP growth and inflation below 1 percent. This move by the ECB showed the market that it is willing to support European economies, although one has to wonder if they have enough power to do so.

Why Worry

The employment report this morning was a disappointment with the U.S. only adding 142,000 jobs in the month of August; expectations were for over 200,000.  Ferguson Wellman believes this data will eventually be revised upward.  The economic data the last few months has been very robust and is not consistent with this weak jobs number.  Therefore, we aren’t concerned about the number unless other economic data starts to signal a slowdown.

Gameday

With the Seattle Seahawks opening game win Thursday, it reminds us of the Super Bowl stock market prediction. Some may recall when we highlighted the belief that if the Seattle Seahawks won the Super Bowl this year it would foretell a positive year to the market. So far so good with a 9 percent+ gain in the S&P 500 to date. Even with this strong run, we believe that earnings growth and low inflation will continue to be tailwinds for equities, pushing them higher to year-end.

Our Takeaways for the Week

• Internet security will become more of a focus for companies and individuals
• Global central banks are supporting economies - coupled with strong earnings, this is a positive for stocks

Disclosures