A $4 Trillion Debt Bomb

A new tax and spending bill passes the House… It all adds up to more debt… Potential rocket fuel for bond yields… OPEC’s new price war… The hidden oilfield sabotaging the Saudis… This 9.75% bond could outlive the oil crisis…

We have some ‘big, beautiful’ details to discuss…

A new Republican-led tax and spending bill passed – barely – through the House of Representatives overnight. It still faces much debate in the Senate, so nothing is a done deal, but it’s worth looking at the proposed details now to stew on the potential economic consequences.

The 1,000-page-plus legislation includes an extension of President Donald Trump’s 2017 tax cuts (which just about everybody expected), plus a laundry list of fresh items (and about $350 billion in new costs) for Uncle Sam…

No taxes on tips, overtime, and some car loans… work requirements and more eligibility checks for Medicaid beginning at the end of 2026… $140 billion in spending to crack down on illegal immigration… increasing the federal tax deduction from $10,000 to $40,000 for state and local taxes (“SALT”) paid by Americans making less than $500,000 a year.

Another proposal is “Trump accounts” for U.S. children, in which the U.S. provides $1,000 to invest in a U.S. index fund. (And here we are reminded of pandemic-era stimulus checks… and a new form of passive-style market concentration fuel.)

The bill would also eliminate several “green energy” tax incentives passed under the Joe Biden administration and speed up permits for fossil-fuel programs.

You may agree with all, some, or perhaps none of these ideas. I (Corey McLaughlin) am not here to debate any of it, but mainly to point out the kicker, the biggest long-term impact as we see it…

As for how to pay for all this, here’s the plan… Just raise the federal debt limit again…

The bill proposes raising the debt ceiling by $4 trillion…

If that doesn’t happen, the federal government will be unable to pay its bills as an already $36 trillion in federal debt continues to snowball. Several analyses project the bill, as written, would add $3.8 trillion to the federal deficit over the next decade.

Turns out, the once-promising Department of Government Efficiency’s projected $150 billion in cuts for fiscal 2026 is nowhere near enough to make a big difference. We, the taxpayers, will bear the inflation burden in the future.

Some things, it appears, will never change.

As we wrote yesterday, Treasury bondholders and buyers have been paying attention…

On news that this legislation would increase the federal deficit by more than expected, longer-term yields have risen lately (meaning that bond prices have been falling).

The 10-year yield is near 4.55%. That’s higher than it was on the day that rising yields encouraged Trump to “pause” his Liberation Day tariffs. And the 30-year yield is above 5% for the first time since fall 2023.

At the same time, Federal Reserve officials are already considering how this bill fits into their policy, and it sounds like “higher interest rates for longer.” Fed Governor Chris Waller said during an interview on Fox Business today shortly after the bill passed the House…

Everybody I’ve talked to in the financial markets, they’re staring at the bill, and they thought it was going to be much more in terms of fiscal restraint, and they’re not necessarily seeing it. And therefore there’s going to be a lot of issuance of Treasurys. And in order for them to buy these things, they want it at a lower price, and, therefore, a higher yield.

As we mentioned, this bill faces debate now in the Senate, and it could take a month or two to reach a conclusion. House Speaker Mike Johnson said after the vote early today that he’s seeking to get the bill to Trump’s desk by July 4.

Treasury Secretary Scott Bessent has previously said the government is likely to hit its previous debt ceiling in August. We’ll be keeping close watch on bond yields as this all plays out over the next several weeks…

Today, longer-term yields actually fell a touch. The major stock indexes were little changed. Of note, for the second day in a row, bitcoin has traded above its previous all-time high from January. The world’s most popular cryptocurrency is above $111,000 as we write.

Meanwhile, updating the story of oil prices…

We’ve written a couple times about OPEC’s recent moves to increase global oil supply despite concerns about slowing demand.

Put it together, and prices are lower than they’ve been in years. Brent Crude – the international benchmark – costs around $64 per barrel, and West Texas Intermediate is at $60.

A lot of people are chalking this up to Trump’s tariff policy, but other factors are at work…

One that we’ve mentioned is that OPEC kingpin Saudi Arabia is, shall we say, upset that one of the oil cartel’s members, Kazakhstan, had been producing more oil than it is supposed to as part of the group’s quota agreements. Kazakh oil has flooded the European market, replacing Russian crude.

This is one reason prices for oil were already falling, which frustrated the Saudis enough that they’re risking even lower prices in the short term.

In this month’s issue of Stansberry’s Credit Opportunities, published yesterday, editors Mike DiBiase and Bill McGilton dove deeper into this story. It’s about “the Soviet-era oilfield that just broke OPEC” called Tengiz in the western part of Kazakhstan, whose increased production was blowing OPEC’s plan to pieces…

Saudi Arabia had finally had enough. It was ready to make an example of Kazakhstan’s cheating. So instead of gradually unwinding production cuts, the world’s most powerful oil alliance did something no one expected… It opened the taps.

OPEC+ announced an accelerated increase in production of 411,000 [barrels per day] for May. The cartel followed that with another planned production hike in June… and another is expected for July.

