Seven Grey Swans a Swimmin’ in 2025: Counting Down From #7

“Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.”

–Ogden Nash

December 23, 2024— Yes, the holiday season is a time of good cheer. But there’s still some fear rumbling around in the markets. And as markets wrap up a banner year, it may be a good time to quietly reflect on potential dangers ahead this holiday season.

So, we want to use the last trading days of 2024 to review seven of the most significant grey swans a swimmin’ around in today’s cold waters.

Don’t worry. We’ll keep things short, sweet, and to the point, using these ideas as jumping-off points for further in-depth analysis as they take flight next year.

Plus, we see some positive Grey Swan events that could unfold in 2025. We’ll get to those after New Year’s when you’re dealing with the holiday hangover and December credit card bills. For now, let’s start the countdown…

Grey Swan #7: The End of the Great American Debt Binge

Americans have become addicted to credit — and not just Uncle Sam, either. Many Americans have followed the federal government’s lead and spent beyond their means.

The result? Soaring consumer debt levels, from credit cards to personal loans.

It’s a ticking time bomb that could implode at any second, easily resulting in a consumer crash. Unlike Uncle Sam, consumers can’t float an infinite amount of debt. Or print money.

Naturally, it’s no wonder that one of Wall Street’s most well-known hedge fund managers, Mark Spitznagel, went on record as saying we are currently in the midst of the “greatest credit bubble of human history.”

There has never been a bigger chasm between consumer savings and debt in history, and it’s only getting worse.

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If we are “the richest nation on earth,” why are so many Americans living paycheck to paycheck?

More than half of families earning salaries of $100,000 or more a year (51%) say it’s barely enough to live on, leaving many with few realistic options outside of taking on debt.

In the meantime, just 45.6% of American households have nothing at all saved for retirement. The same retirement that Uncle Sam has implicitly promised with programs such as Social Security, whose debts aren’t even calculated in the “official” $36 trillion deficit.

On average, American households have built up $104,215 in debt, with a record $17.796 trillion in total debt nationwide.

Meanwhile, disposable income … aka money you can afford to spend… has dropped at a faster pace in the past few years than at any time since 1932 – the worst year of the Great Depression.

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And even as we have less money to spend, it’s worth less each day, so people spend instead of save.

While we often consider a government crisis a Grey Swan event, it’s possible that consumers will simply lack the spending power to push the economy, and therefore the stock market, higher in 2025.

And that could mean a market correction, potentially even a drop into a full-blown bear market.

That’s especially true if the rising unemployment trend continues to tick higher. As Grey Swan Investment Fraternity contributor John Rubino notes:

During a recession, several things will happen:

Workers will lose their jobs, stop paying taxes, and start collecting benefits.
Stock prices will either correct or crash, depending on the way the recession plays out, cutting capital gains tax revenue and increasing capital losses.

And when consumers get tapped out, government deficits get worse. And they’re already bad enough in a “growing” economy.

That’s also why, as we recommend in our upcoming December issue for paid-up Grey Swan Investment Fraternity members, we’ll be scaling back on some of the consumer-facing stocks in our model portfolio.

For now, investors should remain mindful of consumer spending and pay close attention to the final holiday sales numbers that come in during the coming weeks.

And remember, even if there’s been a new record high in consumer spending, be sure to check out how it compares to the 20%+ inflation over the past four years. You may be surprised.

Regards,

Addison Wiggin,
Grey Swan

P.S. Debt is not just a U.S. problem, or a consumer and government problem. There have been 33 corporate debt defaults in Europe year-to-date, according to data compiled by Global Markets Investor.

That’s the highest level of corporate debt defaults since the 202o pandemic lockdown-inspired financial catastrophe. It’s also double the amount in 2022, the year inflation really started to bite. And 11 more than in the crisis year 2009.

Last week, GMI also released data showing corporate bankruptcies in the U.S. are tracking along to hit a 14-year high in 2024. The trends “are concerning” and worth watching as we analyze macro trends moving into the new year.

Your thoughts on the top Grey Swan events of 2025 are welcome here: addison@greyswanfraternity.com.

“Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.”

–Ogden Nash

So, we want to use the last trading days of 2024 to review seven of the most significant grey swans a swimmin’ around in today’s cold waters.

Don’t worry. We’ll keep things short, sweet, and to the point, using these ideas as jumping-off points for further in-depth analysis as they take flight next year.

Grey Swan #7: The End of the Great American Debt Binge

Americans have become addicted to credit — and not just Uncle Sam, either. Many Americans have followed the federal government’s lead and spent beyond their means.

The result? Soaring consumer debt levels, from credit cards to personal loans.

It’s a ticking time bomb that could implode at any second, easily resulting in a consumer crash. Unlike Uncle Sam, consumers can’t float an infinite amount of debt. Or print money.

There has never been a bigger chasm between consumer savings and debt in history, and it’s only getting worse.

Turn Your Images On

If we are “the richest nation on earth,” why are so many Americans living paycheck to paycheck?

