Protect Yourself From the "New" America

Editor's Note: Over the past several months, my colleague Dr. David "Doc" Eifrig has taken on a controversial research project...

The topics he chose to cover include sensitive, sometimes emotional, and very politicized issues.

At the core of Doc's research is a belief that you might have yourself...

Over the past decade or so, something has changed about America. Maybe you've recognized it... just like he has.

The sad truth is that America is a very different place than it was just a dozen years ago.

I'm sure if you are over the age of 40, you recognize these changes, too... even if you can't pinpoint exactly what's gone on.

From Doc's perspective, it's been the slow adoption of a series of almost imperceptible new laws, regulations, and corrupt ideas... coupled with major changes in technology, which have left us with a country that is barely recognizable from the place we knew only a dozen or so years ago.

These changes are affecting our money, our families, our health, our privacy, and everything about our daily lives.

Fortunately, Doc has found several "common sense" solutions that can help you protect yourself from some of the worst elements in today's America.
In the pages that follow, you'll find…

I know some folks will find Doc's conclusions unpatriotic... or even crazy. But I believe what he has to say is one of the most important messages in the world right now. And I believe if you listen with an open mind, it could be hugely beneficial to you.

I hope you enjoy our special series.


Brian Hunt
Editor in Chief, DailyWealth

The Most Dangerous "Everyday" Threat to Your Privacy

Three powerful forces have come together to dismantle the privacy of U.S. citizens...

First, government programs and regulations have formed the foundation of a massive tracking grid for all individuals. It has passed laws that give it sweeping "snooping" authority... It can now legally peer deeper into our daily lives than ever before.

Second, corporations collect huge amounts of our personal data to aid in marketing. The government can also force them to hand over customer records. In essence, banks, Internet service providers, airlines, car-rental agencies, cell-phone companies, and more have become proxy agents of the government's domestic intelligence apparatus.

Third, we live in a hyper-connected technological age... Smartphones, "cloud" computing, and credit cards have made it easier than ever to rob someone's resources... even his or her identity. This provides unprecedented opportunity for crooks to use your data against you.

This "new" America is a dangerous place. But there are simple steps you can take to protect yourself and your family. I'll share several with you today...

In a recent Wired article, one of the magazine's senior writers described how a hacker "dissolved" his online data:

In the space of one hour, my entire digital life was destroyed. First my Google account was taken over, then deleted. Next my Twitter account was compromised, and used as a platform to broadcast racist and homophobic messages. And worst of all, my AppleID account was broken into, and my hackers used it to remotely erase all of the data on my iPhone, iPad, and MacBook.

Among the casualties in this "digital massacre" was every digital photo he had of his newborn daughter's first year of life.

The hacker exploited a weakness in Apple's security measures. But as the writer discovered, he could have prevented the worst of the damage...

The No. 1 way people's accounts are hacked has nothing to do with the actual password. It has everything to do with the password "recovery tools." These are systems e-mail providers and online stores have in place to help you if you've forgotten your password.

It turns out, every day, folks are providing hackers an easy way to exploit these recovery tools... They're signing credit-card receipts.

Credit card receipts "X out" all but the last four digits of your credit card number. You may think this provides a strong degree of security. Think again. In Apple's case, the recovery tools require the last four digits of the credit card linked to the account and the account holder's billing address.

Addresses are easily attainable via public record searches. Combine this with the last four digits of a credit card and voila, you have taken over access to someone's AppleID. And it's not just Apple that works like this... any number of corporations have similar programs.

But there is a solution...

From now on, whenever you use your credit card, always black out the last four digits on your receipt. Do this on the business copy as well as your own. If anyone hassles you, explain you have a legal right to do so. The digital transaction has already occurred... you are just keeping your personal data private.

Another major weakness in password "recovery tools" is the "security questions." These are often mundane questions like "What town were you born in?" or "What is your mother's maiden name?"

A simple search of public records and social networking sites (like Facebook) should yield these answers. At the very least, it will give a hacker a short list from which to deduce the correct answers.

But there is a solution...

Do NOT supply answers to these easily identifiable questions.

If you're given the option to choose your own recovery question, make it a tough one. Make it nonsensical. Make it something that only you would know. And if you have no choice but to use the stock questions provided, give false answers.

For example, if the question asks for your mother's maiden name, make up a name like "MacSmithowitz." Keep the answers written down on paper (never in digital form), in a secure location that only you can access.

Finally, the biggest "recovery tool" weakness is your primary e-mail account. That's because on the Internet, all "roads" lead to your e-mail address. It's the nexus of your online environment.

A hacker with access to your e-mail can immediately gain access to your other accounts by resetting their passwords. (The confirmation e-mails for these are sent to your primary account, which he now has control over.)

