Income That’s “Locked In”

Posted On Apr 27, 2016 By Dave Gonigam

  • Stress: CEOs in a dying line of business air their dirty laundry in public
  • Ten-bagger opportunity from 2009, available again in 2016
  • The book that inadvertently killed “file and suspend”
  • “Precision” treatment for heart disease
  • Cheaters unmasked (if they want to sue)… the real agenda behind Social Security… “a very astute and decent world leader”… and more!

Nothing like a little CEO snark to liven up a moribund industry.

The newspaper business may be dying a slow death, but USA Today owner Gannett appears determined to buy up every newspaper outside of New York and Washington, D.C., that it doesn’t already own. (Years ago in this space, our fearless leader Addison Wiggin described Gannett’s “empire of cookie-cutter crappy newspapers stretching from Poughkeepsie to Palm Springs.”)

On April 8, Gannett closed on a deal for Milwaukee-based Journal Media Group. Four days later, it started gunning for the Chicago Tribune and Los Angeles Times.

The news went public on Monday: Gannett’s making an unsolicited $815 million bid for Chicago-based Tribune Publishing.

Tribune, so far, doesn’t want to play ball. That, or it’s playing hard to get. The result has been a — uhhh — urination match that’s played out in an amusing email exchange between Gannett CEO Robert Dickey and Tribune CEO Justin Dearborn.

“Gannett’s behavior… has been erratic and unreliable,” Dearborn wrote. “On Sunday morning, April 24, you sent the company a letter demanding a substantive response to your proposal from our board of directors within 90 minutes… While the company has been handling your unsolicited, nonbinding proposal with a constructive seriousness, Gannett has been playing games.”

“It is not constructive to address the inaccuracies in your letter with respect to the events of the past few weeks and we won’t,” replied Mr. Dickey. “From the time of my first contact to Tribune, all we have asked for is a substantive response to our proposal.”

Gannett’s offer has been nothing but good for Tribune shareholders this week. On Friday, before Gannett made its bid public, Tribune shares closed at $7.52.

With Gannett offering $12.25 a share, Tribune zoomed up first thing Monday morning. At last check today, it’s still hanging in there at $11.24. A nice payday for anyone who still thought the newspaper biz has some sort of future.

But there was much bigger money to be made from Tribune seven years ago… and similar opportunities are starting to open up here in 2016.

It wasn’t Tribune common stock that was so lucrative. In fact, Tribune was privately held at the time. Rather, the profit potential lay in something our income specialist Zach Scheidt has come to call “Chicago Income Rights.”

“In February of 2009,” he explains, “investors had a unique opportunity to buy ‘Chicago Income Rights’ at an incredible discount. Each one of these ‘rights’ came with a legal obligation, backed by the Chicago Tribune. And each one of these ‘rights’ — purchased at an extreme discount — ultimately paid investors more than 12 times their investment in profit. In fact, these investors were able to capture a 1,203.9% return on their investment!”

Better yet, these payments are effectively “locked in” under contract law.

Important point: “You don’t have to have special permissions or an advanced education to harness the power of ‘Chicago Income Rights,’” says Zach. “In fact, most people can take advantage of these ‘income rights’ through a regular brokerage account.”

That includes tax-advantaged accounts like an IRA.

On the other hand, “Chicago Income Rights” are not an evergreen investing vehicle. They’re ripe for the picking every few years, and for only a narrow window of time. 2009 was one of those windows. And now is another. Click here and Zach will explain how it all works. Even better, there’s no “boring, long-winded presentation” to watch.

It’s one of those days when traders are biding their time until the Federal Reserve makes its every-six-weeks “policy statement” in the afternoon. The major U.S. stock indexes are little moved as we write, the S&P 500 off two points at 2,089.

The Nasdaq is an outlier, down more than three-quarters of a percent — dragged down by Apple’s earnings numbers. Yes, we’ve reached “peak iPhone”; year-over-year sales are down for the first time since the iPhone was introduced in 2007. That part was expected. The part about falling sales in China, not so much. AAPL is down about 6% as we write.

Elsewhere in earnings-land, Comcast met expectations but Boeing missed.

Gold has recovered the $1,250 level. Crude is holding its own at $44.40.

Who’da thunk it? A best-selling book might’ve killed the “file and suspend” strategy of maximizing Social Security benefits.

The book is Get What’s Yours: The Secrets to Maxing Out Your Social Security, by Laurence Kotlikoff, Philip Moeller and Paul Solman.

[Irony: Kotlikoff is the fellow who says Uncle Sam’s unfunded liabilities — Social Security and Medicare — mean the national debt is not $19.2 trillion but, rather, $210 trillion.]

Legislation passed in 2000 opened the door to the “file and suspend” strategy for couples — allowing one spouse to collect spousal benefits while allowing his or her own benefits to grow. But only with the publication of Get What’s Yours did it become a big deal.

As we documented a year ago, the White House sought to kill the strategy — even before publication of the book. And as we documented last fall, Congress agreed.

“Kotlikoff, an economics professor at Boston University, says he’s been told by senior officials at the Social Security Administration that his book was the catalyst,” says a Bloomberg story. Kotlikoff and his collaborators are furiously working on a revised edition.

