Austerity Meets Reality

Musk and Trump's 'big, beautiful breakup'... The $4 trillion debt bomb that's about to blow up DOGE... Austerity meets reality... What it means for your portfolio... The latest on oil and AI... Greg Diamond's technical outlook...

Elon Musk weighs in...

Earlier today, CBS News shared some of the Department of Government Efficiency ("DOGE") captain's thoughts on the "big, beautiful bill" sitting in Congress right now.

As part of an interview that's due to air in full on Sunday morning, Musk, who is now visibly back in his roles as CEO of Tesla (TSLA), SpaceX, and the social platform X (and wearing an "Occupy Mars" t-shirt), said he was "disappointed to see the massive spending bill, frankly, which increases the budget deficit... and undermines the work that the DOGE team is doing."

In a follow-up thought, Musk said...

I think a bill can be big, or it can be beautiful, but I don't know if it can be both. My personal opinion.

Cue the Truth Social post criticizing Musk in three... two... one...

In the meantime, the White House has posted an article featuring a collection of quotes from supporters of the bill on President Donald Trump's social media page, and Trump defended the bill when asked about Musk's comments. (More on that in a moment.)

Musk is right, we think...

As I (Corey McLaughlin) wrote last week, the tax and spending bill that has passed the House (and still awaits Senate approval) includes extending the 2017 Trump tax cuts, increasing state and local tax deductions, and adding about $350 billion in new spending to the budget, just to name a few items. It's projected to add $3.8 trillion to the federal deficit over the next decade.

And here's the kicker, as we wrote on Thursday...

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.

Today, a reporter asked Trump for his reaction to Musk's comments during a media event...

"Our reaction is a lot of things," Trump said. "No. 1, we have to get a lot of votes. We can't be cutting... We need to get a lot of support... I'm not happy about certain aspects of [the bill], but I'm thrilled by other aspects of it. That's the way it goes."

On it goes.

A 'big, beautiful breakup'...

DOGE came in with a bang... ran roughshod through Washington... and is now going out with a whimper and disappointment, including disappointing the man behind it. In another interview published yesterday, Musk told the Washington Post that federal bureaucracy situation is "much worse than I realized."

For his part, Musk probably could have gone about his "chainsaw" policy a little smoother.

Mass e-mailing federal employees asking them to list five things they accomplished in the previous week seemed to be a tipping point for D.C. bureaucrats, and at least a few Trump department heads pushed back publicly on the efforts.

But the main point is that this situation sure looks like a "big, beautiful breakup" between Musk and the White House... and between austerity and reality.

The same old story, dressed up...

As for what this means for your portfolio, it speaks to something that won't change: The same debt and fiscal problems that have defined the U.S. financial system for decades will just keep snowballing.

As we wrote last week, the dollar's dwindling value has been going on for decades – since the currency went off the gold standard. We don't see anything from Washington changing that course.

Financing its debt has also become the government's largest expense. The government is already paying more interest on its debt each year than it spends on national defense... and national defense spending is due to rise in the new bill. And tariffs aren't going to cover the tab.

This is why we advocate for alternatives to Treasury bonds. The more debt Uncle Sam racks up, the more Treasurys the government needs to issue, and the less valuable they become.

It's why we question the effectiveness of the conventional "60/40" stock-bond portfolio... encourage folks to own "hard assets" like gold to safeguard wealth in the long run... and recommend shares of high-quality businesses that will make the most of their cash flows.

As for today...

The major U.S. indexes were lower, with the benchmark S&P 500 Index down 0.6%. Longer-term bond yields were little changed. The biggest development to report is about oil.

The price of Brent crude, the international benchmark, is up about 0.6% in the past 24 hours to $65 per barrel and West Texas Intermediate – the U.S. standard – has gained about 1% to near $62 per barrel following a couple of news items...

First, the White House announced it is keeping plans in place to bar oil major Chevron from exporting crude oil from its facilities in Venezuela, which will put a dent in current supply flows.

