Better Than a Money Printer
A potential 'DOGE dividend'... It won't solve anything... Worrying corporate-debt signals... Checking on Uncle Sam's credit... 'The safest investment without a money printer'... Looking past 'headline risk'...
'Will check with the President'...
That was Elon Musk's reply to a social media post proposing a "DOGE dividend."
In short, James Fishback, CEO of the investment firm Azoria, suggested that the U.S. government should send taxpaying Americans $5,000 refund checks from whatever money is "saved" by Musk's Department of Government Efficiency ("DOGE").
There's so much to say here... But we'll start with the fact that people will never turn down a check from the government... and we saw how that experiment turned out in the throes of the COVID-19 pandemic.
As much as it might be appreciated and even "deserved," considering some of the types of waste DOGE has purported to uncover, the economic effect of sending the "savings" directly to Americans would be simply redistributing the same government spending.
Many Americans would most likely spend the money (possibly fueling more inflation)... speculate with it (and push prices of "risk on" assets ever higher)... or pay down debt owed, providing some very short-term relief.
It's also unclear how much savings we're even talking about, and if it would make that much of a difference.
The pesky details...
The proposal for $5,000 checks is based off of Fishbeck's hypothesis that DOGE will actually find $2 trillion in savings, which Musk already admitted last month is a "best-case outcome," and that a 20% "DOGE dividend" would equal $400 billion.
Then, divide that by an estimated 79 million federal taxpaying households, per the proposal. But according to "receipts" posted by DOGE on its website on Monday, it has saved "only" an estimated $55 billion... and even that's debatable.
As Bloomberg reported today...
The federal cost-cutting effort dubbed the Department of Government Efficiency says it has saved $55 billion in federal spending so far, but its website only accounts for $16.6 billion of that.
And that's before factoring in an error in the data published on DOGE's website that mislabels a contract as $8 billion, which was later corrected in the federal database to only be $8 million. That cuts nearly in half the total of DOGE's itemized savings, including from contracts and leases, to about $8.6 billion...
As of Wednesday morning, the DOGE website had been updated to show an $8 million savings value for the contract that had previously been listed as $8 billion, though it retains the $55 billion top-line savings claim.
Those numbers would make it closer to a $110 check for each taxpaying household. That's not zero and reported savings should go up, but it shows you the scope of the challenge Musk is facing. Another important note: This "DOGE dividend" is simply a proposal. I (Corey McLaughlin) saw a lot of people on the Internet today thinking it was a done deal, but it's not.
In any case, sending dollars back to Americans – while nice in spirit – won't help solve the heart of the matter... the continued devaluation of the U.S. dollar. In other words, how each existing dollar becomes relatively less valuable every time a new one is created, typically to fund some kind of U.S. government spending... with no promise of future spending slowing down.
A bunch of worrying corporate-debt signals...
Speaking of spending, in recent months, we've highlighted some red flags in consumer debt.
Put simply, credit-card debt among Americans is at record-high levels, and delinquencies are now at the highest level since 2011. Those factors, coupled with interest rates that are higher than they've been in about 15 years, point to trouble brewing for consumers.
Today, we're looking at a few indicators on the corporate-debt side – starting with "zombie companies"...
Zombie companies don't make enough in profit to cover the interest expense on their debt. And according to data from Apollo Global Management and Bloomberg, as of October, 43% of the small-cap Russell 2000 Index had run at a loss over the previous 12 months.
Outside of the COVID-19 pandemic, that's the highest share since at least 1995. So this is notable, to say the least. If companies can't run a profit, they can't service their debt. That will lead to delinquency or even defaults.
Nearly half of smaller companies are in danger of this fate.
That brings us to our next red flag...
On Monday, the Financial Times reported that U.S. businesses were at least one month late on more than $28 billion in debt payments at the end of 2024. That was $5.4 billion higher than at the end of 2023.
You can think of this as the corporate equivalent of falling behind on your monthly credit card or mortgage payment.
