A Stealth Tax Increase

October 21, 2013

  • The upfront Obamacare tax… and a hidden one
  • Was last Thursday gold’s turning point?
  • Curse this sector all you want, but it’s on a roll
  • A 5 follow-up: The view from overseas on a mega-bank’s wire transfer ban
  • The return of corporate jet bashing… more tilting-at-windmill solutions to government dysfunction… your chance to be one of 25 lucky and bold readers… and more!

  So now the president has labeled the glitches on the Obamacare website “unacceptable.”

Heh… They were acceptable as long as the shutdown-debt ceiling farce was going on and attracting the bulk of media attention. Then, he said the glitches at the site were no different than the rollout of Apple’s iOS 7 mobile operating system. (That assertion was so silly even the media took the time to notice.)

But now there’s an all-hands-on-deck effort to really fix things — “the highest-profile step,” Reuters reports, “in a broad damage control effort that the administration has launched since technical problems with the website, healthcare.gov, have prevented Americans nationwide from signing up.”

Time’s a-wasting: If you don’t have insurance now, you need to have something by Dec. 15 to avoid the penalty — er, tax — that kicks in Jan. 1.

  Meanwhile, businesses are already groaning under the weight of Obamacare requirements.

Last week, the Federal Reserve issued its monthly Beige Book. “It’s based on interviews with business contacts, economists, market experts and other Fed sources,” explains our Dan Amoss.

Here are its exact words: “Several districts reported that contacts were cautious to expand payrolls, citing uncertainty surrounding the implementation of the Affordable Care Act and fiscal policy more generally.”

Then came the reports from within each of the Fed’s 12 districts. A sampling…

  • “There is anxiety about rising health insurance premiums, which was attributed to the Affordable Care Act”
  • “Many of our contacts are concerned about the implementation of the Affordable Care Act and the effect it will have on their total labor cost”
  • “Many contacts also commented on reluctance to expand due to uncertainty surrounding the Affordable Care Act; some employers cut hours or employees”
  • “Staffing services firms noted flat demand overall since the last report, but saw an unexpected decline in direct hires. One contact saw a few signed contracts designed to circumvent the Affordable Care Act (ACA) by utilizing a temporary employee full time, then hiring that person on a permanent but part-time basis when the ACA goes into effect.”

“Over time,” Dan sums up, “Obamacare will weigh like a tax on both businesses and households. Only instead of a transparent tax, it will come in the form of escalating premiums for the same health coverage.”

Yeah, and you think it’s bad now.

But because we don’t like to complain about something without offering a concrete solution, there’s our exclusive guide called The Obamacare Antidote: 6 Ways to Get the Best Health Care of Your Life and Save up to $2,000 per Year. Thumb through its pages and you’ll learn…

  • How to get access to the best doctors in top-notch hospitals… while cutting your insurance premium payments by as much as 50%…
  • How to get medical testing done for 80% off what you’re currently paying through your insurance…
  • How to revive the doctor-patient relationship just like the good old days, effectively removing the middleman!

We’re less than three months away from the next phase-in of the law’s requirements. Act now, while you still can.

The major U.S. stock indexes have barely budged as we write this morning. The Dow and the S&P are down a bit, the Nasdaq and the Russell 2000 up a bit. Both the S&P and the Russell closed at record highs on Friday.

With the shutdown-debt ceiling in the rearview — for now — earnings and economic numbers are returning to center stage. McDonald’s beat expectations by a penny per share this morning. Existing home sales slipped 1.9% from August to September.

  After 10 days of volatile action, gold may be settling into a new groove. The price this morning is little changed from Friday’s spot close at $1,319.

The turn came last Thursday after the resolution of the shutdown-debt ceiling. After a $4 blip down, the price shot up $40. “There is little doubt,” writes Alasdair Macleod of GoldMoney.com, “that the bears, having failed to see selling materialize on the opening mark-down of $4 on Thursday, suddenly realized how exposed they were when the U.S. dollar suddenly weakened.

“The result is gold has now broken up out of its short-term downtrend (the dotted line). More importantly, the bears failed to push gold down below the June lows under $1,200; so gold looks like it has established two rising low points, confirming that gold is in an uptrend. This being the case, after a brief consolidation, gold has the potential to move swiftly higher to challenge the $1,350 level and above.

“Behind this turn of events is a weaker dollar,” writes Mr. Macleod — pointing to several developments we covered last week. “There is little doubt that as a brand the U.S. dollar has taken a beating. Not only did the U.S. suffer the indignity of airing its washing in public, not only did a ratings agency threaten to downgrade U.S. government debt, but also the Chinese, through their official news agency Xinhua, are calling for an end to dollar and U.S. supremacy.

“They have backed this up by freezing New York out of the internationalization of the renminbi, choosing London instead. The full implications of all this have not yet been reflected in financial commentary and will no doubt be debated in the coming weeks.

“This is generally bad for the dollar and good for gold.”

  Crude has fallen below $100 a barrel for the first time since July 3 — the day of the coup in Egypt.

  For the record: With the debt ceiling now suspended, the national debt crested $17 trillion on Friday.

If you really care, the precise figure is $17,075,590,107,963.57.

  “Here come the corporate jets again,” our fearless leader Addison Wiggin quipped in an email over the weekend.

When the president delivered his post-shutdown speech last week, he declared his intent to “close these corporate tax loopholes that don’t help create jobs and freeze up resources for the things that do help us grow, like education and infrastructure and research.”

The president made a big deal out of corporate jets during the 2011 debt-ceiling showdown — never mind that closing the corporate jet “loophole” would amount to only $3 billion over 10 years. But the proposal is part of a wider plan for $1 trillion in tax increases, again stretched over the next 10 years.

