If You Thought the 1040 Was Bad…

March 13, 2013

• Fifteen pages of paperwork, scrutinized by three federal agencies: the practical consequences of “health care” as Congress shirks its duties
• Budget cuts be damned: Byron King spies profits within a $500 billion annual pie
• Six straight days of Dow records: Mayer on “a market fraught with peril”
• A place where 1,000 small businesses vaporize daily… reader-submitted clues that aim to solve Patrick Cox’s crime of the century… the next installment of the mystery… and more!

  So the health care system is coming to this: Either pay a penalty — er, tax — or suffer a new bureaucracy at least as complex as the IRS.

“Applying for benefits under President Barack Obama’s health care overhaul,” reports The Associated Press, “could be as daunting as doing your taxes.”

The AP got its hands on a draft of the application for people who aren’t already covered by an employer’s plan, Medicare or Medicaid. For a family of three, it runs 15 pages. Once submitted, it will be scrutinized by the IRS (to verify income), the Social Security Administration (to verify identity) and Homeland Security (to verify citizenship).

“Seven months before the Oct. 1 start of enrollment season for millions of uninsured Americans,” the wire service sums up, “the idea that getting health insurance could be as easy as shopping online at Amazon or Travelocity is starting to look like wishful thinking.”

Heh…

  Then again, what other consequence can you expect when the regulations literally stack up like this…

According to the office of Senate Minority Leader Mitch McConnell, these 20,000-plus pages are the regulations written to implement the law. So far.

The law itself was an already-staggering 1,600 pages. But in the current day and age, the legislative branch sloughs most of its law-writing responsibilities onto executive branch agencies like… well, the IRS, the Social Security Administration and the Department of Homeland Security.

“Since the New Deal,” wrote the Cato Institute’s Roger Pilon in 2009, “Congress has delegated ever more powers to the executive branch without much guidance as to how they are to be used. And a supine [Supreme] Court, cowed originally by Franklin Roosevelt’s threat to add six new members, has gone along…”

Pity the estimated 4.3 million people who’ll be stuck filling out that form before year-end.

The June 2012 issue of Apogee Advisory, sensing this sort of nonsense coming, was titled “Why You Should Take Your ‘Health’ Into Your Own Hands.” It spelled out several alternatives that allow you to sidestep the bureaucracy and expense of 21st century U.S. health care. We’ll update our recommendations in the next issue now that the new regulations are a few steps closer to reality. If you’re not yet a subscriber, you can become one at this link.

  “From the president on down, this has become a key point of concern and discussion with China,” says the president’s national security adviser Thomas Donilon. “And it will continue to be.”

“It” is cybersecurity. On Monday, Donilon spoke to the Asia Society in New York. “In an unusually direct appeal,” reads a Washington Post account, “the Obama administration called on China to halt its persistent theft of trade secrets from corporate computers and engage in a dialogue to establish norms of behavior in cyberspace.”

  Then yesterday, the Pentagon owned up to its own capabilities to use cyberweapons.

What’s more, the Pentagon’s Cyber Command — now in its third year of existence — will set up 13 teams by 2015. “I would like to be clear that this team… is an offensive team,” Gen. Keith Alexander told Congress. Alexander runs both Cyber Command… and the National Security Agency.

  “China is one of the world’s biggest victims of cyberattacks,” reads a story that turned up by coincidence yesterday in China Daily, “and Chinese companies should improve their Internet security systems and remain vigilant to cyberthreats, Internet security researchers said.”

At least 60% of cyberattacks inside China originate overseas, according to a firm called Beijing Rising Information Technology. “Although we do not know who initiated those attacks, we do know which country the hackers are from,” says the firm’s Liu Siyu.

The plot thickens…

  Back in Washington, Gen. Alexander is concerned about budget cuts. “By singling out the civilian workforce, we’ve done a great disservice,” Alexander says of the “sequestration” that took effect at the start of March. About one-third of Cyber Command’s workforce is Air Force civilians — many of whom will face furloughs.

“With sequestration, the fiscal vise is finally closing on Uncle Sam,” wrote Byron King last week in his first Military-Tech Alert briefing. “No, there are no true ‘cuts’ to the ever-growing overall budget. It’s just that the rate of spending growth is slowing, if even for only a brief moment, until Congress and President Obama agree to spend more, if not to tax more.

“Still, the handwriting is on the wall. The money isn’t there for the national government to do business as usual, and blow money in the classical, old ways. Down at the Pentagon, they know this. The planners and program managers know that they had better come up with new ways of doing old things. Or they’ll accomplish far less, and fail… if not lose wars.

“We have to ponder how the U.S. military, the Department of Energy, Homeland Security, law enforcement and more will do business in the years to come… without the budgets that they’ve grown used to having.”

  “For all the problems facing the DOD,” Byron goes on, “there’s a way to play this scenario. It’s investable.” Consider this chart…

“As you can see, the U.S. has been spending nearly $700 billion each year to maintain our military. Maybe that number drops to $600 billion. Or $500 billion.

“Any way you slice or dice it, $500 billion is still a massive number. Compare $500 billion with, say, the energy industry. The number is over twice the market capitalization of oil super-major Chevron. And $500 billion is the market capitalization of global oil service giant Schlumberger five times over. It’s 20 times the market cap of offshore drilling titan Transocean.

“Even in an era of austerity, I foresee investment opportunity in military technology.”

