A Great Market Paradox

We start today with a paradox. The U.S. stock market has never been larger — $63.8 trillion, by Goldman’s count. That’s double what it was just five years ago.

To put it in context: it took eight years, from 2012 to 2020, to double the last time. Now we’ve done it in five, with the S&P 500 clocking in another record just yesterday.

In sheer scale, the U.S. market is a colossus:

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The U.S. market now dwarfs Europe’s by more than threefold.

It’s even larger than the markets of Europe, China, Hong Kong, Japan, and India, combined.

Astonishing, really. But in that same breath, we’re reminded of history.

Since 1990, U.S. equities have outperformed the rest of the world 70% of the time:

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But in the handful of years when they started the year trailing by more than 2.8% — as they did this February — they never caught back up.

Not once.

In each of Bloomberg’s six cases, the second half of the year tended to be grim.

Blood in the Streets

In this morning’s research call, we joked — uncomfortably — about the old “Blood in the Streets” promo. It helped launch the U.S. edition of The Fleet Street Letter, whose prescient British editors warned of WWII in 1937.

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For the record, we don’t believe a crash is imminent.

But let’s also be clear: all the factors are in place:

Massive market distortions, a bloated Fed balance sheet, rising geopolitical stress, a crumbling currency, and political brinksmanship dressed up in red, white, and blue.

We’re not being alarmist.

We’re students of history.

The conditions we see today rhyme with every major market reversal we’ve studied — from 1929 to 2000 to 2008.

Yes, the term “blood in the streets” has been used so often it’s become cliché. But that doesn’t mean it’s wrong. And the real blood won’t be like this April’s “Liberation Day” selloff. It’ll be a relentless wave of selling that makes the 2022 bear market calm by comparison.

“The Nvidia Killer”

Elon Musk is set to revolutionize the AI industry with his latest invention.

It could make a lot of people rich in the process…

All while triggering a crash of up to 50% in the next 12 months in Nvidia and other popular AI stocks.

Which is why this former hedge-fund manager is calling it “the Nvidia killer”.

Click here to see Elon Musk’s new invention now.

The Crack-Up Boom Returns

Ludwig von Mises coined the term crack-up boom to describe the chaotic, euphoric end of an inflationary cycle — where the public, losing faith in the currency, buys anything of substance just to escape their evaporating money.

There are echoes of that now.

Stocks are at record highs, but only for a narrow group of companies. AI fever drives hiring and capital spending. Meanwhile, consumer credit card debt is at historic highs. Delinquencies are rising. The U.S. dollar lost 10% of its value — the worst first-half performance since Nixon killed the gold standard in 1973.

At the same time, we have a monetary experiment in stablecoins and central bank liquidity games — and a government attempting to finance its future with tax cuts and tariffs. It’s a crack-up boom in a digital wrapper.

Mid-Year Scorecard

So here we are. The S&P 500 rose 5.5% in the first half of 2025, despite the carnage following Liberation Day.

Meta hit a new high, thanks in part to Zuckerberg’s AI hiring binge. Meanwhile, the dollar has lost more ground in the first half of the year than it has in over 50 years.

Trump’s team is touting rate cuts, trade deals, and strong corporate earnings. But market optimism is colliding with a sinking greenback, evaporating bond demand, and a debt ceiling deal that adds $3.3 trillion in new red ink over the next decade, per the CBO.

The Dollar Gets the Blues

There’s no sugarcoating this: investors around the world are ditching dollars and long-term U.S. Treasurys. Why? Because confidence is cracking. Tariffs are stoking inflation. Bonds are less attractive with every Congressional budget gimmick.

Some analysts say a weaker dollar could benefit American manufacturers and tech firms earning overseas. Maybe. But that same weakness also accelerates the dollar’s decline as the world’s store of value.

This isn’t just about currency — it’s about credibility. And Washington’s running out of it.

Trump vs. Musk: Spite Store Politics

Nothing lays bare how the sausage gets made like a Congressional budget debate. The so-called “One Big Beautiful Bill” — a $3.3 trillion tax package — is inching its way through amendments.

