In 1940, Fred Schwed Jr. published Where Are the Customers’ Yachts?, a short, sly book that skewered Wall Street’s oldest joke: the brokers all had yachts, the customers did not.
The timing was perfect. The world was just emerging from a decade that had tested capitalism to its breaking point—the 1930s, the long shadow after the 1929 crash.
Those years gave rise to populist politics, interventionist economics, and gold confiscation. The New Deal expanded the government’s reach into nearly every corner of economic life. Markets rose, then fell again, then rose once more in a cycle of boom, bust, and bitter disillusionment.
The nation endured, but the question lingered—where, indeed, were the customers’ yachts?
Schwed captured the mood of that era: weary of confidence men, skeptical of “experts,” resigned to the idea that finance would always take care of itself first.
Schwed’s little book, as funny as it was biting, offered both warning and wisdom. And as it happens, we could use both again today.
The AI Boom: Different Toys, Same Wiring
Fast-forward to 2025. AI is the new radio, the new automobile, the new magic machine that promises to make everything faster, richer, and more efficient.
Data-center spending alone, according to Reuters, added roughly 0.3% to U.S. GDP in 2024 and could do the same this year as hyperscalers pour trillions into chips, power, and concrete. Morgan Stanley now pegs total global data-center spend at nearly $2.9 trillion through 2028. The line, for now, still goes up.
Andrew Ross Sorkin—whose Too Big to Fail chronicled the 2008 financial crisis after the fact— released his new book 1929: Inside the Greatest Crash last week on October 14.
We were speculating that Sorkin, a younger man, may have learned something from chronicling 2008, as sought with his new book to get the discussion going before the crash, rather than after.
Sorkin’s conclusion echoes across the decades: bubbles don’t burst because of a single event but because leverage, herding, and storylines become indistinguishable.
In 1929 it was radio, utilities, and margin debt. In 2025, it’s GPUs, AI clusters, and vendor-financed optimism. The cast changes; the script stays the same.
Ray Dalio would call this a late-stage “long-term debt cycle” moment—high debt, low trust, rising populism, and an overstretched system juggling inflation, tariffs, and geopolitical rivalry.
In Dalio’s telling, big technological leaps rarely rescue economies; they magnify the distortions already in play. They don’t solve the cycle—they accelerate it.
Hemingway’s Iceberg, Schwed’s Grin
Hemingway wrote about his own style that what gives a story power is what’s left unsaid. Others have dubbed the “iceberg theory” of writing.
In 1940, what went unsaid was the fear that prosperity might never return. In 2025, it’s the quiet awareness that the prosperity we’re seeing may not last. You can feel it in the hum of data centers, the speculative chatter on X, the relentless optimism of headlines about AI and productivity.
The seen: record highs. The unseen: mounting debt, rising financing costs, and fragile confidence.
“Denominate stocks in gold instead of dollars,” Bloomberg’s John Authers, recently observed (and cited here), “and you’ll see that we’ve been in a bear market for two decades.”
Inflation expectations may look tame, but gold and silver’s new highs—up more than 10% this month—suggest that trust in money, not productivity, is driving behavior. Optimism is the hedge against inflation; gold is the hedge against optimism.
If the AI Party Ends — What Then?
Sorkin’s framework from 1929 still holds: bubbles evolve into crises when three forces align—momentum buyers, misallocation, and fragile funding.
Momentum: “Buy AI” has become a reflex, not a strategy.
Misallocation: capital is chasing logos and hype rather than real returns.
Fragile funding: the build-out runs on debt and cheap capital that no longer exist.
A single rate shock or profit disappointment could ripple through the sector, just as overbuilt utilities and car companies did in 1930. The result may not be a crash so much as a slow unwind—projects delayed, valuations compressed, and leverage unwound through time and inflation.
Dalio calls that outcome “financial repression”—a soft default by another name.
Policymakers will inflate away debts rather than admit to defaults. In that environment, real assets outperform financial promises, and nominal returns mean little if your purchasing power erodes in silence.
Practical Takeaways for the Grey Swan Reader
This week we’re going to take up both Sorkin and Dalio’s mantle. For help in reading our editorial and commentary keep these ideas in mind:
- Balance exuberance with ballast. Stay exposed to AI’s genuine winners—those with pricing power and cash flow—but hedge the mania with tangible assets and short-duration Treasuries. Treat gold as insurance, not ideology.
- Follow the 3 C’s: cash flow, capacity, and covenants. This is a credit-driven cycle. Whoever controls the financing and the power—literally, the energy—controls the narrative.
- Expect more policy in your portfolio. Just as the 1930s birthed the SEC and Glass-Steagall, and 2008 birthed zero interest rate policy (ZIRP) and euantitative easing (QE) the latter part of 2020s will likely produce new regulations—on data, chips, and capital flows.
Under the Trump Great Reset strategy and the weight of the AI arms race, the “free market” is giving way to managed capitalism. Position accordingly.
The Punchline Schwed Would Appreciate
Wall Street will always sell tickets to the parade—radio in 1929, dot-coms in 1999, GPUs in 2025. Some parades end in confetti; others in subpoenas. Schwed’s wisdom still stands: you don’t need to time the last note, just keep your seat close to the exit.
If the boom continues, your portfolio participates. If it falters, your ballast buys you time—and maybe your own modest “yacht,” which Schwed would remind you is simply a sturdy rowboat, with good oars and a sound hull.
~Addison
P.S. What do you do with your money before the AI bubble reaches the top? Glad you asked.
This week on Grey Swan Live! we’re planning a special two-fer.
Thursday, October 23, 2025 @ 2 p.m. ET — “The Terrifying Bull Market Review.”
We’ll break down the records this market has already shattered — margin debt, retail inflows, and top-heavy concentration in the S&P 500 — and outline what an AI crash scenario could look like. As Andrew Ross Sorkin said promoting 1929, the trick is to “know when to get on — and, more importantly, when to get off — the wave.”
Friday, October 24, 2025 @ 2 p.m. ET — “Grey Swan Portfolio Review.”
For annual members, we’ll unveil the Plunge Protection Plan — practical strategies to preserve gains, hedge risk, and profit when markets turn south.
The time to prepare for a correction is before it happens. Once the exits get crowded, even the best traders can’t move fast enough. Mark your calendar — this may be the most important two hours of your financial year.
If you have any questions for us about the market, send them our way now to: Feedback@GreySwanFraternity.
