The first trading day of September ended like a lukewarm cup of coffee: stocks sagged, all three major indexes in the red, traders sluggish as if they hadn’t shaken off the holiday weekend.
Seasonality is against them — September’s dark shadow is long and cruel for otherwise ebullient investors.
Alphabet managed a “meh” day too, until after hours, when a federal judge revealed penalties for Google’s monopolistic search practices.
The big takeaway? Google doesn’t have to sell Chrome. Judge Amit Mehta rejected the DOJ’s call for a forced breakup, ruling that “plaintiffs overreached.” Instead, Google can no longer broker exclusive search contracts and must share its search data.
The stock popped more than 7% after hours, helping the indexes clear the cobwebs. But seasonal affective disorder (SAD) is going to be harsh this year.
Our often mundane survey of social media research sites reveals bond vigilantes are back in the saddle, pursuing market equilibrium as aggressively as ever.
“The bond market is screaming debt crisis (again),” Andrew Packer noted in our Grey Swan chat yesterday: Thirty-year U.S. Treasury yields nudging 5% are enough to spook equities, especially when the Fed’s next rate decision looms on September 17.
The setup is eerily familiar: stocks are floating on easy optimism, while bond traders quietly demand higher pay to fund a government drowning in deficits.
Bonds in the Hot Seat
Yesterday’s $42 billion auction of 10-year Treasurys made the point louder. Demand was weak. The 10-year briefly nudged 5%. Dealers — the market’s backstop— were forced to take down more than usual. Barron’s called it “a red flag for long-term funding health.”
The U.S. Treasury has already repurchased $138 billion in bonds this year, nearly double the amount in 2024. (Source: U.S. Treasury)
Officials say buybacks improve liquidity and smooth the market. But the side effects — shorter debt maturities and a steeper curve — make long-term yields more volatile.
As one strategist told Bloomberg: “You can’t keep playing Jenga with the Treasury market. Eventually, a piece gives way.” Expect volatility to increase. The good news? That’s favorable for making the right trades, like some of our positions in the Grey Swan Trading Fraternity.
Tariffs on Trial
Adding to the uncertainty yesterday, tariffs — the great economic lever of Trump’s “Great Reset” – were declared illegal by an appeals court. Most people who can register a pulse expected the legal challenge. However, the court also delayed its ruling until October, giving the Supreme Court a chance to weigh in.
Trump is asking for an expedited hearing. His economic team is throwing fits.
“If you take away tariffs, we could end up being a third-world country,” Trump thundered. Peter Navarro, with his customary reserve, went further: “If we lose this case, it will be the end of the United States.”
Heh. Who would claim the end of America?
“Tariffs are just taxes,” Bill Bonner wrote this morning. “They don’t enrich a nation; they only shuffle money and leave everyone poorer. Prosperity can’t be legislated at the border.”
The White House insists tariffs have driven $8 trillion in new U.S. investment. The Global Business Alliance points to falling foreign direct investment instead. Meanwhile, tariff revenue set a record $28 billion in July — barely a tenth of that month’s $291 billion deficit.
Manufacturing, too, is in decline, struggling with the reset.
No Signs Of Life Just Yet
U.S. factory activity contracted in August for the sixth straight month, a casualty of Trump’s scattershot tariffs and the court battles now threatening their legality. Production slowed, delivery times lengthened, and imports shrank faster — a familiar trifecta when supply chains are forced to navigate whiplash trade policy.
There were hints of resilience: the ISM’s new orders gauge jumped 4.3 points to 51.4, its first expansion since January, and the prices-paid index fell to 63.7, a six-month low.
The bellwether ISM gauge of productive manufacturing has yet to come to terms with Trump’s nascent tariff regime. (Source: Institute for Supply Management).
Regardless of what Larry Kudlow might say, the manufacturing sector has not registered new productive capacity for the time being.
The bond market’s revolt and investment in new factories are part and parcel of the same story — capital demanding real returns while policymakers try to satisfy political promises.
Performative Authoritarianism
While courts and factories weigh in on economic policy, the administration stages power elsewhere. A grainy video released over the weekend showed a drone strike on a Venezuelan boat in the Caribbean. Eleven dead, guilt assumed, trial?
Closer to home, the National Guard was redeployed to Washington — not to defend against unrest, but to pick up trash.
“We know of construction companies who’d do the job for 25% of the Federal cost,” writes one histrionic resident of the District on X. (Source: X)
The Windy and Charm cities are next on the list for deployed federal garbage cleanup.
Oh yeah, “we will go in,” Trump said yesterday. But didn’t tip his hand as to when.
A friend of mine who hosts Baltimore Votes — a local Facebook live event every Wednesday for 80,000 residents — says the locals are split 50/50 on federal troops in the city.