In the meantime, file and suspend goes away in two more business days. Not everyone will qualify, but if you think you might, check this out right away.

Get set for the era of “precision” treatment for heart disease. And not a moment too soon, says Stephen Petranek on the science-and-wealth beat.

“With immunotherapy showing sudden and extraordinary promise for curing cancer, we are on the verge of wiping out or treating cancer as a chronic but manageable set of diseases within a decade,” he says. “That’s truly astounding. But at the same time, we are entering a lull in similar progress against heart disease.”

One ray of hope, however, lies in precision medicine. “The concept behind precision medicine,” Stephen explains, “is to develop therapies that pinpoint an individual’s problem, rather than developing medicines and therapies designed for the masses.

“Why do some people react well to specific statins and others don’t? We actually don’t know the answer to that question, but if we understood the role of cholesterol in our bodies better, and especially if we understood how individual genetics change that role, it could revolutionize one field of heart disease.

“Cancer is undergoing a revolution of precision medicine,” Stephen reminds us.

“We no longer give almost all breast cancer patients the same chemotherapy, as we once did. Patients undergo molecular testing to establish their specific genetics. Then we decode the genetics of the individual’s cancer, which has its own characteristics, and then the patient is given a specific therapy that is most likely to work for their version of the cancer.”

Stephen says researchers at one company are aiming to do the same for heart disease — targeting hypertrophic cardiomyopathy. “It’s probably the most commonly inherited heart disease among humans, affecting one in every 500 people.”

In HCM, the heart muscle thickens abnormally. “It is the leading cause of heart attacks among people under 30 years of age and is characterized by shortness of breath and chest pain, and sometimes includes fainting spells and palpitations.”

Stephen will be following the researchers’ progress in Breakthrough Technology Alert.

A federal judge in Missouri has handed down karma for a certain group of hacking victims.

Among the large computer hacks of 2015 was that of Ashley Madison, a website that caters to people looking to cheat on their spouses. The personal information of some 30 million users was compromised.

Forty-two of those users have filed a class-action suit against the site’s parent company, Avid Life Media.

They sought anonymity. Federal District Judge John Ross has told them no.

“There is a compelling public interest in open court proceedings, particularly in the context of a class-action suit,” Ross writes, “where a plaintiff seeks to represent a class of consumers who have a personal stake in the case and a heightened interest in knowing who purports to represent their interests in the litigation.”

Besides, there’s the fact THE HACKERS HAVE ALREADY BLOWN THEIR ANONYMITY!

Judge Ross was a bit more circumspect in his language: “The personal and financial information plaintiffs seek to protect has already been released on the Internet and made available to the public.”

Heh…

“I think I see another angle of the war on cash,” a reader writes.

“I am 66 years old and retired 14 months ago. All the money (cash) that I ‘saved’ in Social Security was stolen (spent) by our government.

“My monthly check is not my money: It is the working young people’s money. Is my retirement money an entitlement or is it my welfare money?

“I suggested the latter to some other retirees and the fur flew. I was told to be quiet. My retirement money was stolen, and now I feel like I am stealing from younger people. I think this is a war on self-reliance and independence. I am a ward of the state. And I feel sad.”

The 5: Yes. That’s the idea. It’s how the German Chancellor Otto von Bismarck justified his nation’s forerunner to Social Security in the 1880s.

To his mind, ordinary Germans were becoming too prosperous, too independent of the state. A mandatory government old-age pension would forever bind the people to the state.

Worked like a charm, wouldn’t you say?

“Great financial advice,” a reader writes. “However, slamming Putin, who is a very astute and decent world leader, is not really appropriate! Study up on what’s going on in the world!”

The reader is responding to a sales message we sent out on Sunday for Jim Rickards’ Currency War Alert. It had the subject line, “Rickards: Bad News, Putin!”

We’re not sure how it was “slamming” Putin. I merely said, “The thing that may be ticking off Vladimir Putin is the very thing that could make you a fortune.” No value judgments attached.

Besides, while your editor wouldn’t deign to call any sitting head of state “a very astute and decent world leader”… I’ve nonetheless caught much flak the last two years for questioning the Putin-bashing orthodoxy surrounding the new cold war. (Here’s a representative sample.)

“Congratulations on your ninth anniversary!” writes one of our longtimers as The 5 enters its 10th year. “Since Addison started this whole thing, I read it daily.

“Here’s a special request for Addison. Would he be willing to share what he is doing with his capital these days as we apparently enter the latter days of the ‘Mother of All Financial Bubbles’?

“Is he sitting on cash under his mattress as a hedge against bank closures and the war on cash? Is he continuing to build precious metals reserves (here or abroad)? Does he own any sovereign or other types of bonds? Or is he buying up farmland and other real estate (here or abroad)? Anything he is willing to share would be welcome. What will be the trigger event that causes him to leave the U.S., or is that date already determined and approaching?

“As I play the home version of this game, it is increasingly difficult to anticipate and stay ahead of the ever-changing rules our overlords erect to limit our options.

“I understand completely if he is unwilling to show his hand publicly, however.”

The 5: As it happens, Addison… well, all I’m at liberty to say right now is to watch this space.

Best regards,

Dave Gonigam
The 5 Min. Forecast

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