The global stock rally stretched into a seventh day. Optimism over artificial intelligence lifted equities from New York to Shanghai.
Global Infrastructure Partners is nearing a $40 billion deal for Aligned Data Centers, while Chinese fund managers are betting Alibaba has more room to run after its $250 billion AI-fueled surge this year.
Retail investors are leading the charge; net buyers of equities in 21 of the last 24 weeks.
Options activity now has 22 consecutive weeks of net purchases:
Tech stocks dominate the U.S. market at 56% of total cap — a record. Defensive sectors, by contrast, are at 16% — an all-time low.
“This has never happened before,” one strategist told Bloomberg yesterday. Only the dot-com bubble comes close.
One dominant trend we observed in Grey Swan Live! yesterday with Mark Jeftovic: Current economic and monetary trends are forcing savers into stocks. (More on this important Live! conversation below.)
Fiscal Dominance, Front and Center
Professional traders call it the “debasement trade” — trade dollars for assets or risk being left behind as part of a permanent underclass.
As we highlighted last week, Geiger Capital warns of the Trump administration’s move toward “fiscal dominance,” most notably in its efforts to create a “Shadow Reserve” and undue influence at the Fed.
With Washington issuing record debt, the Federal Reserve has little choice but to keep rates low enough to fund deficits, even when inflation whispers otherwise.
The majority of Americans, though, aren’t thinking in those terms. They’re noticing grocery bills and rent. Official CPI is ticking back up again.
Lived experience tells a harsher truth daily: incomes don’t stretch as far as they used to.
Yet the Fed, despite an embargo on current employment data, is planning for another rate cut on October 28.
OpenAI’s $500 Billion Badge
The financial press doesn’t help. This from Morning Brew this morning:
OpenAI completed a secondary sale that allowed employees who owned stock for more than two years to sell up to $10.3 billion worth of shares in the company.
When all was said and done, $6.6 billion worth was sold to investors at the fresh $500 billion valuation.
The sale sent OpenAI’s valuation rocketing past its previous $300 billion estimate, as well as SpaceX’s $400 billion. The new valuation and subsequent optimism for AI also gave the US stock market a nice little bump, despite the federal government’s shutdown.
Like a pizza party, but better. The secondary sale was likely a reward for employees who shunned exorbitant pay packages and signing bonuses dangled by other companies and chose to stay with the ChatGPT-maker during recent poaching sprees. In July, Meta snagged former Apple engineer Ruoming Pang with a $200 million pay package.
All this while folks scramble for Sora invite codes: OpenAI released the newest version of its TikTok-esque AI video app this week. Similar to Meta’s Vibes, Sora users can generate videos of giraffes walking neighborhood streets or OpenAI CEO Sam Altman “stealing” GPUs from Target.
The company says it included guardrails to prevent the creation of violent or sexual content, as well as to allow users to remove videos featuring their likenesses. The app’s feed showed users hyperrealistic Pokémon and real people in Nazi outfits, according to the Wall Street Journal and New York Times. Copyright owners must opt out to keep intellectual property off the app, according to OpenAI.
There’s a slight divide between the tech world and “lived experience” in the real economy, wouldn’t you say? We love the stories. Just don’t let FOMO influence your investment decisions ;~}
Credit Scores Rewired
Fair Isaac rattled the credit world by cutting Experian, Equifax, and TransUnion out of the loop. Starting now, lenders can pull FICO scores directly for half the cost. FICO shares surged 18%, the other bureaus fell as much as 11%.
The disruption could be as significant as the introduction of stablecoins into the banking system. For homebuyers, the shift may mean lower mortgage costs. For investors, it’s a reminder: even old-line industries can flip overnight.
Shutdown’s Quiet Truth
Day three of the shutdown, and the headlines focus on furloughs and the missing jobs report. “The first casualty in what is likely to be a string of delayed or missed economic data,” says the Washington Post, hyperventilating.
Policymakers had been hoping for clarity on a cooling labor market, rising unemployment, and sticky inflation. Instead, they’re left waiting. Or relying on the private sector and alternative data.
