The U.S. Just Made a MASSIVE $2 Trillion Gamble... Buy These 3 Stocks

Finance / Market Setup (Macro Funding + Rates)

U.S. Treasury Borrowing Choice (“Adjustable-Rate Mortgage” Analogy)

• Borrowing 30-year: 5.31%
  • Treasury auction hit 5.216%
  • Highest 30-year auction rate since 2001
  • Weak demand required discounts
• Borrowing 3-month (short-term): 3.87%

Implication / risk: Borrowing can look cheaper today, but the government must roll debt repeatedly, making interest expense highly sensitive to future short-term rates (refinancing risk vs. locking in long rates).

Debt Magnitude / Funding Stress

• $2 trillion deficit being funded with short-term paper
• Treasury Advisory Committee warning: $1.45 trillion funding hole in 2027–2028
• Net interest on debt > $1 trillion per year
  • Speaker compares it to more than the entire U.S. military budget

Investor “Opportunity Channel”: Cash Yields Are High

• $7.93 trillion in money market funds (record high)
• Drivers:
  • “Cash actually pays something”
  • Prior years had near-zero yields
• Retail participation noted as large:
  • >$3 trillion in retail money

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What the Speaker Recommends (Strategy / Theme)

Core Theme

Higher-for-longer rates can benefit insurance annuity writers by:

• Improving investment yields
• Allowing reinvestment of assets as lower-yield holdings mature

Why It Works (Profit Mechanism)

• Annuity insurers earn a “spread”:
  • What they credit customers
  • Minus what they earn on supporting assets after hedging/expenses

Time Horizon Framing

The need for government refinancing and demand for guaranteed income products may persist “over the next several years.”

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Step-by-Step Framework Mentioned

1. Identify the rate/funding environment: Short-term yields are elevated; Treasury refinances repeatedly.
2. Translate to demand for yield products: Higher cash yields sustain demand in guaranteed-income vehicles (annuity activity referenced).
3. Map to the company profit mechanism: Insurers earn more spread when new money earns higher rates and older bonds roll up into higher yields.
4. Select “winners” using spread economics + execution quality:
   • Look for insurers with strong profitability tied to annuity spread performance.
5. Monitor risks:
   • Surrender risk
   • Credit/bond quality
   • Valuation/timing (stocks described as already near highs)

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Key Numbers Used to Justify the Stock Ideas

Annuities Demand

• Americans bought $123.9B in annuities last quarter (biggest quarter ever recorded)
• Fixed-rate deferred annuity sales: +26% (single-quarter jump)

Money Market Context

• Cash yield attractiveness is cited as the reason money market assets surged.

Dividend Focus

• Each selected insurer is described as paying roughly a ~3% dividend (per the speaker).

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Stock Ideas (Tickers and Metrics)

1) Jackson Financial (JXN) — “Purest Expression”

• Profit per share: $7.30 last quarter vs. Wall Street $5.70
  • Beat by 28%
• Retail annuity sales: +34% YoY
• Spread account value: +49%
• Earning on: $44.1B (spread account value base cited)
• ROE: 12.7% → 16.3% over 12 months
• Dividend: 2.7% (per speaker)

2) Corebridge Financial (CRBG) — “Big One” / Discounted vs. Peers

• Base spread income: $898M last quarter
• Full-year expectation: $2.5B (speaker estimate)
• Private equity holdings: “delivered nothing” (described as a drag)
• Valuation/tape point: Trades below its high; opportunity to buy cheaper while collecting ~3% dividends

3) Equitable Holdings (EQH) — Spread + Asset Management (AllianceBernstein)

• Notes AllianceBernstein under Equitable
• Combined managed assets: $1.2 trillion (speaker estimate)
• Spread profit: 174 basis points last quarter (1.74% interest on money managed, as described)
• Risk emphasis: surrender is highlighted as the key threat (see below)

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Risks / Cautions Highlighted

Primary Risk: Annuity Surrender Risk

• If rates rise (example: 5% → 10%), customers may terminate old contracts to buy better ones elsewhere.
• Customers can face surrender charges, which slow outflows, but:
  • If insurers must sell bonds at losses to fund withdrawals, results can deteriorate.

Historical reference: In 2022, the fastest Fed hikes triggered bear markets in stocks and bonds, creating a temporary hit to these stocks, followed by recovery.

Secondary Risk: Valuation / Timing

• Stocks described as trading up near 52-week highs
• Preference stated for businesses with earnings trends already confirmed, not “deep-value turnaround” bets

Not Automatic Free Money

• Even if credit rates rise, bond quality matters
• Surrender and credit conditions can still alter outcomes

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Other Market / Investing Observations

• Speaker claims the selected stocks recovered after the 2022 shock
• “Boring corners” idea beyond insurers:
  • Mining / precious metals / copper
  • Infrastructure
  • Insurance
• Framed as benefiting from “durable bottlenecks” and strong cash flow trends

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Disclosures / Disclaimers

• No explicit “not financial advice” disclaimer noted in the provided subtitles.
• Speaker promotes a paid service:
  • “Black Ops trading service” for $5 for the whole year
  • Mentions a refund promise tied to mailing address if not satisfied

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Presenters / Sources Mentioned

• Narrator / Speaker: Ross (implied by “tradewithross.com”; name not explicitly stated in subtitles)
• Scott Bessent (mentioned as a former critic, then Treasury role)
• Janet Yellen (referenced regarding prior emphasis on short-term issuance)
• U.S. Treasury / Treasury Advisory Committee
• Federal Reserve
• AllianceBernstein (mentioned via EQH)