Transcript of THE $5,000 CHECK TRAP: Why That Proposed Trump Dividend Will Cost You $48,000!
Wall Street Truthbombs
0:00The most expensive thing in your0:01financial life right now is a check that0:04hasn't even been written yet. By the end0:07of this video, you're going to0:08understand exactly why a $5,000 promise0:10made on a stage in Dallas can cost you a0:13heck of a lot more than $5,000 and why0:16it starts costing you before a single0:18dollar is ever even mailed. My friends,0:22stay with me. The arithmetic is simple0:24and it's not what you're going to hear0:26anywhere else this morning. So, pay0:28attention.0:30I was standing in line at the post0:32office on Church Street earlier this0:34week behind a guy who looked like he was0:36mailing his mortgage payment as a paper0:39check. He had the envelope already0:41stamped. He did it last month, too. I'm0:43pretty sure of it. And you know what?0:45He's going to do it again and again next0:47month and the month after. And he'll0:49keep doing it long after every headline0:51about this week is forgotten. That's the0:55whole story in one single envelope, my0:58friends. We pay attention to the lump1:01sum. We don't pay attention to the flow.1:04Now, here's what happened in case you1:06haven't heard. Wednesday night at the1:08Republican midterm convention in Dallas,1:10President Trump pledged a $5,0001:13dividend to every adult American. Whoa.1:17Contingent, of course, on Republicans1:19holding the House and the Senate in1:21November. by breakfast. Well, even1:25before breakfast, the entire country was1:27talking about the same three questions.1:29How much and when does it arrive or1:32check or direct deposit? That is the1:35surface story. And the surface story is1:38well the sticker price. What would you1:40do with the money? What could it buy?1:42Every network ran the same segment with1:45a different anchor. Now, let me be1:47meticulously fair about something before1:49I go any further with this. There is no1:52bill. There is no eligibility rule.1:55There is no payment date. There is no1:57stated funding source. And money cannot2:00leave the Treasury without an2:01appropriation passed by Congress. So2:05until Congress acts, this is just a well2:08a sentence. It's not a policy. A great2:10many floated ideas, as you probably2:13know, die quietly and are never spoken2:15of ever again. Now, here's the first2:18crack in the surface story. markets.2:21Well, markets don't wait for2:23legislation. They never have. And that2:25is the part that nobody on television is2:27sitting with this morning, my friends.2:31Let's dig in further. But before we do,2:33please click like and don't forget to2:34subscribe. It's really important to be2:36in the know about this plumbing. And2:38this is how you do it. Okay. Let's start2:41with what I hope is well obvious.2:44Washington does not have a trillion2:46dollar sitting in an account somewhere2:48or sitting in a basement. The federal2:51government already runs a deficit near2:53$1.8 trillion a year against more than2:56$40 trillion in accumulated debt. There3:00is no surplus to distribute, which is3:02why the word dividend kind of gets my3:05hackles up a little bit. A dividend, a3:08classic dividend at least, is paid out3:10of profits a company has already earned.3:13What's being described here is a3:15distribution funded by issuance. Those3:18are two completely different animals3:20wearing the same collar. All right,3:23follow the mechanics. If the check gets3:26written, the treasury issues bonds.3:29Those bonds have to find buyers and3:31buyers are under no obligation3:33whatsoever to show up at yesterday's3:36price. Supply rises, price falls, yields3:40rise. That is not ideology. That is3:44plain old economic arithmetic. It's the3:48same stuff that has worked for the same3:49way for 400 years. And here's where it3:53reaches your kitchen table. Nearly every3:56borrowing rate in America is priced off3:58the Treasury yield curve. Mortgages,4:02auto loans, small business lines of4:04credit, even the rate on your bank's4:06certificate of deposits. When the curve4:09moves, they all move. with a lag and a4:12spread, but the but they move and then4:15the loop unfortunately closes on itself.4:19And this is the genuinely uncomfortable4:21part. I'm going to remind you, I've4:23talked to you about this before, but I4:25want to remind you right now, higher4:27yields raise the government's own4:29interest expense on the very debt it4:32just issued to