The last downgrade is in... U.S. debt just lost its crown... The world's strongest balance sheet isn't in Washington... $3.15 million in new debt per minute... Don't miss Whitney Tilson and Jeff Brown together on Wednesday...
Moody's finally caught up...
After Friday's close, Moody's became the last of the three major credit-ratings to downgrade the elite status of U.S. debt – from Aaa to Aa1. It cited the federal government's growing budget deficit and rising interest payments on its debt as reasons...
This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.
This puts Moody's rating in alignment with Standard & Poor's (S&P) and Fitch Ratings, which downgraded U.S. debt from AAA in 2011 and 2023, respectively.
In 2011, S&P took the action four days after Congress raised the debt ceiling and cited "America's governance and policymaking becoming less stable, less effective, and less predictable." Sounds about right.
And Fitch's 2023 downgrade is still relatively fresh in my (Corey McLaughlin's) mind. An unresolved debt limit was cited by Fitch as the catalyst, as Congress dragged its feet on ultimately greenlighting Uncle Sam to take on more debt to pay its massive bills.
Fast-forward two years, and Moody's is now the last of the "Big Three" to acknowledge the government's awful debt situation. Uncle Sam's fiscal deficit is north of $36 trillion today. That's $1.66 trillion higher than just a year ago and $11.15 trillion higher than five years ago.
With interest, the debt has increased by an average of $4.54 billion per day over the past year... or $3.15 million per minute... or $52,493 per second. Meanwhile, the U.S. budget deficit for the last fiscal year was $1.8 trillion. The U.S. government is drowned in liabilities.
It's easy to forget the scale of this debt. For further perspective, consider that just the hundredths-place decimal in $4.54 billion is $40 million... and in $1.66 trillion, it's $60 billion.
Uncle Sam is paying more interest on its debt than it spends on national defense... And funding and spending bills being talked about in Congress right now are promising essentially more of the same, without significantly reducing the size of government.
At this point, Moody's downgrading U.S. debt from Aaa is not shocking news given that two of the other big ratings agencies already did years ago. Though at the same time, the symbolism is significant – and the slight downgrade is perhaps too generous. As Ray Dalio, founder of the mega hedge fund Bridgewater Associates, put it on social media platform X this morning...
Re the U.S. debt downgrade, you should know that credit ratings understate credit risks because they only rate the risk of the government not paying its debt. They don't include the greater risk that the countries in debt will print money to pay their debts thus causing holders of the bonds to suffer losses from the decreased value of the money they're getting (rather than from the decreased quantity of money they're getting). Said differently, for those who care about the value of their money, the risks for U.S. government debt are greater than the rating agencies are conveying.
Longtime readers know about all this already. It's true, and it's why we advocate for alternatives to Treasury bonds... 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.
But the dollar's dwindling value (going on decades since the currency went off the gold standard) is coming more to the forefront of the economic market discussion today. It feels almost like it's becoming more routine, which is concerning and doesn't scream economic "stability."
Part of bitcoin's compelling thesis, for instance, is the destruction of the dollar "system" as much of the world has known it over the past century. Bitcoin traded above $105,000 today, up more than 35% since President Donald Trump "paused" many of his new tariffs.
The era of high(er) inflation since the pandemic has exacerbated what was already a problem...
Higher interest rates have raised the cost of financing U.S. debt, which has a compounding effect of negative consequences.
It means the government must spend more dollars to cover its past spending decisions. And history has shown over and over that "printing" money often becomes the government's most convenient solution to this problem.
But that only makes the situation worse and erodes the value of the dollar even more, and leaves Americans dealing with more inflation. It also raises doubts, as Dalio points out, about traditional "safe haven" fixed-income assets like Treasury bonds.
As our Stansberry's Credit Opportunities editor Mike DiBiase explained in his May 2024 issue...
This magic money printer is the only reason folks consider our government a "risk free" creditor. They know it always has a willing lender to bail it out. The Federal Reserve's printing press will finance its deficit spending if no one else will.
And we pay the price for it... through inflation.
Inflation will only get worse as our government's debt grows and our nation's money supply increases.
The only way to bring inflation down is through economic pain – a combination of higher interest rates, higher unemployment, higher taxes, and a contraction in credit and the money supply – in other words, a recession and credit crisis.
It's clear... our government can't afford today's higher interest rates. The national debt is now growing by $1 trillion every three months, thanks in large part to higher interest costs. Rates have to come down. It's just a question of when and what will break first.