He can also change the password and shut you out from it... peruse financial data and gain partial account numbers, like the last four digits of your credit card and Social Security numbers... rummage through all your private data, including photos, videos, and more... gain access to your cloud-based files and devices... and delete things of value to you.

This is exactly what happened to the Wired writer.

But there is a solution...

First, NEVER "daisy chain" your passwords. This means do NOT use the same password for every account you own. A compromise of one means a compromise of all.

Also, NEVER select "remember me" or "keep me signed in" on your e-mail website. (This allows others who use the same computer to access your e-mail without needing a password at all.)

And if it's offered, ALWAYS use "two-factor" authentication. For example, in order to log in, you might need your password plus a code sent to an alternate e-mail or mobile device that is associated with your account.

All these steps may take a little extra time and effort. But think about it this way... Let's say you own a rare, jeweled necklace. Would you leave this out on a table in your front yard, just so others could admire its beauty? Or would you take steps to keep it safe?

In the modern age, your personal information is more valuable than exquisite jewelry. And the strategies I showed you today are a few easy ways to keep it safe. You should put them into practice immediately.

One of My Favorite Ways to "Dodge" Taxes

Are you earning the market's safest, highest tax-free yields?

Or are you still buying into the hype?

For the past three years, I've been one of the few investment advisors to continually "pound the table" on municipal bonds. They've been – and will continue to be – a great deal for income-seeking investors.

As you probably know, municipal bonds are loans made to state and municipal governments. To encourage folks to invest in the government, interest received from "munis" is exempt from federal income tax and, in many cases, state and local income taxes.

This makes them a great way to earn investment income... and keep it from the taxman.

During the time I've been urging investors to own munis, there's been an enormous amount of "fear hype" surrounding them. On the December 19, 2010 broadcast of 60 Minutes, Wall Street analyst Meredith Whitney – best known for her bearish call in the fall of 2007 on Citigroup – foretold 50-100 "significant" municipal bond defaults that would add up to "hundreds of billions of dollars."

Whitney's media appearance caused a panic. About $30 billion exited the muni bond market. Some of the strongest, best bond funds fell 15% in just a few months. This is an enormous move for "boring" bonds.

The panic was way overdone. In 2011, defaults totaled just $2.6 billion. That's a hair less than the $2.8 billion defaults in 2010 and hardly the disaster industry "experts" were expecting. My Retirement Millionaire readers kept holding their muni bonds and making great tax-free money.

And then Stockton, California stoked the fear hype again. Back in June, Stockton became the largest U.S. city to declare bankruptcy. The crisis triggered the same warnings investors had heard for years.

But remember... the municipal bond market is huge... It's over $3 trillion. So while Stockton is the largest city to declare bankruptcy – with over $500 million in debt – it can't do much, if any, harm to the whole muni market.

It's still too early for the final 2012 municipal default rates. But I expect the defaults to be minuscule – perhaps 0.5%-1% of the total municipal bond market. But as of late December, many of the muni bonds were priced as if they were expecting 10%-14% default rates. Remember... in 2011, defaults totaled $2.8 billion... less than 1% of the total market. Even if defaults doubled (to $5.6 billion) last year, that is still less than 1% of the market... and a long way away from the 10%-14% the talking heads have been yelling about.

Plus, when there is a default, new terms are usually quickly worked out. Sometimes investors still get new deals that provide $0.80-$0.90 on the original dollars. In short, default isn't the huge risk you're hearing about.

Many investors have sold municipal bonds in the past month. They're afraid politicians will try to tax folks on muni bond interest income. This is another overblown fear. It's not happening.

One of my favorite municipal bond picks is the Invesco Value Municipal Income Trust (NYSE: IIM). IIM invests in tax-free, fixed-income securities. It holds a diversified portfolio of mostly A-rated (or higher) municipal securities. The interest and principal payments are also covered by insurance. Owning a fund that holds insured, investment-grade paper means we can sleep well at night.

IIM's current distribution rate (as of the end of January 2013) is 5.4%. For people in the 35% tax bracket, this works out to an incredible 8.3% taxable equivalent yield.

Bottom line... Don't let the scary headlines and gloomy predictions spook you out of a great investment and a great tax "dodge." Ignore the hype and earn safe, tax-free income.

How to Take Control of Your Retirement Money

Don't trust your employer to do what is best for your retirement.

In December, Hostess Brands – the bankrupt baked goods company – admitted to using workers' pensions to pay for company operations. Not only was Hostess misusing retirement funds, the company missed over $20 million in pension payments.

If you're over 40 years old, you may have a "pension," also known as a defined-benefits plan. It's a retirement account that your employer funds and controls. When you retire, your employer agrees to give you either a lump sum of money or monthly payments.

With a pension, you have zero control over what happens. You can't increase or decrease the amount that's being invested. Companies also hire managers who oversee where pension money is invested, and the fees they charge dilute returns. Plus, if you die right after you retire, your dependents might get nothing.

