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America’s Debt Crisis Just Got Real
The safety of U.S. Treasury's is being questioned...
Matt Allen
18 May
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Welcome to the Bean Breakdown. Have a great week!
HEADLINES
What You Need To Know
Moody’s downgraded the U.S. credit rating from Aaa to Aa1, citing rising interest costs and a growing debt burden. The agency said America’s fiscal outlook has deteriorated, with deficits projected to reach nearly 9% of GDP by 2035. The move follows similar downgrades by S&P and Fitch and comes as Congress remains gridlocked on long-term deficit reduction. Treasury yields edged higher after the announcement, and Moody’s warned further downgrades are possible if spending trends continue.
Joe Biden has been diagnosed with advanced prostate cancer that has spread to the bone, his office announced Sunday. While considered aggressive, the cancer is hormone-sensitive, which opens the door to treatment options focused on depriving tumors of the hormones they need to grow. Biden, 82, is weighing next steps with his doctors and family. President Trump and Vice President Harris both issued messages of support. The diagnosis comes two years after Biden launched his “cancer moonshot” initiative and adds a new chapter to the health challenges he has faced since leaving office.
UnitedHealth shares plunged 13% Thursday after a report revealed the DOJ is conducting a criminal investigation into its Medicare Advantage practices. The company denied receiving notification and called the report “deeply irresponsible.” This follows a February civil probe into inflated diagnosis claims and comes amid broader turmoil. UnitedHealth recently replaced its CEO and has lost over $300 billion in market value this year, driven by mounting legal troubles, cyberattacks, and high medical costs.
Google has unveiled AlphaEvolve, a groundbreaking AI agent designed to discover new algorithms that improve everything from chip design to math research. Built by DeepMind, AlphaEvolve uses Gemini language models and automated evaluators to evolve smarter, more efficient code. The system has already delivered real-world results: boosting Google’s AI training speeds, helping design a next-gen TPU chip, and increasing data center efficiency by nearly 1%. It also made progress on famous math problems, like improving a centuries-old geometry challenge.
President Donald Trump announced more than $1 trillion in new business deals across the Middle East this week, as part of a sweeping economic push during his regional visit. In the United Arab Emirates, Trump touted over $200 billion in agreements, including a $14.5 billion aircraft deal between Etihad Airways and Boeing, and a $4 billion aluminum smelter investment in Oklahoma from Emirates Global Aluminum. The U.S. and UAE also revealed plans to build the world’s largest AI data center outside the U.S., led by G42 in Abu Dhabi. In Qatar, Trump signed agreements worth $243.5 billion, with expectations to scale up to $1.2 trillion. Key deals include Qatar Airways’ $96 billion order for 210 Boeing jets, $52 billion in defense purchases, and a $1 billion investment in quantum computing via Al Rabban Capital and Quantinuum. Meanwhile, Saudi Arabia committed to $600 billion in new investments, plus $300 billion in additional deals signed during a major investor conference. Highlights include a $142 billion military agreement with U.S. firms, $100 billion in joint tech investments with companies like Nvidia and Google, and a $20 billion AI infrastructure project by DataVolt. Elon Musk also announced Starlink’s expansion in Saudi aviation and shipping.
UPCOMING
What You Need To Watch
On Tuesday, the G7 meeting kicks off and I’ll be watching closely. Treasury Secretary Scott Bessent and Fed Chair Jerome Powell will both be there, which could give us important clues about global economic policy.
On Wednesday, we’ll get the latest U.S. crude oil inventory numbers. It’s a helpful snapshot of energy supply and demand.
On Thursday, S&P Global releases its Manufacturing PMI data. I’ll be paying attention to what it says about the strength of factory activity.
On Thursday, April’s existing home sales report comes out. It’s always a good read on how the housing market is doing.
On Friday, we’ll get April new home sales. This is another key update for anyone watching the real estate and construction sectors.
TIP
Earnings Quality Matters More Than Growth Hype
Not all growth is created equal. A company might report rising profits, but it’s important to ask where those earnings are coming from. Are they the result of strong, repeatable business performance, or boosted by one-time gains, aggressive accounting, or temporary cost cuts? High-quality earnings are backed by real cash flow, consistent margins, and strong demand for core products or services. These companies tend to be more stable and reliable over time. Looking past the headline numbers and into the source of earnings can help you avoid overpriced hype and focus on businesses with true staying power
CHART
BUFFETT’S PLAYBOOK
Source: @bean_wealth
TERM
Revenue Recognition
Revenue recognition is the accounting rule that decides when a company records revenue on its income statement. It happens when a product or service is delivered, not necessarily when the cash is received. For example, if a company sells a $1,200 annual subscription and collects the payment upfront, it can't report all $1,200 as revenue right away. It has to recognize $100 each month as the service is provided. Understanding revenue recognition helps investors evaluate whether a company's reported growth is real and sustainable, especially in industries like software, construction, or consulting.
See you on Wednesday!
Cheers,
Matt Allen
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