Similarly, with a resolution to the war in Ukraine looking more unlikely than it has in months, there's also the possibility of new financial sanctions on Russia, which raises questions about the availability of oil from one of the world's largest oil-producing nations.

However, separately, the OPEC+ oil cartel is reportedly getting ready to announce another production hike by at least eight of its members (for the month of July), and a decision could come this weekend. That would increase supply and help keep prices lower in the longer run.    

Then there's AI...

AI bellwether Nvidia (NVDA) is reporting its quarterly earnings as we go to press tonight. We'll have a full report on those numbers, the market's reaction, and what it shows about the AI space in tomorrow's edition.

Which reminds us...

Make sure you don't miss the free AI-focused presentation from Stansberry's Investment Advisory lead editor Whitney Tilson and noted Silicon Valley investing veteran Jeff Brown.

Jeff is the founder of our corporate affiliate Brownstone Research and recommended Nvidia before it rose more than 18,000%.

In the presentation, Whitney and Jeff detail how they see the "next generation of AI" playing out...

They discuss how an AI "super chip" from a little-known California company could reshuffle the markets and economy... and the portfolio moves you can make to possibly double your money on five different investments as it happens.

Whitney and Jeff are calling this "the investment opportunity of the decade," but the window of opportunity is closing fast. Their presentation will go offline at midnight Eastern time tomorrow.

Click here to watch the presentation now. Just for tuning in, you'll hear a few free recommendations. Regardless of where stocks as a whole go next, you're going to want to understand this "super chip" story before it goes mainstream.

New 52-week highs (as of 5/27/25): Automatic Data Processing (ADP), Alpha Architect 1-3 Month Box Fund (BOXX), WisdomTree Japan SmallCap Dividend Fund (DFJ), Dimensional International Small Cap Value Fund (DISV), EQT (EQT), iShares MSCI Germany Fund (EWG), iShares MSCI Spain Fund (EWP), SPDR Euro STOXX 50 Fund (FEZ), Franklin FTSE Japan Fund (FLJP), Cambria Foreign Shareholder Yield Fund (FYLD), GE Vernova (GEV), Intercontinental Exchange (ICE), iShares U.S. Aerospace & Defense Fund (ITA), NetEase (NTES), Rubrik (RBRK), Construction Partners (ROAD), Republic Services (RSG), Sprott (SII), Travelers (TRV), UGI (UGI), Vanguard FTSE Europe Fund (VGK), Verisk Analytics (VRSK), and W.R. Berkley (WRB).

In today's mailbag, feedback on yesterday's edition, which included a look at "buy now, pay later" loan delinquencies picking up and student-loan-repayment requirements starting again (after a five-year pause)... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"British people refer to BNPL purchases as 'The Never Never' which is perhaps a more realistic term!" – Subscriber Bob W.

"Just after my two sons were born, college funds were set up for both. Pay a little from a young age, and over a period of time compounding provides a nice college fund... just like retirement, right? I filled out the government student loan form when it was time for their registration at college. My income was too high, so we self-funded the costs using the college savings, then made up the rest. No college loan debt for both sons. I resent the mindset of student loan forgiveness... you made the choice for college, you have to fund it and pay it back if you borrowed. Think of all the taxpayers on the hook for repayment for debt you took on... even if they paid their loans, or didn't go for post-secondary education. My son's friends were bragging on how all their student loan debt was going to be forgiven.

"My niece, with her mom cosigning, took on six-figure loan debt to go to an aviation college in Florida... [She] didn't go for a flying career, but did get a good job in a support role in dispatching aircraft around the USA. Throughout the craziness of life in aviation, she kept her job and has made all student loan payments with no missed payments! Well done.

"In my small circle of family, we planned, persevered, and performed to create our success. Now it's time to step up, and plan and pay for your future. One step at a time but start now." – Subscriber Rob C.

All the best,

Corey McLaughlin with Nick Koziol
Baltimore, Maryland
May 28, 2025