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Was Your Tax Return Stolen?

By Bob Brooks

May 27, 2015

Another day…another data breach.  Unfortunately, this one involved the IRS.  Yes, it is estimated that 100,000 tax payers had their tax returns with all of their personal information stolen from the IRS database.   However, this was not your ordinary security breach.  This was a sophisticated crime.

Hackers ALREADY had personal information before breaking into the IRS data system.  They used personal information obtained in other security breaches to pass the authentication process and obtain prior year tax returns.  According to the IRS, there were 200,000 attempts between February and May of this year.  Roughly 100,000 were successful and 100,000 were not successful. 

Information from those tax returns was used to file fraudulent returns.  The agency sent nearly $50 million in refunds before it detected the scheme.

So, how do you know if you were involved in the cyber-crime?

The IRS is in the process of notifying those whose information was compromised.  They will also notify the other 100,000 whose information was not successfully compromised. 

ALL of those notified by the IRS need to take precaution. Whether the hackers were successful or not is not the point.  The point is that the hackers had personal information sensitive enough to use the authentication process in order to steal the returns. This is the kind of information that a criminal can use to commit an identity theft. The mere fact that a hacker tried to use personal information would suggest that they intend to use information for identity theft purposes.

The IRS has said that they would provide credit monitoring.  However, it is not clear if they are going to be providing credit monitoring to all three credit reporting agencies.  

BOTTOM LINE:  No one should be without round the clock credit monitoring.  The stakes are too high and the security breaches too many.  Credit monitoring is the first line of defense against identity theft.        

Bob Brooks hosts the Prudent Money Radio Show heard weekdays Monday through Friday on 91.3, 97.5, and 99.9 in the Dallas Fort Worth Area. You can reach Bob at This e-mail address is being protected from spambots. You need JavaScript enabled to view it This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

 
Regulators Warn about Bond Mutual Funds?

By Bob Brooks

May 22, 2015

 

Bond mutual funds are typically viewed as plain vanilla, conservative investments.  Sure they can lose money. However, there is not a concern that they will crash and burn…..or is there?

 

 

The Financial Stability Oversight Council issued a stern warning in their annual report this week.  They stated that “exchange-traded funds and fixed income mutual funds (bond mutual funds) could potentially pose risks to the marketplace during times of stress.”

 

 

I can think of many types of mutual funds that could warrant a warning and bond funds wouldn’t hit that list.  However, there is a real risk and it is one that most bond mutual fund holders don’t understand.  It all comes down to liquidity. 

 

 

Here is the risk – Let’s say there is a financial crisis, bonds are losing money, and you want out.  You call the mutual fund company or your financial advisor and give instructions to sell your bond fund.  Each day the manager of your bond mutual fund receives orders to buy the fund and to sell the fund.  Hopefully, there is plenty of cash available to execute your order to sell your shares of the bond fund. 

 

 

If there is not enough money available, then the mutual fund manager has to sell bonds to create cash. Ideally there is someone who wants to buy those bonds.  What if there isn’t?  What if there isn’t a buyer for the bond at market price and there are more sellers than buyers?

 

There are always buyers.  However, there might be a buyer for the bond at a much lower price.  The fund manager needs cash and has no choice but to sell it at a lower price. 

 

If this happens on a massive scale where many are investors are selling their bond mutual funds, then a potential problem develops where the fund manager is selling the bonds at much lower levels just to get cash.  Now, add in a financial crisis where the bond market is going down and you have a toxic situation on your hands.

 

 

Your account was worth $50,000 and after the sale happens you walk away with much lower. 

 

 

This the big difference between holding a bond and holding a bond mutual fund.  When you are issued a bond, you are paid interest during the term of that bond.  At the end of the term, you are paid back that money in most cases.  So, it doesn’t matter if the price fluctuates.  You just hope that the company you bought the bond from stays solvent.  You don’t get that luxury with bond mutual fund.  The fund manager is forced to sell something that he or she would prefer to hold but has to do so at of necessity. 

 

 

So, if you are holding bond funds, you might want to do a little further investigation.  You might be holding onto a lot more risk than you think.

 

 

Bob Brooks hosts the Prudent Money Radio Show heard weekdays Monday through Friday on 91.3, 97.5, and 99.9 in the Dallas Fort Worth Area. You can reach Bob at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

 

 
Nearly 34 Million Cars could have Defective Airbags - Is Yours One of Them?

By Bob Brooks

May 20, 2015

Takata makes air bags.  Apparently, they don’t do a good job with them because some of these airbags have exploded on impact killing the passenger or driver.  A number of car manufacturers use Takata parts in their cars.   They started with a limited recall last year.  After another driver was killed this year,  the Department of Transportation expands the recall effecting over 34 million cars.

The question is…..Do you have a faulty air bag?

“There is good news and bad news with the announcement of the Takata air bag recall:  the good news, millions more Americans are covered for a fix to this serious problem, the bad news, it could take years to get safe parts manufactured and replaced in affected vehicles.”

Jack Gillis, Consumer Federation of America’s automotive expert and author of The Car Book, published with the Center for Auto Safety

So the key is to take action. Time is not on your side. So what do you do?

