The Equifax Hack

Sep 8, 2017   //   by Bruce Mason   //   Weekly Market Update  //  No Comments

It was another busy week with one hurricane behind us and another quickly approaching.  Our thoughts and prayers go out to those who lost so much in Houston.  For those in Florida, we pray the storm weakens before it hits and we urge those who can to evacuate if possible.  Since the news is adequately covering these storms, I’ll move on to the things this week that you may have missed.

In a somewhat unexpected move, President Trump struck a deal with Democratic congressional leaders on Wednesday to increase the debt limit and finance the government until mid-December.  In embracing the three-month deal, President Trump accepted a Democratic proposal that had been rejected earlier in the day by Speaker Paul Ryan.  After weeks of criticizing Republican leaders for failing to pass legislation, President Trump signaled he was willing to cross party lines to score a much-needed legislative victory.  It is unclear whether this collaboration with Democrats foreshadows a more sustained shift in strategy or amounts to a one-time pragmatic decision.  Either way, the government will remain in business at least through mid-December.

In other news, Federal Reserve Vice Chairman Stanley Fischer has resigned citing personal reasons.  His term as vice chair was set to expire next June but his appointment to Federal Reserve wasn’t set to expire until 2020.  The president now has the opportunity to appoint not just the next Fed chair, but the vice chair as well.  Interestingly, the front-runner to replace Janet Yellen atop the Fed, Gary Cohn is now unlikely to be nominated by the president thanks to Cohn’s criticism of Trump’s response to the Charlottesville violence last month.  Cohn, for now, remains the White House’s chief economic advisor.

Another story that broke late on Thursday is a massive data breach at one of the country’s largest credit bureaus.  Equifax announced a massive data leak that may have impacted 143 million U.S. consumers.  This number represents 44% of the U.S. population but is closer to 75% of those with a credit file.  Information that was accessed includes names, social security numbers, birth dates, addresses, and driver’s license numbers.  In an odd twist, three Equifax executives sold shares of the company in the days after the breach was discovered, but before it was reported.  The execs sold $1.8 million worth of stock, but insist they had no knowledge of the breach when they sold their shares.  In another twist, during the month of July, only 260 put options were traded on the stock.  However, on August 21st someone purchased 2,600 September puts with a strike price of $135.  This $156,000 investment is now worth more than $4 million thanks to the plunge in Equifax’s stock price.  It seems investigators will have their hands full.

Turning to France, I came upon a story that indicates just how quickly the things we take for granted can change.  This past July, France announced it would place a ban on the sale of gasoline and diesel cars by the year 2040 as an ambitious plan to meet its targets under the Paris climate accord.  This announcement came only days after Volvo said it would only make fully electric or hybrid cars from 2019 onwards.  This week France took it a step further.  France’s government drafted legislation to phase out all oil and gas exploration and production on its mainland and overseas territories by 2040, becoming the first country to do so.  This represents a seismic shift in just twenty years, demonstrating the speed at which the transformation of the energy and automobile industry is occurring.

In closing, I hope to amuse the wordsmiths among you.  I had a dispute with my wife this week over the spelling of a common phrase.  Is it Just Deserts or Just Desserts?  Even among those who have a solid grasp of the English language, it seems this phrase causes confusion.  These two terms, though only one letter apart and pronounced identically, have different etymologies.  The particular sense of desert that appears in just deserts derives from the Old French verb deserver meaning “to deserve,” and has been around since the 1200s.  Dessert with the double s derives from the French desservir meaning “to clear the table.”  So, the next time you’re talking about someone’s comeuppance make sure to use just deserts with one s.  As for who was right between my wife and me, I’ll never say.  Now you know.

September 8, 2017

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