If Wikileaks is here to stay, what does it mean for the markets?
If there are no secrets anymore, what does that imply for investments? For one thing, the price of security just went up. Let’s face it: there are thousands of legitimate reasons for confidentiality. So the demand for technical solutions to the Wikileaks problem is going to increase.
That means anyone producing encryption software or secure data vaults or providing "privacy consulting" should see a boost in demand. But most leaks don’t come from hackers. They come from disgruntled insiders with a score to settle. The first Wikileaks data dump allegedly came from an Army Private who wanted the world to know what he knew, regardless of the law.
That brings up another implication: Ben Franklin famously quipped that "Three may keep a secret if two of them are dead." The likelihood of a secret’s being disclosed increases exponentially with the number of people who know it. One of the most famous secrets of the 20th century, the Watergate cover-up, couldn’t be suppressed even though only a handful of folks were in the know.
So small firms well-trained in maintaining confidentiality now have a competitive advantage in relation to the Citis and Goldmans of the world. With Wikileaks set to open the books on the major banks soon, that has to be a concern of many of their clients, who no more want their names published than someone working with the State Department.
Wikileaks changes everything. It’s only a matter of time before we figure out more of the implications.
Douglas R. Tengdin, CFA
Chief Investment Officer
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