“Just the interest on the national debt now exceeds the Defense Department spending. We spend a lot on the Defense Department, but we’re spending like $1 trillion on interest. If this continues, the country will go, become de facto bankrupt.”
– Elon Musk
March 4, 2025— The market threw a tantrum yesterday — despite weeks of forewarning. The rout continues today. In effect, traders on Wall Street took one look at the new tariffs and did what we expect after a year full of all-time highs: panic.
The S&P 500 dropped 1.7% while the Nasdaq fell 2.6% on Monday. The Magnificent 7, as we’ve been forecasting, led the way. Nvidia alone lost $300 billion, while the group as a whole erased $568 billion in market cap.
The Dow, too, dropped. The index is down nearly 1,200 points over the past 5 trading days. Bond yields, Bessent’s bane we wrote about yesterday, shot up. And every finance bro with a microphone started hyperventilating about “short-term volatility.”
As a point of fact, the Mag 7 have erased ~$2.4 trillion in value since its peak in December and fell below its 200-day moving average. Momentum traders and HFT algorithms could carry the route further before the selling is done.
With the new tariffs, Trump proved he’s comfort… er, serious about using “sanctions” as a leading salvo in a global trade “war” aimed at “punishing” our largest trade partners. Rather, to make trade fair again.
It’s not a coincidence the executive orders kicked in on the eve of Trump’s address to the joint session of Congress. Only the increase on China was a surprise… 20% on all goods instead of the projected 10%, according to WSJ.
Meanwhile, 25% tariffs on Canada and Mexico took effect last night.
Reciprocal tariffs are still scheduled for April 2.
Here’s the thing. Yesterday (and today?) aren’t just bad trading days.
We’re confident the tariffs are the leading edge of a slow-motion train wreck other writers, notably Bridgewater founder Ray Dalio, and we have been warning about for years: the end of America’s debt super-cycle.
The bills have come due, and the only surprise is that people are still surprised.
Jeff Berwick’s Controlled Demolition of the American Empire lays it all out. Grey Swan contributor John Robb also points to the Trump era of populism and renewed political emphasis on sovereign nations versus the failed, confusing ideas of the global elite.
America didn’t just accidentally run out of money — our economy was rigged for collapse decades ago.
First, politicians gutted the industrial base and replaced it with financial gimmicks.
Then, they offshored the jobs and told everyone to “learn to code.” Meanwhile, the country borrowed trillions, convinced deficits don’t matter (shoutout to Dick Cheney).
And now? The detonators are wired, the plunger has been pressed, and the only question is how many people will be standing in the rubble, wondering why their 401(k) turned into a 201(k).
And yet, tonight, Donald Trump steps up to address a joint session of Congress.
Technically, it’s not the State of the Union — he’s only been in office for a month, so tradition states the first address given by a president to a joint session of Congress is just that, an address.
And a chance to crow before a large audience the early achievements of the incoming administration.
Tonight’s message will be clear: temporary pain now, economic rebound just in time for the 2026 midterms. That’s the strategy.
Rip the band-aid off, let the government spending binge slow down, and by the time voters head to the polls, the economy will be on the mend and Trump can help Republicans retain control of Congress.
Of course, initial reaction proves the market hates this plan.
Government spending props up GDP, and cutting it will shrink the economy on paper — at least for now. That’s the problem with the way Washington does math.
The government doesn’t make anything, it just spends other people’s money (or borrows it). When you start dialing back that spending, it makes the numbers look ugly in the short term, even if it’s the only way to stop the rot.
Ray Dalio gave some advice to listeners of the podcast Odd Lots. His advice? Buckle up. The debt super-cycle isn’t going out quietly.
Dalio suggests cash-flow businesses, hard assets, gold — these are the lifeboats. Gold and silver gained 1.8% and 2.1%, respectively and continued their gains this morning.
Trump and Musk have been itching to get into “Fort Knox” and audit the nation’s gold supply. We anticipate further discussion of revaluing the gold price to help shave $11 trillion off the national debt. We wrote about it on February 21, but you can get further details right here: Elon’s Coming Gold Shock.
We also expect to hear tonight about Trump’s planned crypto summit on Friday. Yesterday, he telegraphed that any Federal crypto reserve would include more than just bitcoin. It will likely include Ethereum, Cardano, Ripple and Solana.
Fair warning: while MAGA strategists are betting they can take the hit now and ride a recovery into 2026, history has a way of making fools out of central planners.
The empire is cracking, and the only question is whether America’s planned demolition – underway – will work effectively enough to clear away decades of bad political mojo.
Regards,
Addison Wiggin,
Grey Swan
P.S. Following Trump’s Congressional address, we’ll be releasing new research on where to best profit as the MAGA strategy kicks into high gear.
Prior to doing the research, we asked a simple question: Which stocks are most likely to benefit from the policy mix Trump, Musk and Bessent are advocating?
Once we’ve checked our assumptions, we’ll likely release the research on Thursday. Stay tuned.
P.P.S. In the meantime, chew on this reader comment from Brian:
I guess the real question is: is it fiscally more efficient to pay these useless government employees who deploy tax money to useless projects so these fat blood suckers can go to the gym and have a latte, or pay them unemployment for 26 weeks instead of a full-time salary and benefits and say good luck?
This is what happens to teachers who get let go if enrollment goes down or Home Depot employees if interest rates are too high and no one can afford home improvement projects, etc.
I know what our founding fathers would advise, and Milton Friedman, too.
Personally, I’d like to see urban America get their meal ticket taken away and filter out the fluff just like forest fires do. Urban America, in my opinion, is the poison to our Country. They have a warped moral compass. Trump needs to cut them off. Start again. Democrat lead cities are a drain culturally and fiscally.
Yes, it will be a bumpy transition, but no pain, no gain. I’m from Chicago. I’m sick of Democrats ruining my city. Clean house. Democrats will continue this urban control as long as they can keep paying for their power and buying votes with my tax $$$.
Please send your comments to addison@greyswanfraternity.com