The last time the Posse Comitatus Act was suspended in Baltimore was during the Civil War, when cannons overlooking the city from Federal Hill were trained on the unruly Southern collaborators trading under the cover of darkness in the Inner Harbor below.
Contrast that with Beijing. Xi Jinping rolled out China’s largest-ever military parade, missiles gliding past Tiananmen Square, Putin and Kim applauding from the reviewing stand. India’s Modi and Iran’s Pezeshkian were there, too.
“You will see a transformation in the nature of power,” Jim Davidson and William Rees-Mogg forecast in The Sovereign Individual 28 years ago. “The collapse of the modern nation-state as the world’s predominant form of social organization. Violence will become more random, more localized, and less profitable on a mass scale.”
As we noted in the latest issue of our Grey Swan Bulletin, we recently reread our copy of The Sovereign Individual and have been marveling at how accurately Davidson and Rees-Mogg were in forecasting the shifting monopoly of power in the then “new” Information Age.
In the West today, state power is dressed as a spectacle and shared on social media. In the East, it’s on parade.
Either way, the sovereign individual must prepare for a world where legitimacy no longer cloaks the use of force.
As the global economy strains under the quickening pace of technology, expect to find the exercise of power to become more performative and erratic, conducted for theatrical effect.
The Money Monopoly
Mark Jeftovic also warns that while the White House insists that central bank digital currencies (CBDCs) are off the table, their skeleton is already being assembled.
The Treasury is seeking comments on a new digital ID system for crypto markets, which is framed as anti–money laundering.
On October 21, the Fed hosts a Payments Innovation Conference. Stablecoins, tokenization, and AI in finance are on the agenda. The future of money is being re-architected, piece by piece.
“Call it what you want,” Jeftovic writes this morning, “but we’re watching the quiet construction of a China-style social credit economy.”
We’re going to take a hard look at the potential upside developing in the digital money arena tomorrow with fraternity friend Ian King, details in the p.s. below.
You’ll want to tune in for this week’s Grey Swan Live! We even amended the time slot to make it easier for folks across the country to attend.
The Demographic Trap
And then there are the forces no government can command: demographics. Analyzing new data sets for the American Institute of Economic Research (AIER), Mike Munger warns that within 25 years, most developed nations will face sharp population declines.
Decades of overpopulation fears and fertility-blunting policies have left birthrates below replacement.
This is more than a cultural crisis. It’s a fiscal time bomb. Western welfare states rely on young workers to fund retirees. Fewer workers mean fewer taxes, more strain, and more temptation for governments to print money.
Davidson and Rees-Mogg foresaw this trend too: the collapse of the modern welfare state under the weight of promises it cannot keep.
In their view, the sovereign individual survives not by hoping Washington fixes it, but by preparing for the inevitable arithmetic.
Bread and Circuses
Meanwhile, Americans are buying lottery tickets. The Powerball jackpot has swelled to $1.4 billion ahead of tonight’s drawing. The real winner? The IRS, which will take home about half the gross amount in taxes, whether the winner takes the lump sum or the 20-year payment.
A Wall Street Journal–NORC poll found that 70% of Americans no longer believe that hard work leads to upward mobility, a record high. The sentiment spans income levels, even among households earning over $100,000.
On this day in 1783, the Treaty of Paris ended the Revolutionary War, formally recognizing American independence.
The republic, if we can keep it, was born suspicious of “capricious”, unchecked power.
242 years later, citizens place their hopes in spectacle — tariffs, drone strikes, jackpots — and ignore the deeper challenges of debt, demographics, and declining legitimacy.
Meh, who’s counting?
With all this in mind, should we be positive or negative here?
Upon reflection, Mr. Packer suggests both: “The world is rapidly splitting between those with capital and who can invest and those who rely on labor… AI is going to greatly profit the owners of AI companies, while upending many traditional lower-skilled jobs.”
In this stage of the great reset, even the time value of money itself is under review.
Stay tuned.
~ Addison
P.S.: You’ll also want to join us for Grey Swan Live! tomorrow at 2 p.m. ET with Ian King.
Ian’s hot on an upcoming event that he forecasts will trigger a new crypto boom, sending the market cap of the space to $8.5 trillion by 2030.
We’ll be looking at his latest moves in the cryptocurrency market – including the rise of Ethereum as the rally in bitcoin takes a pause. What’s it all mean? And where do we stand regarding President Trump’s plans for a Strategic Bitcoin Reserve?
All that and more. Ian will also cover his list of the top token opportunities in the cryptocurrency space as this asset class continues to push higher and gain regulatory guidance.
Remember the new time!
Grey Swan Live! with Ian King will begin at 2 p.m. ET/11 a.m. PT tomorrow, Thursday, September 4, 2025.
Your thoughts? Please send them here: feedback@greyswanfraternity.