Enter Elon Musk. In protest, he announced his plan to launch a new political party — “The America Party” — if the bill passes.

“Every member of Congress who campaigned on reducing government spending and then voted for the biggest debt increase in history should hang their head in shame!” Musk posted.

Trump, never one to let a slight go unreturned, fired back: Musk, he said, only exists because of subsidies. “Take away the subsidies, and Elon would probably have to close up shop and head back home to South Africa,” Trump posted this morning.

The bromance is over. The feud now resembles Larry David opening a spite store. But instead of lattes, it’s billionaires trading barbs over budget deficits and government pork.

The Common Thread?

The appearance of control is tenuous, at best. And slipping.

And that’s the common theme for today: control — of policy, of perception, of outcomes — is slipping.

Trump came into office promising a Great Reset: lower taxes, stronger trade deals, economic sovereignty, a return to American strength.

But now we see the contradictions. Debt is ballooning. The dollar is sinking. Musk is revolting. And the “success” of the market — this $63.8 trillion juggernaut — is starting to feel more like a burden than a badge.

There’s no shame in admitting the system’s under stress. The shame would be in ignoring it.

What to Do Now

We’re not fortune tellers, but we do pay attention. This is one of those moments when a few chess moves ahead beats reacting to headlines. So we’re trimming exposure to overvalued tech, adding some ballast with energy and metals, and taking a hard look at alternative currencies — not out of fear, but strategy.

The dollar may bounce, or it may continue its slide, but we’d rather be holding productive assets and real stores of value than betting on the Fed’s next pivot.

~Addison

P.S. Andrew and I will break it all down in this week’s Grey Swan Live!—Thursday, July 3 at 11 a.m. ET — where we’ll walk through the latest model portfolio adjustments and our strategy for navigating the second half of the year without losing your footing in the fog.

Your thoughts? Please send them here: addison@greyswanfraternity.com

We start today with a paradox. The U.S. stock market has never been larger — $63.8 trillion, by Goldman’s count. That’s double what it was just five years ago.

To put it in context: it took eight years, from 2012 to 2020, to double the last time. Now we’ve done it in five, with the S&P 500 clocking in another record just yesterday.

In sheer scale, the U.S. market is a colossus:

Turn Your Images On

The U.S. market now dwarfs Europe’s by more than threefold.

It’s even larger than the markets of Europe, China, Hong Kong, Japan, and India, combined.

Astonishing, really. But in that same breath, we’re reminded of history.

Since 1990, U.S. equities have outperformed the rest of the world 70% of the time:

Turn Your Images On

But in the handful of years when they started the year trailing by more than 2.8% — as they did this February — they never caught back up.

Not once.

In each of Bloomberg’s six cases, the second half of the year tended to be grim.

Blood in the Streets

Turn Your Images On

For the record, we don’t believe a crash is imminent.

But let’s also be clear: all the factors are in place:

Massive market distortions, a bloated Fed balance sheet, rising geopolitical stress, a crumbling currency, and political brinksmanship dressed up in red, white, and blue.

We’re not being alarmist.

We’re students of history.

The conditions we see today rhyme with every major market reversal we’ve studied — from 1929 to 2000 to 2008.

“The Nvidia Killer”

Elon Musk is set to revolutionize the AI industry with his latest invention.

It could make a lot of people rich in the process…

All while triggering a crash of up to 50% in the next 12 months in Nvidia and other popular AI stocks.

Which is why this former hedge-fund manager is calling it “the Nvidia killer”.

Click here to see Elon Musk’s new invention now.

The Crack-Up Boom Returns

There are echoes of that now.

Mid-Year Scorecard

So here we are. The S&P 500 rose 5.5% in the first half of 2025, despite the carnage following Liberation Day.

Meta hit a new high, thanks in part to Zuckerberg’s AI hiring binge. Meanwhile, the dollar has lost more ground in the first half of the year than it has in over 50 years.

The Dollar Gets the Blues

This isn’t just about currency — it’s about credibility. And Washington’s running out of it.