fund the transfer. The4:35cost of borrowing goes up because, well,4:38you borrowed. Look at where the curve4:40actually sits and you can watch4:42investors working through this in real4:44time. The 2-year note was at 4:434:47Wednesday afternoon. The 10-year was at4:50483. The 30-year was at about 528 or so.4:55And as I'm recording this right now, the4:5710 year is probably 492 at this point.5:00Its highest since October of 2023. And5:02the 30-year is at 532. Notice which end5:06of the curve is doing all the worrying.5:09The market is not especially fright of5:11next quarter. It's a charging um it is5:15charging a premium right now for the5:17next three decades. Now here's the thing5:21almost nobody's putting on the screen5:22right now. The cost of this proposal is5:25not just a number. It is a range. And5:27the range is the entire story. Limit the5:30payment to registered voters and you're5:32talking about roughly 174 million5:35people. Call it 870 billion. Apply it to5:39adult citizens and you're roughly 2405:42million people. Call it 1.2 trillion.5:46Use the broader adult population count5:49around 270 million and you land near5:521.355:54trillion. I did that math so you don't5:56have to. Yeah, that's it. 1.35 trillion.5:59Nearly half a trillion dollars turn6:02turns on which definition somebody6:05eventually picks. And nobody in Dallas6:08actually picked one. That's the shadow6:10data. A bond desk, you see, cannot price6:12a number that does not exist yet. So6:15guess what? It prices the risk of the6:18biggest version. I'm sure you're not6:20surprised to hear that. That's how6:22uncertainty becomes a yield. And there's6:25a second layer underneath that one as6:26well. The funding source people keep6:29gesturing at is tariff revenue. Custom6:32duties brought in about 195 billion in6:35fiscal 25. That is less than 16th of6:38what the smallest version of this6:41payment could actually cost. And in6:43February, the Supreme Court struck down6:44certain uh the certain of those tariffs,6:47if you remember, which triggered roughly6:49a hundred billion in refunded duties,6:51which I'm sure you remembered. the state6:53fund, excuse me, the stated funding6:55source, well, it's not growing. It6:57actually just shrank. One housekeeping7:00note that matters more than it sounds7:01right now. And let's talk about that.7:03The federal fiscal year runs from7:05October through September. So, when you7:07hear somebody quote a revenue figure for7:09the year, ask well, ask which year they7:12actually mean. The calendar and the7:14budget don't agree and people exploit7:16that gap constantly. Okay, let me ask7:19you something directly here. When was7:21the last time a politician told you the7:24price of something and then told you the7:26financing terms in the same sentence?7:29Right? Neither party, not once. Now, put7:32the calendar on the table because the7:35calendar is what makes this week7:38different. August inflation data arrives7:41tomorrow morning of all times. July7:43printed 3.4% 4% headline and um headline7:47and 2.5, excuse me, that's the headline7:50number and the core inflation number was7:522.5%. The FOMC, right, that's the Fed7:56meets Tuesday and Wednesday of next week7:59and they're having they have right now a8:00target range is still at 3.5 to 3.75%.8:04And of course, futures swung toward8:06pricing a quarter point hike with odds8:08running around 60 plus%. And that's a8:11dramatic reversal from where they were8:14before chair uh Kevin Worsh spoke at8:16Jackson Hole just a few weeks back. So8:20one arm of Washington proposes adding8:22more than a trillion dollars of spending8:24power to the economy while another8:26prepares to make money more expensive8:28precisely because there's already more8:31spending power than there are goods to8:34buy. Sit with that for a second. That's8:36really important to understand that8:38concept. Those are not8:39complimementaryary policies. They're8:41opposing ones. And when fiscal and8:43monetary policy point in opposite8:46directions, my friends, I can tell you8:47this from experience. The bond market is8:50the exa is exactly where that argument8:53gets settled. My longtime viewers, you8:56know, I have been adamant that the Fed8:58cannot fix energy inflation with higher9:00rates. I say it all the time. You can't9:03raise the funds rate and produce a9:05barrel of crude oil. With Brent above9:07100 bucks for the first time since 22,9:10that point has rarely been more9:12relevant. But demand