More than half of families earning salaries of $100,000 or more a year (51%) say it’s barely enough to live on, leaving many with few realistic options outside of taking on debt.

On average, American households have built up $104,215 in debt, with a record $17.796 trillion in total debt nationwide.

Meanwhile, disposable income … aka money you can afford to spend… has dropped at a faster pace in the past few years than at any time since 1932 – the worst year of the Great Depression.

Turn Your Images On

And even as we have less money to spend, it’s worth less each day, so people spend instead of save.

While we often consider a government crisis a Grey Swan event, it’s possible that consumers will simply lack the spending power to push the economy, and therefore the stock market, higher in 2025.

And that could mean a market correction, potentially even a drop into a full-blown bear market.

That’s especially true if the rising unemployment trend continues to tick higher. As Grey Swan Investment Fraternity contributor John Rubino notes:

During a recession, several things will happen:

Workers will lose their jobs, stop paying taxes, and start collecting benefits.
Stock prices will either correct or crash, depending on the way the recession plays out, cutting capital gains tax revenue and increasing capital losses.

And when consumers get tapped out, government deficits get worse. And they’re already bad enough in a “growing” economy.

For now, investors should remain mindful of consumer spending and pay close attention to the final holiday sales numbers that come in during the coming weeks.

And remember, even if there’s been a new record high in consumer spending, be sure to check out how it compares to the 20%+ inflation over the past four years. You may be surprised.

Regards,

Addison Wiggin,
Grey Swan

Your thoughts on the top Grey Swan events of 2025 are welcome here: addison@greyswanfraternity.com.

The narrative for BTC and other cryptocurrencies is that every government around the world has high debt-to-GDP ratios. It means they are going to print more currency. It means there is a need for alternative currency. In the past, this alternative currency was gold.

Gold is not very portable. It’s a good store of value. It’s not as great of a store of value as BTC in terms of actually storing it. BTC, you can store it on a hard drive or at Coinbase. Gold, if you have bars you have to keep them in a bank or you have to dig a hole in your backyard. And you can’t send gold around the world as easily as you can send BTC.

I still think this rally has legs. If you go back to where the breakout happened, we were really in November of 2024 that was the beginning of this bull market in my mind because that was the first time we hit an all-time high in a couple years. Then we rallied. We pulled back. We tested that level again.

The uptrend, in my mind and with what I’m seeing, is still intact. We’re just in an oversold condition right now.

Nvidia’s $900 billion round-trip this week wasn’t about some revelation in Jensen Huang’s chip factory. The business is firing on all cylinders – and may yet be one more reason for the market to soar higher into 2026.

The culprit was the macro — one gust of wind from the labor market and trillions in valuation shifted like sand dunes.

Nvidia’s earnings lifted the market at the open, but the jobs report’s undertow snapped sentiment like a dry twig. As we pointed out this morning, the S&P notched its biggest intraday reversal since April.

The first half of the move was classic Wall Street choreography: blowout earnings, analysts breathless with adjectives, and every fund manager terrified of underweighting the patron saint of AI.

In April, following the “Liberation Day” low, the indexes took off in the morning only to crash later in the day. The first and only other time in history we have seen a strong bullish opening followed by a sharp bearish close was during the 2020 recovery from the Covid shock.

In both cases, the markets were rebounding from exogenous shocks.

That’s not where we are today. The index-level charts may look composed, but underneath plenty of individual stocks are trading as if they’ve already slipped into a private bear market of their own.

We’ll see how the day unfolds. It’s options-expiration Friday — the monthly opex ritual when traders roll positions forward, unwind old bets, and generally yank prices around like terriers with a chew toy.

Every major tech shift has followed a similar pattern. As information moves faster, the money follows.

The telegraph made news global and opened up a world of investment opportunities. Radio, and then television, ignited a new wave of prosperity for investors. And the internet made communication instant, creating fortunes for those who saw what was coming.

Now standards like x402 are doing the same for AI and digital payments, potentially putting Jamie Dimon’s empire in jeopardy.

If you have Coinbase building the payment rails, Circle handling settlement and projects like Worldcoin and Particle Network solving for identity and wallets — do you really need a bank to validate transactions and keep track of who owns what?

All of these companies are helping to build a new layer of fintech infrastructure. And they’re all working toward an economy that runs continuously, without the need for corporate scaffolding.

The uptrend, in my mind and with what I’m seeing, is still intact. We’re just in an oversold condition right now.

The culprit was the macro — one gust of wind from the labor market and trillions in valuation shifted like sand dunes.

The first half of the move was classic Wall Street choreography: blowout earnings, analysts breathless with adjectives, and every fund manager terrified of underweighting the patron saint of AI.

In both cases, the markets were rebounding from exogenous shocks.

Every major tech shift has followed a similar pattern. As information moves faster, the money follows.

Now standards like x402 are doing the same for AI and digital payments, potentially putting Jamie Dimon’s empire in jeopardy.

All of these companies are helping to build a new layer of fintech infrastructure. And they’re all working toward an economy that runs continuously, without the need for corporate scaffolding.