Stocks are at record highs while volatility is at a record low. Which is another way of saying that investors aren’t as worried as they probably should be about the coming year.
That’s okay. Price corrections (with their attendant volatility spikes) are normal and natural ways for markets to teach overconfident investors a little humility. Think of them as the financial word’s forest fires, clearing out the underbrush of misconception, malinvestment, and hubris.
But there’s another area of Peak Complacency that is neither natural nor benign. And that’s cyberspace. Americans – and Europeans and Japanese – have moved most of their financial lives online just as hackers and other cyber-enemies get the upper hand. Recently:
- Credit rating agency Equifax – apparently through its own incompetence – allowed hackers to access and presumably copy and sell “sensitive personal information” of 146 million Americans.
- Online portal Yahoo upped the number of accounts that were hacked in 2013 to – get this — 3 billion.
- The National Security Agency admitted that its state-of-the-art hacking tools were stolen by hackers and are now available for sale on the dark web.
- The Federal Deposit Insurance Corporation (FDIC) suffered more than 50 data breaches between January 2015 and December 2016, exposing “personally identifiable information (PII) of U.S. citizens.”
- The U.S. Securities and Exchange Commission EDGAR database of corporate documents was hacked, leading to illegal insider trading that the SEC is still trying to unravel.
And then there’s bitcoin, where online exchanges are being hacked with apparent impunity and zero recourse for victims:
The obvious conclusion is that our bank, brokerage and bitcoin accounts aren’t safe from hackers and/or cyber-attacks that shut down settlement systems and power grids.
In the aftermath of Hurricane Maria, for example, much of Puerto Rico is still without power, which means ATM machines aren’t working. See Puerto Rico is now a cash-only economy.
So physical cash – always a good thing to have on hand – is a crucial part of disaster planning. And precious metals in the form of small denomination gold and silver coins are if anything even more important, since who knows what a large-scale cyber event and the subsequent central bank money printing will do to fiat currency values.