These are big numbers we're talking about it, but it's not the worst environment we've seen – yet.
The corporate delinquency rate, which measures the percentage of loans that companies have missed payments for, now sits at about 1.5%, according to the Financial Times. While that's the highest level since 2016, it's still well below the 5% level from the financial crisis peak.
So, it could be worse. But the trend indicates that we're headed in that direction. As our colleague and Stansberry's Credit Opportunities editor Mike DiBiase says, the stage is set for the next major "credit crisis."
An overlooked safe haven...
When investors get worried, they flee to safety. For many, that means buying U.S. Treasury bonds to generate safe yield. But increasingly, the government's finances are being put under a microscope...
Uncle Sam has spent $840 billion more than it has brought in so far in the 2025 fiscal year. And the debt load has ballooned to more than $36 trillion. This has led to questions about the government's ability to pay its debts... one of the reasons the concept of DOGE is so popular.
After all, two of the three major credit-ratings agencies have downgraded U.S. debt (though both still have it as the second-highest rating). The dollar is still the king of global currencies, but more and more people are talking about "safe haven" alternatives to U.S. debt.
For example, analysts from DoubleLine Capital, the investment firm founded by bond king Jeffrey Gundlach, recently wondered whether there are corporate bonds that are "safer" than government debt.
In a paper earlier this month, DoubleLine analysts highlighted that software giant Microsoft (MSFT) may have a better balance sheet than the U.S. The company has $45 billion in long-term debt, which could be paid off completely by the $48 billion in cash the company is expected to earn in the 2025 fiscal year.
And Microsoft doesn't have to pay its debt off all at once. With regular interest payments, Microsoft has enough cash to pay its annual interest more than 50 times over, according to DoubleLine.
Compare that with the government, which runs at a deficit and is facing annual interest that is set to be the third-largest expenditure behind only Social Security spending.
The credit-ratings agencies agree with DoubleLine...
Microsoft is one of two companies with a higher debt rating than the U.S. government, the other being Johnson & Johnson (JNJ).
This may sound familiar to some readers...
DoubleLine's paper was put forward as a "thought experiment," according to Bloomberg, and the firm has no open position on Microsoft bonds.
But in the May 2024 issue of Stansberry's Credit Opportunities, editor Mike DiBiase did recommend a Microsoft bond – calling it "the safest investment without a money printer."
Like DoubleLine, Mike also highlighted Microsoft's fortress-like balance sheet. From that May issue...
Microsoft has $80 billion of cash in the bank. It could write a check today to pay off all of its debt and still have nearly $29 billion left over. Microsoft also generated enough [free cash flow] last year ($59 billion) to pay off all of its debt. It's one of the most financially sound companies on the planet. So it should be no surprise that it earns our highest Stansberry credit-rating-system score of 10.
Microsoft's debt is so safe that Mike and his team didn't even run a worst-case analysis for if the company liquidates. And even the company's heavy investment in artificial intelligence ("AI") – which CEO Satya Nadella said will come in at $80 billion this year – won't change that.
More from Mike...
These large [capital-expenditures] investments don't worry us. Just like with the cloud, we're confident they'll eventually lead to even greater profit margins and cash flows in the years ahead. Companies like Coca-Cola (KO) are already spending billions on Microsoft's cloud platform to access the latest AI technologies.
Mike alerted his subscribers to this investment idea almost nine months ago. He told Credit Opportunities subscribers back then that they had a chance to earn up to 33% within the next year with one of the safest bonds on the planet.
Mike expects the prices of extremely safe bonds to go higher when the Federal Reserve cuts interest rates to fight an upcoming recession. But his recommendation is still in buy range today.
Paid-up subscribers and Alliance members can read Mike's original recommendation right here... and the January issue of Credit Opportunities here, which included a new recommendation and an update on the Microsoft bond and two other long-duration bonds with "virtually no default risk." As Mike said...
All we need is for the Fed to cut rates and let the bonds' duration work in our favor.