(1)  Go to www.safercar.gov/vin and type in your VIN – this will tell you if your car has a Takata Airbag

(2)  Immediately call your dealership and have the airbag replaced

(3)  Make sure a loan car is part of the repair

Jack Gillis gave this advice.  “The sooner you contact a dealer, the sooner you’ll get on the list for repairs. Traditional recall response rates are around 70%, so in the end, if consumers don’t respond to this recall, there could potentially be over 10 million vehicles with this dangerous defect on the road. While the root cause of this problem is not fully understood, humid regions with high moisture in the air can exacerbate the problem.  Consumers in those areas have likely already received a recall notice and should respond immediately.”

Bob Brooks hosts the Prudent Money Radio Show heard weekdays Monday through Friday on 91.3, 97.5, and 99.9 in the Dallas Fort Worth Area.  You can reach Bob at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .  

 
Social Security Garnished over Student Loan Debt?

By Bob Brooks

May 18, 2015

We are all aware of the ticking time bomb that we call student loan debt. However, did you know it is affecting senior citizens?  According to a recent article in The Washington Post (see below), the number of seniors going into their retirement with student loan debt has spiked by a whopping 500 percent since 2002. With seniors receiving an average of $1,300 a month in social security, the student loan burden is slashing their benefits to the bone.

At least 36,000 people age 65 and older had their benefits cut to pay student loan debt in 2013, a 500 percent increase from the 6,000 seniors who faced the same loss in 2002, according to the General Accountability Office.  Researchers found that the total outstanding student loans held by seniors grew from $2.8 billion in 2005 to $18.2 billion in 2013 

In an interview last week, student loan management and consolidation expert Bruce Mesnekoff stated that someone on social security could lose as much as 15% of their social security payment because of defaulting on student loan debt.   That is significant considering many are living solely off of social security.  
 Listen to the interview with Bruce here!

Student Loan debt is the one debt that will never go away.  You can dissolve in bankruptcy and you can't treat it like credit card debt.   You don't pay and the consequences are three fold.  

First, they add a 25% penalty on top of the amount you already owe.  For example, say you owe 50,000 student loan debt and you default.  They will add an additional $12,500 to what you already owe.  

Second, they raise your interest rate to 18%.  With that interest rate, chances are you will pay for a very long time.  

Third, they garnish your wages and take the payment that way.  If you are going to borrow to go to school, just know you are making a deal with a loan shark.  They are happy to finance over 100% in some cases of your education costs.  However, you don't pay and they own you.

If you find yourself in trouble, Bruce Mesnekoff runs an incredible business that can help you take advantage of the government programs designed to provide help.  His site is http://thestudentloanhelpcenter.com.  

 
Is a Currency Crisis About to Happen?

By Bob Brooks

May 14, 2015

Well Porter Stansberry is up to his scare/gloom/doom messaging again. However, this time he is using Senator Ron Paul to deliver his message.  You can watch Dr. Paul’s dire predictions at www.ronpaulmessage5.com.  He is predicting the next big currency crisis.  The video is brought to you by Stansberry Research.   

I get so many questions from readers who are genially and legitimately scared by this type of messaging.  As a result, I feel it is my obligation to write the other side of the story.  It is not my intent to smear anyone’s name.  It is my intent to give you some other facts and shine does of reality on this messaging.  How about a little about Porter Stansberry.

About once or twice a year, Porter Stansberry produces a hour plus video describing the end of the world and typically predicting a date when it is supposed to happen.  Here is a Youtube video page full of examples.   If you sort through the videos, you will find years of failed predictions.  I think the latest was the collapse that was supposed to happen last July 2014.  Then there was the infamous End of America Video that was claiming everything will collapse either at the end of 2013 or 2012. 

Who is Porter Stansberry?  He is an investment newsletter publisher.  He is also the guy described below.

  US judge fines Agora subsidiary and editor Porter Stansberry $1.5 million for securities fraud

An investment newsletter’s publisher and its editor have been hit with $1.5 million in financial penalties after a U. S. federal judge determined they defrauded their own subscribers in a securities scam.

Judgment in favor of the Securities Exchange Commission and against Maryland-based Pirate Investor LLC, now called Stansberry & Associates Investment Research, LLC, and Frank Porter Stansberry was issued at the U. S. District Court for the District of Maryland on August 1, 2007 – 28 months after the completion of a bench trial.  – www.briandeer.com

Here is the SEC Litigation release on the case

Now at the heart of every gloom/doom video is a solution to all of your problems.  All you have to do is subscribe to Stanberry’s newsletter and all of your problems will be solved. 

I think that it is unfortunate that Ron Paul has aligned himself with Stansberry. Dr. Paul carries a lot of credibility with his position in Congress.  He is creating a lot of unnecessary fear. 

The reality is simple this.  Yes, we have 18 trillion plus dollars’ worth of debt in this country.  Yes, we will go through some tough times at some point because the debt will overwhelm the system.  Can we predict what that looks like?  Can we predict when that will occur?  No, Dr. Paul we can’t.  Further, anyone can get on a video and make outrageous forecasts citing that we are facing a crisis worse than the Great Depression. 

It comes down to this.  You have to decide are these videos marketing or credible information?  Are these videos designed to truly inform you or to market a newsletter subscription?  Do you simply automatically trust a guy who a federal Judge determined defrauded their own subscribers in a securities scam?  

Mr. Stansberry is an incredible marketing genius. Beyond that, I would think real hard if you want to put stock and trust in any of his or his messengers’ predictions and scare tactics.

To be fair, below is Mr. Stansberry defense to charges of fraud and running a scam. http://www.stansberrysecfraud.com/

 
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