Trump vs. Musk: Spite Store Politics

Nothing lays bare how the sausage gets made like a Congressional budget debate. The so-called “One Big Beautiful Bill” — a $3.3 trillion tax package — is inching its way through amendments.

Enter Elon Musk. In protest, he announced his plan to launch a new political party — “The America Party” — if the bill passes.

“Every member of Congress who campaigned on reducing government spending and then voted for the biggest debt increase in history should hang their head in shame!” Musk posted.

The bromance is over. The feud now resembles Larry David opening a spite store. But instead of lattes, it’s billionaires trading barbs over budget deficits and government pork.

The Common Thread?

The appearance of control is tenuous, at best. And slipping.

And that’s the common theme for today: control — of policy, of perception, of outcomes — is slipping.

Trump came into office promising a Great Reset: lower taxes, stronger trade deals, economic sovereignty, a return to American strength.

There’s no shame in admitting the system’s under stress. The shame would be in ignoring it.

What to Do Now

The dollar may bounce, or it may continue its slide, but we’d rather be holding productive assets and real stores of value than betting on the Fed’s next pivot.

~Addison

Your thoughts? Please send them here: addison@greyswanfraternity.com

The Bureau of Labor Statistics changed the way it calculated productivity. It began to look at what it called a “hedonic” price index that took into account not just the price of computer equipment, but its computational power.

On the surface, this makes some sense. If a dollar buys twice as much computational power one year as the next, it is as if the price of computing power had fallen in half. The third quarter of 1995 was the first time this change took effect. It miraculously transformed $2.4 billion in computer spending into $14 billion of output, instantly boosting GDP by 20%, lowering inflation, and increasing productivity (output per hour).

The number for the fourth quarter, to repeat, was spectacular. Incredible. It was revised later to an even more incredible 6.9%. The only trouble was that it was not real.

It was, like the New Era that supposedly made it possible, a fraud. More computational power is not the same as economic growth. And being able to turn out more computational power for each hour of labor input is not the same as an increase in labor productivity.

CPI, which drives inflation, is usually based on the costs of about 90,000 goods across the economy. But with one-third of the data now based on an estimate — or worse, a guesstimate — it makes CPI data suspect.

This makes other measures, like PPI, suspect, making it impossible for the Fed to accurately determine inflation or its trend.

Margin debt just hit a record $1.01 trillion, jumping $87 billion in June alone—the largest monthly increase in history. That surpasses the peaks seen before both the dotcom bust and the 2008 crisis. Relative to M2 money supply, it’s the highest since 2018. Risk appetite is off the charts.

Meanwhile, in the real economy: housing defaults just hit their highest level since 2011, and credit card defaults at small lenders are at record levels.

These pressures explain Trump’s desperate push for rate cuts… but if Powell resists, the fallout could be swift and severe.

Never in the history of man had any people been able to get rich by spending money . . . nor had investment markets ever made the average buy-and-hold investor rich . . . nor had paper money, unbacked by gold, ever retained its value for very long.

In the late 1990s, however, all these things seemed not only possible, but inevitable. Everything seemed to be going in Americans’ favor. Then, suddenly, at the beginning of this new century, everything seemed to be going against them.

How could US consumer capitalism, which had been phenomenally successful for so long, fail them now? It can’t, they will say to themselves. Why should they have to accept a decline in their standards of living, when everybody knew that they were getting richer and richer? It cannot be.

Besides, said Americans to themselves in early 2003, if there were problems, they must be the fault of others: terrorists, greedy CEOs, or policy errors at the Fed.

The number for the fourth quarter, to repeat, was spectacular. Incredible. It was revised later to an even more incredible 6.9%. The only trouble was that it was not real.

This makes other measures, like PPI, suspect, making it impossible for the Fed to accurately determine inflation or its trend.

Meanwhile, in the real economy: housing defaults just hit their highest level since 2011, and credit card defaults at small lenders are at record levels.

These pressures explain Trump’s desperate push for rate cuts… but if Powell resists, the fallout could be swift and severe.

Besides, said Americans to themselves in early 2003, if there were problems, they must be the fault of others: terrorists, greedy CEOs, or policy errors at the Fed.