No doubt we’ll be hearing more about it as the politicos preen in advance of the “grand bargain” budget that congressional greybeards are supposed to draw up in the next two months. Oh, joy…

 “If you’re looking for a solid trend to play heading into the last couple of months of 2013,” says Greg Guenthner, “financials are hitting new highs left and right.”

That’s despite the regulators getting kinda sorta tough — to wit, J.P. Morgan Chase’s $13 billion settlement over sales of its mortgage bonds, news that slipped out on Saturday.

“You can complain about the bankster criminals and accountability all you want,” Greg writes in this morning’s Rude Awakening. “But the charts don’t lie. After underperforming since July, financials are ramping up.

“You almost can’t go wrong in this group,” Greg sums up.

  From an alert reader in Ecuador comes confirmation of our thesis about JPMorgan Chase’s move to ban international wire transfers by personal and small-business customers.

The news set off an Internet brush fire of baseless speculation that JPM was battening down the hatches for capital controls ahead of an all-on financial collapse. We suggested it had more to do with the feds’ ham-fisted attempts to crack down on money laundering for drugs and terrorism.

Now the Gringo Tree newsletter, targeted toward expats in Cuenca, Ecuador, sheds light from another angle. “Chase’s new rules may be partly the result of tough new U.S. financial controls, including the Foreign Account Tax Compliance Act, or FATCA, scheduled to go into effect next year. The new law is intended to stop tax evasion and money laundering. Its effect, however, may be felt most strongly by U.S. citizens living abroad, like the thousands of expats in Cuenca.

“In recent months, a number of Cuenca expats who don’t bank with Chase have reported delays, some longer than a week, in receiving wired funds from the U.S. Their banks say the hold-ups are probably the result of heightened government controls. In one case, an expat lost a real estate deal, forfeiting a large earnest money payment, because of the delay.”

Yuck. No wonder 1,809 Americans gave up their citizenship in the first half of 2013 — a number already higher than any previous annual total.

  “I decided to remove most of my cash from my bank account last Monday,” in advance of the debt-ceiling deadline, a U.S. reader writes us.

“I don’t have much, but they grilled me a bit about what I was doing with it. I dislike that every time I take cash they do this. I used a plausible excuse and they gave up. I’ve seen a number of people walk out of my branch complaining about them not loaning money to small businesses, even the most local and trustworthy. What a shame banking has become a government tool, just to survive and steal money.”

The 5: It wasn’t always?

  “For the life of me,” chimes in one of our regulars, “I don’t understand why anyone with any gray matter that hasn’t hardened doesn’t open up and do business with a local credit union.

“I live in a Midwestern state that isn’t too sophisticated yet. Maybe the Eastern states have put the credit unions out of business already (they sure want to!). But so far, I am able to go that route when I can’t find an honest small bank. I’ll keep my money under the mattress, where I know it won’t disappear as fast as in a ‘big-time, sophisticated bank’!”

The 5: You’ve got that right about trying to put them out of business.

  “As long as we’re making out our wish lists of things that will never happen but would dramatically improve our political system,” continues a thread from last week, “here are my submissions:

1. Abolish the party system. Private citizens are, of course, free to form free associations, but anyone running for public office must do so independent of any formalized ‘party’ affiliation. Difficult to enforce, I know, and virtually impossible to prevent the formation of coalitions altogether. But so long as they remain small in scope and influence, at least it would be an improvement.

2. No more setting up residence in D.C. except for the president. It is no longer logistically necessary for the House and Senate to meet in person. We have the technological capability for our elected officials to reside in the states/districts to which they were elected and convene via teleconference. This would give their constituents more ready access to them than the hordes of special interest lobbyists who command their attention in D.C. It would also all but eliminate the risk of a ‘mass extinction’ event due to an attack on government buildings.

3. Constituents get to decide how much they want to pay their elected officials. After all, who’s (supposed to be) the boss?

“Love The 5!”

  “I live in a country with no re-election,” an expat reader writes on the subject of term limits. “The result is clearly: unelected bureaucrats running the country, with no one to control them.

“I agree that our main problem in unresponsive, unrepresentative government is that as the population increases and the government remains the same size, the representational voice of each voter keeps getting smaller every term. At the same time, to fill that vacuum, the influence of the well-heeled special interests becomes ever greater. If a Congress of 600 is too large to be able to do any real work, just imagine one of 6,000.

“I think the only workable solution would be for the states to revoke most of the powers ceded to the federal government and then form five regional governments of a size that could be responsive and accountable to a reasonable number of constituents.”

  “Here’s my take on how to clean up the acts of these self-serving, incompetent traitors in D.C.:

1. Make ‘betrayal of public trust’ by an elected official or political appointee a felony that, upon conviction, results in a minimum sentence of 10 years (no parole) served on a county work farm run by Sheriff Joe Arpaio (Maricopa County, Ariz.) and forfeiture of all pension(s), health care or other benefits of the position held, as well as forfeiture of all physical property obtained during their time in office in which they held any beneficial interest.

2. Lifetime banishment from serving in ANY form of government position.

3. Should an elected or appointed official’s actions cause the unlawful death of a citizen in any manner connected to or with personal gain, or through committing an un-constitutional act, such official will be hanged until dead in a public location to be chosen by the victim’s (or

victims’) family and the event will be televised via the mandatory donation of airtime by the three major networks and will take place on Saturday mornings between 10:00 a.m. and 12:00 p.m. in lieu of regularly televised cartoons.

“Do this for a decade and see how these bastards shape up!”

The 5: Hmmm… There must be a way of making Sheriff Joe subject to the same law without trampling on the 10th Amendment…


Dave Gonigam
The 5 Min. Forecast

P.S. Here’s a “shutdown” that actually matters to your finances.

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