“Once More Unto the Breach”

What should we make of the latest security problem?

After a blogger reported that massive new batch of stolen credit and debit cards went on sale Tuesday, Home Depot confirmed that it is investigating a possible data breach. Rumors are that the breach ran from May through August. If true, this could be much bigger than Target’s data breach last fall, when 40 million cards were stolen in three weeks. Home Depot is the fourth largest retailer in the US, with $80 billion in sales a year.

Crooks seem to be hacking credit and debit card information with increasing frequency. Target, Neiman Marcus, TJX—all have had massive troves of data stolen. And smaller shops (with less security) also get attacked. Bagel bakeries near college campuses seem to be a frequent target. Data breaches are tough on business: sales go down while security costs rise.

The solution to this technological crime is more technology: smart cards with embedded chips that create unique codes for each purchase; two-step security that requires a PIN and cell phone-based code for large transactions; and so on. We have the know-how to stop this sort of crime. We just have to employ it.

But security costs money. Until retailers and consumers see that the cost of a breach is greater than the cost of new equipment, they won’t bother. Let’s just hope this latest news pushes more of us to upgrade our systems.


Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
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