I knew the letter from the IRS sitting in my mail box was bad news just from the color of the paper.

It was not light green, the color of a refund check from the United States Treasury. Instead, it was white, warning that it contained some sort of demand, audit notice, or threatened legal action.

In fact, it was far worse than that.

In the most stilted, bureaucratic language possible, I was informed that my $100,000 tax refund for 2015 had been paid out to someone else.

Another party using my name and social security number, but a different address, had already filed a 2015 return.

In order for me to get my money back I would have to file a new return and include hard copies of every single piece of supporting documentation. It was in effect a full paper audit. Then I would have to wait 60 days.

This was three months ago.

I informed my accountant immediately. I heard him shout across the room to his partner, ?Hey, I?ve got another one.?

He told me that half of his clients had had their refund checks stolen this year, and as a result, the IRS was now demanding automatic audits on all refund requests into four figures or more.

It gets worse. Budget cuts at the despised government agency means that huge delays are occurring in almost all interactions. Even routine requests can sit on a bureaucrat?s desk for two years. The number of standard audits has fallen substantially.

The ones that take place are just a quick pass over, often conducted by mail, rather than the in-person, no stone unturned drill downs of the past.

Furthermore, the government didn?t have the money to pay for the latest upgrade of QuickBooks Pro.

This means it is unable to use this online accounting service?s spreadsheets during audits when the taxpayer?s accountant has upgraded, greatly increasing the time required for each audit while decreasing its effectiveness.

As a result, QuickBooks is seeing the fastest and most widespread adoption of its latest software version in history.

You can?t make this stuff up.

I asked my accountant how long it would really take for me to collect my 2015 refund.? Better count on a year,? he said.

Then the news flash came out that hackers had stolen the tax returns of 100,000 individuals, including their personal information. I was clearly one of those victims.

Not only did the crooks discover my name and social security number, they also knew that my high school team name was the ?Apaches?, my first car was a Volkswagen, and that I was married in Tokyo. I bet they know my inside leg measurement as well (I?m not telling!).

It all reminds me that it is once again time to revisit Palo Alto Networks (PANW) and Fireye (FEYE). I have been recommending these two cyber security names for the past three years, issuing Trade Alerts on each opportunistic dip.

The near destruction of Sony (SNE) by North Korean hackers has certainly put the fear of God into corporate America.

Apparently, they have no sense of humor whatsoever north of the 38th parallel. I saw The Interview the other day on a plane, the film making fun of Supreme Leader Kim Jong-un that so pissed them off, and it totally sucked.

As a result, there is a generational upgrade in cyber security underway, with many potential targets boosting spending by multiples.

It?s not often that I get a stock recommendation from an army general. That is exactly what happened the other day when I was speaking to a three star about the long-term implications of the Iran peace deal.

He argued persuasively that the world will probably never again see large-scale armies fielded by major industrial nations. Wars of the future will be fought online, as they have been silently and invisibly over the past 15 years.

All of those trillions of dollars spent on big ticket, heavy metal weapons systems are pure pork designed by politicians to buy voters in marginal swing states.

The money would be far better spent where it is most needed, on the cyber warfare front. Needless to say, my friend shall remain anonymous.

The problem is that when wars become cheaper, you fight more of them, as is the case with online combat. Cyber wars are now happening every day, all the time, 24/7.

You probably don?t know this, but during the Bush administration, the Chinese military downloaded the entire contents of the Pentagon?s mainframe computers at least seven times.

This was a neat trick because these computers were in stand alone, siloed, electromagnetically shielded facilities not connected to the internet in any way.

In the process, they obtained the designs of all of our most advanced weapons systems, including our best nukes. What have they done with this top-secret information?

Absolutely nothing.

Like many in senior levels of the US military, the Chinese have concluded that these weapons are a useless waste of valuable resources. Far better value for the money are more hackers, coders, and servers, which the Chinese have pursued with a vengeance.

You have seen this in the substantial tightening up of the Chinese Internet through the deployment of the Great Firewall, which blocks local access to most foreign websites.

Some Mad Hedge Fund Trader subscribers in the Middle Kingdom have told me they can no longer access their US based online brokerage accounts, which are blocked by mainland ?porn? filters.

Try sending an email to someone in the middle Kingdom with a Gmail address. It is almost impossible. This is why Google (GOOG) closed their offices there years ago.

As a member of the Joint Chiefs of Staff recently told me, ?The greatest threat to national defense is wasting money on national defense.?

Although my brass-hatted friend didn?t mention the company by name, the implication is that I need to go out and buy Palo Alto Networks (PANW) right now.

Palo Alto Networks, Inc. is an American network security company based in Santa Clara, California just across the water from my Bay area office.

