Lessons from White House attack Twitter hoax: Vigilance; don’t ‘stop loss’

The hacking of the AP’s Twitter account  this week–about a fictitious attack on the White House–sent the stock market diving reminiscent of the “flash crash” of 2010. Two quick observations:

  • Hackers can be more sophisticated than the social media sites we’re all using. If they want to get past your social media firewall, they almost certainly can. So be vigilant in monitoring your own Twitter and Facebook sites, and even your corporate blog–look what happened to Joel Osteen last week. If a mischievous hacker has taken over your social identity, act quickly to let stakeholders and the media know about the fraudulent posts. Redouble your efforts to beef up your cyber security–but know that you’re still vulnerable. (Here’s a very helpful FAQ from Bloomberg about corporate hacking.)
  • The stock exchanges really need to address susceptibility to flash crashes that certainly unsettle investors and undoubtedly cost many of them significant amounts of their savings. And here’s a tip for the individual investor: We used to be told that we should maintain “stop-loss” orders on our investments to automatically trigger in the event a share price declines precipitously, thereby limiting our losses. In the case of a flash crash, doing nothing is far better than automatically selling into a steep drop that quickly reverses back up. Stop-losses are so 20th century.

- Jon Harmon

 

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