But there is a solution...

You can move money from your pension into a self-directed IRA.

This gives you total control of your money. You get to grow your money tax-free, just like a pension... but there's no limit on how much you can make.

A self-directed IRA is exactly what it sounds like... It puts you in charge of what you invest in. In addition to the conventional investments you can make in a typical IRA – like stocks, bonds, and covered calls (something I regularly recommend to my Retirement Trader readers) – a fully self-directed IRA allows you to invest in many other assets, including real estate, private stocks, businesses, and even precious metals.

You can invest in just about anything, as long as it's not employed for your personal benefit. This simply means you must avoid any conflicts of interest. You can't, for example, invest in companies you have a 50% interest in. But you can buy the house next door through your IRA and then rent it to a neighbor. You can also invest in a local small business (again, as long as it's not your own).

I use my self-directed IRA to generate income by selling stock options. When I use this account for options trading, I don't have to follow any accounting or tax requirements.

In fact, if you do all your trading inside a retirement account, you don't have to report any trades to the IRS. The goal is simply to maximize your total returns as quickly and as easily as you can... And get better returns than a pension could offer.

There are two ways to move your pension to an IRA...

One is to "roll over" the pension directly into an IRA. The broker or custodian you're opening an IRA with should have all the necessary forms for you to fill out. I have mine with Fidelity and TD Ameritrade.

You can also take a lump-sum payment on your pension and then move the funds into an IRA. If you do this within days of taking the lump sum, you'll avoid being taxed on the money and the 10% early withdrawal penalty. (If you can just roll over the pension directly, you don't risk incurring taxes and penalties.)

However you do it, don't wait. Why leave your pension – the money you're counting on for retirement – in someone else's hands?

How to Avoid the Worst Kind of Government Intrusion

The sad truth is that America is a very different place than it was just a dozen years ago.

If you've flown out of an airport over the last two years, you know exactly what I'm talking about.

In 2010, the Transportation Security Administration (TSA) changed its passenger-screening policies. From then on, travelers were forced to submit to a virtual strip search. These full-body scanner machines are so invasive, they were even held up for a time in the United Kingdom... The graphic images they provided violated the U.K.'s child pornography laws. And this doesn't even count the machines' harmful health effects.

You can choose to opt-out... But then you must endure an invasive pat-down search, where a TSA screener lays hands all over your body.

It's hard to believe these degradations now happen in "the land of the free." But as I'll show you today, there is a solution...

You have to jump through a few hoops and play the government's game. But once you do, you won't have to submit to humiliating and even dangerous searches.

The TSA has initiated a "trusted traveler" program. It's called "TSA Pre-Check." Travelers who enroll in the program must undergo a background check and pay a $100 fee. The background check lasts for five years.

After approval, Pre-Check travelers can go through expedited screening lines about 80% of the time. These lines somewhat mimic the bygone days of air travel, including:

  • Keeping shoes, belts, and light jackets on.
  • Leaving laptops and toiletry bags in carryon items.
  • Greatly reduced time in line. (A recent Minneapolis screening took about 30 seconds.)

Not every airport and airline is a part of the program, but the number is growing. Currently, five major airlines and 35 airports participate in the program. Further expansion is expected this year.

And Pre-Check isn't open to all passengers yet... Right now, only folks who are part of the Customs and Border Protection (CBP) or are frequent travelers on specific airlines (like American Airlines, Delta, and U.S. Airways) are eligible.

But there is a "backdoor" way into the program. Travelers enrolled in a CBP program called "Global Entry" are eligible for Pre-Check. And as long as you're a U.S. citizen with no criminal background and you fill out the application truthfully, you should be approved.

In fact, I've just recommended my brother and sister take advantage of this. I think it's well worth the background check and application fee. You can learn more about both programs here.

Participating in the Pre-Check program is not a perfect solution. The TSA can still subject you to radiation scanning and pat-downs. But your odds of having a simple travel experience are improved.

And I know I'll personally never go through another full-body scanner again.

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig Jr., MD, MBA

About the Author

Dr. David Eifrig Jr. (or "Doc" for short) holds an MBA from Northwestern University's prestigious Kellogg School of Management and has worked in arbitrage and trading groups with major Wall Street investment firms like Goldman Sachs and Chase.

In 1995, he retired from the Street, went to UNC-Chapel Hill for medical school, and became an ophthalmologist. Now, in his latest "retirement," Doc has joined Stansberry & Associates full-time to share his experiences and ideas with readers.

Doc is the editor of two of Stansberry's highest-rated and most popular advisory services. One of his advisories, Retirement Millionaire, is a monthly letter showing readers how to live a millionaire lifestyle on less than you'd imagine possible. He travels around the U.S. looking for bargains, deals, and great investment ideas.