The only question is how fast we achieve the capital appreciation and higher returns.
In the January issue, Mike and analyst Bill McGilton also looked at five other open "buy" positions in their model portfolio and went through their Watch Lists and other market and economic indicators. Earlier today, this month's issue hit subscribers' inboxes with another new recommendation with a chance to deliver an 8.5% yield.
You can learn more about these safe bonds and Credit Opportunities right here. You'll hear from a subscriber who used Mike's strategy to retire at age 52... and about the six powerful recession indicators that are flashing red right now. Mike says what's coming could be the best opportunity in a decade for his No. 1 crisis strategy.
He is talking about a potential for triple-digit capital gains, plus double-digit income in investments that he considers "safer than stocks" because of their legal obligations.
Our publisher originally closed this chance to join Credit Opportunities last week, but because this is such a great opportunity, we're reopening it just for tonight's Digest. Don't miss out. Learn more here.
Another voice of reason...
These days, it's hard to keep up with the seemingly endless news stream – whether it's about the market, the latest executive orders from the Trump administration, or global wars.
So we were relieved to hear that our friend Marc Chaikin, who has more than 50 years of experience as a professional investor, has a simple two-word description for what we're seeing in the market right now.
It's "headline risk." As Marc, the founder of our corporate affiliate Chaikin Analytics, wrote this morning in an issue of our free DailyWealth newsletter...
Over the past month, some unsettling developments have caused big volatility in stocks...
One was the turmoil surrounding Chinese artificial-intelligence ("AI") startup DeepSeek. The company announced breakthrough advancements in the speed and cost of AI.
Another development was a series of tariff announcements from President Donald Trump...
And another was the arrival of Elon Musk and his DOGE cost cutters inside the federal government.
Looking ahead, much is still uncertain about the economic impacts of Trump's tariff initiatives and their effects on inflation rates.
The next few months will see a tug-of-war between a strong economy and the shifting sands of U.S. monetary, fiscal, and tariff policies. That will challenge the resolve of this bull market.
Put simply, we're in a time of what I call "headline risk." And I expect to see more big swings in the market as a result.
But, as Marc continued, he's still "bullish" on stocks. In fact, he thinks the S&P 500 Index is due for another 11% gain before the year is out. He says extreme volatility has created numerous "buy the dip" opportunities, but only if you ignore the headlines.
For example, one special group of stocks recently flashed "bullish" in Marc's proprietary Power Gauge system, and he expects their outlook to keep getting better. I'm willing to bet you won't hear about this anywhere else. Click here to get the full details.
New 52-week highs (as of 2/18/25): Blackstone Mortgage Trust (BXMT), Blackstone Secured Lending Fund (BXSL), Compass (COMP), Simplify Managed Futures Strategy Fund (CTA), Commvault Systems (CVLT), Expedia (EXPE), SPDR Euro STOXX 50 Fund (FEZ), Fortinet (FTNT), SPDR Gold Shares (GLD), JPMorgan Chase (JPM), Kellanova (K), Grand Canyon Education (LOPE), Neuberger Berman Next Generation Connectivity Fund (NBXG), Annaly Capital Management (NLY), Palo Alto Networks (PANW), Ryder System (R), Ferrari (RACE), Invesco S&P 500 Equal Weight Technology Fund (RSPT), S&P Global (SPGI), UGI (UGI), United States Commodity Index Fund (USCI), ProShares Ultra Financials (UYG), Visa (V), Vanguard S&P 500 Fund (VOO), and VeriSign (VRSN).
In today's mailbag, more feedback on Dan Ferris' latest Friday essay... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Dan, Your Stansberry Digest issues are the best. I always read them, sometimes twice, some I save. It is clear that you really put some effort into these and present good relevant information. I know I'm getting a realistic view of the 'watch out' side and value type investing..." – Stansberry Alliance member Dale H.
All the best,
Corey McLaughlin and Nick Koziol
Baltimore, Maryland
February 19, 2025