[Ed. Note: For the moment, Byron's Military-Tech Alert is still in the beta-testing stage -- available to only a select few readers. But you can join their ranks by collecting the "loyalty rewards" credited to your account. Please note these rewards expire next Tuesday, March 19... so it pays to collect them now.]

  “Federal contractors are going to be hearing the words ‘supply chain’ a lot over the next 18 months,” writes Steve Charles at a site called Washington Technology — which bills itself as “the authority for government contractors and partners.”

Not being a government contractor or partner, the article is mostly Greek to us. “Having a certifiably secure supply chain will eliminate a potential mark against your selection as a source, just as having the appropriate contract vehicles eliminates friction.”

Oy, it’s painful when people speak in bureaucratese. But don’t glaze over now — because the words “supply chain” offer a significant clue within today’s cryptic video release from Patrick Cox. The first release on Monday dealt with a spectacular robbery in Sweden — in which thieves using a helicopter got away with tens of millions of dollars.

The second release amps up the intrigue into what we think is fair to call the “crime of the century.” If you missed our email earlier today, here’s your chance to watch now…

You might want to watch in full-screen mode to pick up all the clues that could lead you to your reward…

  Stocks are mixed at midweek. The Dow is still slightly in the red, but that’s how the index began yesterday and the day before, only to set records by day’s end.

“Everybody looks smart when the market is making new highs,” Chris Mayer wrote his readers yesterday. “But I think this market is fraught with peril. It has all the singsong seduction of great bull markets of the past, along with the casual disregard toward risks and implicit belief in the price-rising powers of Fed actions.”

Chris’ observations came as he cut loose one of his Capital & Crisis positions — good for 157% gains. The portfolio is down to a lean-n-mean eight stocks — all of them recommended within the last two years.

“This reflects, in part, a sea change in my thinking on commodity markets,” Chris explains. “In the summer of 2011, I started to put out warning signs that commodities were in trouble. Mostly, I believed this because of a slowdown in China and because of new supply growth, almost across the board.

“In the following summer, we were out of all of our commodity-related names — which made up a big chunk of the portfolio. But the portfolio turnover also reflects a surging bull market that took many names well beyond ‘cheap’” — the “C” Chris applies in his CODE screen.

“The current portfolio reflects, too, my more recent focus on U.S. opportunities as the dust from the financial crisis settled. I became a big bull on U.S. real estate and then on overcapitalized U.S. banks, especially those that stood to benefit from the rubble. These trends are playing out now.”

  “What has been happening is humiliating. If I fail, and businesses like mine fail, then everything else fails. We are going through a financial war, which is burying us. Will there be any survivors?”

These are the comments of the Tedeschi family, owners of a small Italian woodworking business, in an interview with The New York Times. Italian businesses are failing at a rate of 1,000 per day. The Tedeschi’s business is barely hanging on, and had to lay off half its workforce since 2011. The backbone of Italy’s economy — small manufacturers — is weakening at an alarming rate.

Italian stocks, well off their old highs, may look cheap — but they operate in an economy that’s destroying shareholder value. “Throw all the bums out!” was the message from the Italian elections. Investors must not ignore the political upheaval under way in Italy, for it will shake the foundation of the euro system. (Suitable guidance follows at the end of today’s episode for PRO-level readers.)

  Precious metals are slowly surrendering yesterday’s gains. Gold has slid to $1,587; silver’s back below $29.

Call it another case of resilience in the face of dollar strength; the dollar index is knocking at the door of 83 for the first time since last August.

  “Wasn’t sure where to submit ideas for solving the crime, so here we are,” writes a reader in reply to Patrick Cox’s first video release on Monday.

“It could be a government-run robbery… that’s what I gleaned from it at first. Now I’m wondering if it was at the building where the G-4 summit was held…don’t know if that helps, but this is fun! (Maybe the government planned a heist during that time…)”

The 5: Oooh, good guess… but not entirely on the mark. Maybe the second video will help. If not, Patrick is promising a third on Friday…

  “Easy,” submits another guesser, letting his imagination run wild. “This is the Federal Reserve robbing from the citizens of the U.S. There were three men seen in the video, but the newscaster says two men were seen leaving with big bags. That would be Ben Bernanke and Congress. The third guy that was not mentioned is the president — plausible deniability.”

“To prevent this from happening, just close the Federal Reserve, term limits for Congress and impeach the president during his first term for the crimes against the citizens and the Constitution of the USA.”

The 5: Dream on. In the meantime, here again is clue No. two.

  “Is Maryland getting desperate for cash?” writes a reader of our home base. He then included a link to a story about a woman ticketed for driving 63 in a 65 mph zone.

“[I was] really shocked,” she told Washington’s WRC-TV, though wishing to remain anonymous. “I thought, Oh, my God, you’ve got to be kidding me.”

Police say she was driving in the left lane along Interstate 95. The woman says the winds were high and she was staying under the limit as a precaution. The story leaves it to our imaginations whether she was actually holding up traffic by being in the left lane. Given the way people drive around here, she probably was.

Meanwhile, the governor — the ex-mayor of Baltimore who loosely served as inspiration for the Tommy Carcetti character on The Wire — is looking to jack up the gasoline tax. So the law-abiding will get theirs, too…

Regards,

Dave Gonigam
The 5 Min. Forecast

P.S. Knowing what we know about Patrick Cox’s second video today, it’s not overstating the case to say we’re talking about the most significant threat the Pentagon sees over the horizon.

It’s bigger than cyberattacks, bigger than any terrorist plot, bigger than “rogue states,” bigger than the Chinese or Russian nuclear arsenal. Follow the clues here…