pull inflation,9:16that is inflation that happens when9:18consumers are excited, they have extra9:20money in their pockets. Sound familiar?9:22When demand pull inflation co created by9:26government helicopter money is an entire9:29different creature. Again, we have had9:32experience with this. Think about it.9:34That one that that that's the one, by9:36the way, that the Fed's tools were9:38actually built for. That's that demand9:40pull inflation, which produces a9:43conclusion most people find backwards. A9:46larger check makes a tightening Fed more9:48likely to tighten, not less. The9:51stimulus argues for the very rate9:53increases that would offset it. So, let9:56us do the arithmetic that actually9:58matters to you. Let's put this into10:00perspective here. The 30-year fixed10:02mortgage average is around 6.71% in the10:05weekly survey, a high for 2026, as you10:08probably know, and daily quotes are10:10already running near 6.8%. I got there10:14without anyone pricing in a and excuse10:16me, it got there to that point without10:19anyone pricing in this trillion promise10:21that we're talking about on a $400,00010:24loan. That's about uh $2,58410:28a month in principal and interest. Move10:31the rate half a point to 721 and that10:35payment becomes roughly 2718.10:38Call it $134 bucks a month extra. That10:42totals to about $1,600 a year and10:46something on the order of $48,00010:50across the life of the loan. The $5,00010:54is the sticker price. The mortgage is10:57the cost per wearing per use. One11:00arrives once and you can see it's11:02sitting in the account. The other leaves11:04quietly11:06$134 at a time for $360 months. That's11:12not a conspiracy, my friends. That is11:14simply how human beings experience lump11:16sums against flows. As I said earlier,11:19and politicians of every single stripe,11:22doesn't matter which side of the aisle11:23you're on, have understood this concept11:26for a very long time. Here's the part I11:29would underline for you, though. You do11:32not get a vote on this trade. Market11:34price, market, excuse me, markets, they11:37price probability, not outcomes. They11:40don't wait for the bill or the vote to11:42uh for the checks to clear. If loan11:44yields drift higher over the coming11:46weeks on the mere prospect of that11:48issuance, borrowers pay for the check in11:51their mortgage rate, whether or not a11:53single dollar ever reaches your mailbox.11:57Now, let me give you the honest other11:59side because none of this means it ends12:02badly. If a payment of any size12:04eventually arrives attached to a real12:06offset phased over reasonable over a12:09reasonable window with eligibility12:11defined before the checks print, markets12:13well markets will probably absorb it12:16without much drama. Bond investors are12:19not hostile to spending. They are12:21hostile to surprises. Give them a12:24schedule and a of course a source of12:27funds and they'll price it politely and12:30they'll move on. And let me concede one12:32more thing while I'm being fair here.12:34Higher yields are not purely a12:37punishment. If you're a saver, if you're12:39retired and living off a ladder of12:41treasuries or certificates of deposits,12:43CDs, a steeper curve is a raise for you.12:47So, it's good for you if you're a saver12:49using those types of instruments as12:50investments. The same move that cost the12:53borrowers 134 bucks a month pays the12:56lender something extra. That is the12:58whole point of a market. Somebody's13:01always on the other side of your trade.13:03The question is only whether you know13:05which side that you are standing on. So13:08what do you actually watch from here?13:10Well, don't watch the polling, not the13:12cable panels. Watch the 30-year bond. If13:16the long end keeps steepening while the13:17short end sits still, that is the market13:20telling you it believes the issuance is13:23coming. and watch tomorrow morning's13:24inflation print, of course, because it13:27lands four days before a Fed meeting13:29that is already at least a coin flip13:32leaning hawkish. So, your truth bomb for13:35this morning is the $5,000 check is the13:38only part of this deal you will ever see13:40arrive because the bond market started13:43collecting the invoice the moment the13:45sentence left the stage in Dallas. Join13:49me every day for Wall Street Truth13:50Bombs, where I drop them right here13:52before the market figures them
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