Alas, none of this is really a new story, so it didn't show up too much in market behavior today. Longer-term bond yields (which trade inversely to prices) actually fell slightly. The 10-year Treasury yield is at 4.45% and the 30-year Treasury yield is 4.9%.
The major U.S. stock indexes traded slightly higher with the small-cap Russell 2000 Index (down 0.4%) an exception.
Better than a money printer...
Close readers may recall we discussed this subject back in February...
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.
One of these alternatives, we said, cited Mike's work from his same May 2024 issue. In that issue, he recommended a corporate bond from Microsoft (MSFT). Based on Mike's analysis, we said that Microsoft was "better than a money printer."
Mike said the company has "virtually no credit risk." In accounting parlance (Mike's specialty), that means Microsoft could afford to pay back its debts and then some, given its tremendously strong balance sheet with $80 billion of cash in the bank at the time...
Its bond price should rise, he said, when the Fed inevitably lowers interest rates amid the next recession. That means a big opportunity for investors in Microsoft's "safe" debt (as opposed to Uncle Sam's).
Mike isn't even concerned about Microsoft CEO Satya Nadella's promise to spend $80 billion on artificial intelligence. As Mike wrote about the company...
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.
Today, the credit-ratings agencies finally agree, as U.S. debt has been taken down a notch. Microsoft is one of only two S&P 500 companies with AAA credit ratings, now higher than Uncle Sam. The other is Johnson & Johnson (JNJ).
Credit Opportunities subscribers and Stansberry Alliance members can read the initial recommendation here. The particular Microsoft bond he recommended remains a "buy" in the Credit Opportunities model portfolio.
Finally, don't forget, in just two days...
Our Stansberry's Investment Advisory lead editor Whitney Tilson and his friend Jeff Brown, founder of our corporate affiliate Brownstone Research, will be sitting down together to share what they feel is an essential story for every investor to understand today.
In a new free briefing that debuts on Wednesday at 10 a.m. Eastern time, Whitney and Jeff share a new development in the AI trend. They say it's about to completely reshuffle the markets and economy in a way not seen since the dot-com era.
As we shared with you last week, if you think you "missed it" when it comes to making gains with AI, they are saying that's far from the case. In fact, they say you could make 1,000% gains if you get positioned immediately.
It all has to do with an AI "super chip" from a little-known California company that Jeff says you need to add to your buy list... and a set of five more obscure stocks that could replace the Magnificent Seven as the market's leaders.
Click here to register for this event now to ensure you don't miss anything.
When you register, you'll get access to a free AI stock pick... plus more information that will get you ready for Wednesday's event on this story that is already rippling through Silicon Valley and will soon hit the mainstream headlines.
Trump's 90-day tariff pause has unleashed an "everything rally," but one often-overlooked discount retailer could be the surprise winner if lower tariffs stick. In this episode of This Week on Wall Street, our Director of Research Matt Weinschenk shares insight into this stock using our proprietary Stansberry Score...
Watch this video on our YouTube page, and be sure to subscribe for more of our free video content, like our Stansberry Investor Hour interviews, Diamond's Edge Live, and more.
New 52-week highs (as of 5/16/25): Automatic Data Processing (ADP), Alpha Architect 1-3 Month Box Fund (BOXX), Copart (CPRT), Dimensional International Small Cap Value Fund (DISV), Enel (ENLAY), iShares MSCI Italy Fund (EWI), iShares MSCI Spain Fund (EWP), SPDR Euro STOXX 50 Fund (FEZ), iShares U.S. Aerospace & Defense Fund (ITA), LandBridge (LB), Grand Canyon Education (LOPE), Sprott (SII), Travelers (TRV), UGI (UGI), Visa (V), Vanguard FTSE Europe Fund (VGK), and W.R. Berkley (WRB).
In today's mailbag, feedback on Dan Ferris' Friday essay, which included thoughts on retail investors "buying the dip"... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com
"Regarding Dan Ferris' recent article, retail investors have created opportunities and given seasoned investors insight to the markets. For example, during the April shakedown I was able to see which of my investments would do best during volatility. Any stop-losses reached were plowed into the survivors." – Subscriber Ted B.
All the best,
Corey McLaughlin
Baltimore, Maryland
May 19, 2025
Join for free. See how over a million people are taking control of their wealth…