That could mean a price war… something Saudi Arabia is strong enough to weather, with its lower production costs and huge financial reserves. The Kingdom knows it can force out weaker producers and reassert its dominance later.

Meanwhile, though, many U.S. oil and gas companies have cut back on production, and the energy sector has sold off sharply. Concern is growing about companies going bankrupt due to high debt loads and falling oil prices, like what happened when prices plunged in 2014.

This line of thinking, however, is a mistake…

First off, according to Mike and Bill, low oil prices won’t last.

One reason is steady demand that will come as the U.S. refills the Strategic Petroleum Reserve (“SPR”)… Despite some increases since the summer of 2023, the SPR still only has about 400 million barrels, which is 39% lower than July 2020.

Another reason to expect higher oil prices, they say, is geopolitical risks that could escalate out of control and disrupt oil supply… And yet another is that a weaker dollar makes oil more affordable for foreign buyers.

In any case, oil and gas producers are generally better positioned to withstand lower prices even if they persist. As Mike and Bill wrote…

Today is nothing like 2014. The days of overleveraged producers are long gone…

Oil producers learned their lessons from the last time. Those that survived cut their debt, streamlined operations, and loaded up on low-cost, high-return assets in places like the Permian Basin in Texas.

In short, they’re now built for this kind of volatility.

In this month’s Credit Opportunities, Mike and Bill covered this fascinating story from the world’s oil patches… and one such U.S. independent oil and gas company that they say has been wrongly caught up in the drop in oil prices.

This business’s stock and bonds have recently sold off, presenting an opportunity to invest at a significant discount. Bond investors who follow Mike and Bill’s advice can also collect a 9.75% interest rate… “one of the fattest coupons on a bond we’ve ever recommended.”

Existing Credit Opportunities subscribers and Stansberry Alliance members can find all the details here.

	In this week’s Stansberry Investor Hour, Dan Ferris and I were joined by Garrett Baldwin, a Stansberry’s Investment Advisorycontributor, for a discussion on how the constant devaluation of the U.S. dollar has warped the economy and markets… Watch the full interview here… To hear the full audio version of this week’s Stansberry Investor Hour, visit InvestorHour.com or find the show wherever you listen to your podcasts.

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New 52-week highs (as of 5/21/25): Alpha Architect 1-3 Month Box Fund (BOXX), GE Vernova (GEV), K+S (KPLUY), New Gold (NGD), and Sprott (SII).

In today’s mailbag, a good question from a new subscriber… Do you have a question or comment? As always, e-mail us at feedback@stansberryresearch.com. Just note: We can’t provide individual investment advice.

“New subscriber here. I have been in the market for about 4-5 years, but I am still very much a novice. One of the things I am worst at is learning when to sell my stocks. Either at a loss, or for profit. My personality tends to be a ‘buy and hold forever’ type, but outside of mutual funds in my IRA, I know that is probably a losing strategy if I want to do more than collect dividends. I have even held to stocks that have now lost 76% and 99% of their value. I know your model portfolios often have a suggested stop loss built in, but aside from that, do you have general advice for learning when it’s a good time to sell, especially on the profit side? Thanks.” – Subscriber David T.

Corey McLaughlin comment: David, we’re glad you found us, and that’s absolutely a great question. A lot of people never even get around to the idea of thinking about “when to sell,” but it’s critically important to long-term investing returns.

I’m not sure if you saw our Tuesday issue already, but if not, you should check it out.

In the issue, Stansberry’s Investment Advisory lead editor Whitney Tilson covered this exact topic. In fact, he wrote that “it’s not always that easy to decide to sell” and that this is the “hardest part about investment.”

Here’s one strategy he suggests, part of the “last lesson” in his essay…

Ask yourself, “If I didn’t already own the stock, would I buy it today at the current price?” The fact that you bought some earlier at a higher price is irrelevant to the decision of what to do today. As the saying goes, “A stock doesn’t know that you own it.”

When a stock falls, you have three choices: You can buy more, do nothing, or sell. There is no clear right answer…

As an investor, your challenge is to figure out when the market is making a mistake and to take advantage of it. These decisions are what separate the winners from the losers in the investment world.

Whitney’s essay goes into a lot more detail on when to sell, and you should definitely check it out. He also shared four more investing “mistakes” to avoid in Tuesday’s edition… lessons that he learned during his days running a hedge fund. You can read the full issue here, and follow more from Whitney in his free daily newsletter and our flagship Investment Advisory.

As you also mentioned, stop losses are a strategy that many of our editors recommend – and we suggest you follow their advice in the positions from their publications – but outside of that, I hope this general lesson from Whitney helps.

While you’re at it, don’t miss Whitney’s new, free presentation with his friend Jeff Brown, founder of our corporate affiliate Brownstone Research.

In it, Whitney and Jeff talk about the “next generation of AI” that is on the cusp of breaking out… and how they suggest people position their portfolios to make big gains as this story plays out. You can watch a replay here, which includes a few free recommendations and more details.

All the best,

Corey McLaughlin
Baltimore, Maryland
May 22, 2025