How much clarity do government reports ever bring? As Liz Wolfe notes in the Reason Roundup, the numbers arrive riddled with revisions big enough to change the story after the fact. Investors know the “gold standard” often looks like fool’s gold.
Meanwhile, the cuts Democrats lament — “$8 billion in energy projects in states represented by Democratic senators and $18 billion for New York transportation projects” — raise a sharper question: why should Washington fund projects that private investors or local governments could handle better?
The hidden truth of every shutdown is that most things keep running. Planes still fly, Social Security checks still land, the mail still arrives. The disruption reveals how many functions could be phased out, privatized, or simply dropped without society grinding to a halt.
For the Fed, the missing data complicates deliberations ahead of its October meeting. Bank of America’s Stephen Juneau predicts Powell will lean toward another “risk management” cut if the jobs numbers remain MIA.
Yet private data already sketches a picture: ADP shows 32,000 jobs lost in September, Challenger finds hiring plans at their weakest since 2009.
The bigger story isn’t the missing report, it’s the illusion the report sustains — that government data is indispensable, and government funding essential. The shutdown peels that illusion back, iceberg-like, revealing what markets and households already feel beneath the surface.
Liz Wolfe again: “One of the great dirty little secrets of every government shutdown—which, again, is a misnomer, because vast swaths of the federal bureaucracy continue to operate—is that everything remains mostly fine, and many functions that the federal government currently performs could be phased out or replaced by the private sector.”
While parsing the shutdown details this morning, we were left wondering who among Swan Dive readers really cares if the government is shut down?
Callous, maybe. But I’m actually interested to hear your thoughts (send them here: addison@greyswanfraternity.com
Oil Slips, Transition Creeps
Crude oil hit multi-month lows this week.
OPEC+ eased back on cuts, U.S. production is at record highs, Brazil and Guyana are shipping more barrels. At the same time, demand hasn’t kept up, with China slowing and other economies stalling.
Cheaper fuel and energy are a good thing, if you’re not counting on investment returns. They also play a big role in the Trump grand realignment strategy.
The long view points to opportunity elsewhere: nuclear and natural gas edging further into oil’s share of the mix.
Portfolio Director Andrew Packer took advantage of the hit in oil and gas stocks this week to position for a rebound in the Grey Swan Trading Fraternity – seasonal trends could allow nat gas prices to tick higher in the months ahead.
Two Jobs, One Expense
Here’s the signal worth watching: Google searches for “second job” are at their highest since records began in 2004, surpassing even the financial crisis of 2008.
Back in the Global Financial Crisis (2008), we recall mass layoffs were driving desperation.
Today, unemployment is relatively low, if climbing.
Affordability is much more of an issue. Food, rent, healthcare, and childcare are all rising faster than wages. Households aren’t jobless; they’re stretched. Job “quits” are at crisis-level lows.
In addition to the top 10% of earners, consumer spending is still strong. Not necessarily because of prosperity, but because households are taking extra shifts, hustling gigs, working late into the night, and using credit cards. The trends hold up demand but hollow out savings.
It’s the quiet form of financial repression. In an era of fiscal dominance, savers see easy returns clipped, workers stretch hours just to stay even, and wealth slips upward into assets while daily life grows harder to afford.
For investors managing their own money, the lesson is caution.
Rising stocks and gold headlines may glitter, but beneath the surface, the pressure on households in the real economy is a story we expect to hear a lot more about.
In life, investing, and writing, Ernest Hemingway would say, the iceberg matters, but what you don’t see above the waterline matters most. (We were just perusing The Sun Also Rises again.)
~Addison
P.S.: There’s a lot of moving parts in the world right now, all intersecting in real time – and it feels like something may break sooner rather than later. That includes the AI bubble, the decline of dollar dominance, and soaring asset prices such as gold and bitcoin.
It’s too much to cover here. That’s why you don’t want to miss out on the conversations happening each week in Grey Swan Live!
Sign up now if you haven’t done so already. Members can find yesterday’s video posted on the site now.