The company?s core products are advanced firewalls designed to provide network security, visibility and granular control of network activity based on application, user, and content identification.

Palo Alto Networks competes in the unified threat management and network security industry against Cisco (CSCO), FireEye (FEYE), Fortinet (FTNT), Check Point (CHKP), Juniper Networks (JNPR), and Cyberoam, among others.

The really interesting thing about this industry is that there are no losers. That?s because companies are taking a layered approach to cyber security, parceling out contracts to many of the leading firms at once, looking to hedge their bets.

To say that top management has no idea what these products really do would be a huge understatement. Therefore, they buy all of them.

This makes a basket approach to the industry more feasible than usual.

You can do this through buying the $746 million capitalized PureFunds ISE Cyber Security ETF (HACK), which boasts CyberArk Software (CYBR), Infoblox (BLOX), and FireEye (FEYE) as its three largest positions. (HACK) has been a hedge fund favorite since the Sony attack.

For more information about (HACK), please click link: http://www.pureetfs.com/etfs/hack.html .

As for my tax refund, I am still waiting.

I Have Some Bad News for You Mr. Thomas

Down, then up, then up some more. That?s all you need to know.

The stock market will mirror the economy with a three-month lag, as it always does.

That calls for a 10% correction in stocks from the recent $2100 peak going into the summer, then a monster rally to new highs going into the end of the year.

Certainly the 200-day moving average in the (SPY) at $199.75 is crying out for attention. Below that you can target the previous breakout level of $192.50, and that nearly gets you to your 10% hickey.

That means you should be buying gold right about now to hedge your existing long positions in equities.

Remember ?Sell in May and Go Away?? I have bad news for you. It?s May 2.

Why should stocks sell off right now? There are a plethora of reasons.

We are just entering the worst six months of the year to own equities. Buy stocks every May and sell them every October and your return on equities for the past 60 years has been zero, despite the indexes going up several thousand percent.

Stocks at a 19X price earnings multiple are at the top end of its historic 9-24X range. Buy high and sell higher? I?ll leave that one to you.

As traders entertain a June rate hike by the Fed, the dollar (UUP) is about to strengthen. This is always terrible news for large US multinationals.

Several large hedge funds are going bust, dumping large amounts of stock on the market. That?s why the Japanese yen has been so strong this week. They?re covering their shorts.

A Q1 mini recession has become a regular feature of the US economy, the aftermath of maxed out credit cards during the holiday shopping season and delayed starts to New Year corporate capital spending programs.

The economy then bounces back hard for the remaining three quarters, but the data won?t show this definitively for 3-6 more months. That?s sets up the annual cycle for the movement of all asset classes which we have learned to both love and hate.

And while QE is gone and dead in the US, it continues full speed ahead in Europe, Japan, and China, which account for 35% of the planet?s GDP.

Therefore, the American stocks that look expensive now at a 19X price earnings multiple become fairly priced in three months, and a bargain in six.

How far in advance do you want to front run the attractive valuations?

In addition, you have to consider the harsh reality that there is absolutely nothing else to buy. US 30 year Treasury bonds with a 2.69% yield? German 10 year bunds at 0.27%? Japanese government bonds at -0.11%. Not a lot to choose from.

How about collectable French postage stamps? Beanie babies anyone?

The fact is that EQUITIES HAVE BECOME THE HIGH YIELD INSTRUMENTS OF OUR DAY.

You can get 2.10% for the S&P 500, and much more for damaged names like AT&T (T)(5.04%), Altria Group (MO)(3.68%), Chevron (CVX)(4.18%), and Verizon Communications (VZ)(4.52%).

The world is still on a giant paper chase, as it has been for the last seven years. The only difference now is that we are shifting from fixed income to equity script.

So when we get our 10% summer correction, you have to jump in with both hands and buy as much stock as you can.

This year is special in that we are likely to get a presidential election that is equity positive. We may even have a shot at an end of congressional deadlock, which would open the fiscal spending floodgates.

I?ll let you guess which result delivers that.

Stocks are almost certainly flying to new all times highs going into the end of 2016. I?m looking for at least a $220 print, a gain of 6.8% from here. If you cash out now, you?ll be kicking yourself around the Christmas tree.

Newbie traders working without the benefit of the Mad Hedge Fund Trader will end up selling every bottom, buying every top, and then wonder where all their money went.

If you are an elderly retiree, or just a plain wimp, and don?t want to trade these big moves, just take a long cruise. You will find share prices pleasantly higher at the end of 2016, and wonder what all the fuss was about.

I recommend the Cunard World Cruise (click here for the link at http://www.cunard.com/cruise-types/world-cruises/ ). You can use my regular owner?s suite.

See You in December