One year ago, the Dow shed over 1,000 points in a single session — a 2.6% tumble that opened the floodgates for an 8% drawdown in August.
The cause then? Goldman Sachs sounded the alarm on excessive AI infrastructure spending.
Big Tech, it turned out, was playing hot potato with retail investor cash.
Fast-forward to today: Same ol’, same ol’.
But the stakes are unmistakably higher.
The Mag 7 and overall tech sector relative to the rest of the S&P 500 has reached 2.2x in July — the highest recorded ratio ever.
The ratio is now much higher than at the 2000 dotcom bubble peak. This metric also sits well above two standard deviations from its historical average.
As Global Markets Investor puts it: “Crazy stuff.”
We reprise a theory about why crashes happen, below.
But for today’s purpose, keep in mind, we’re hearing the same creaks in the stock market. They’re just louder.
Trump’s tariffs are now law, the jobs report was a flop, and the Dow just logged its worst week since April.
Last year, after the flash crash, tech wobbles led the market to an 8% decline for August.
Data Integrity, Trump Style
Friday’s BLS report clocked just 73,000 jobs added in July — far below expectations of 106,000. The unemployment rate ticked up to 4.2%, with the jobless rate for African American workers at the highest since 2021.
But the real story wasn’t the headline numbers, it was that after yet another massive revision, investors were skeptical of those numbers.
Within hours, President Trump fired BLS chief Erika McEntarfer, triggering a weekend of partisan fire and fury.
Sen. Rand Paul warned that “when the people providing the statistics are fired, it makes it much harder to make judgments that the statistics won’t be politicized.”
But White House advisor Kevin Hassett said, “There have been a bunch of patterns that could make people wonder.”
We’ve been detailing how inaccurate the BLS reports are on a regular basis.
It’s something of a hobby of ours going back to the days when we were the publisher for the Kurt Richebacher letter.
But more so since the Biden administration was blowing smoke up everyone’s arse about how great the economy was during his administration.
Taken at face value, Friday’s report shows job creation is slowing.
Worse, however, trust in the process is kaput.
Agree with him or not, Trump kicked over another crumbling boulder of the imperial facade on Friday. The job numbers are supposed to keep everything together… what happens when the market loses faith in them completely?
Factory Fade: Manufacturing Recession Deepens
The ISM Manufacturing PMI, which provides a more accurate gauge of the economy, slipped to 48.0, its lowest level since November 2024.
New orders are contracting for the sixth straight month. The employment index dropped to 43.4, with 25% of manufacturers reducing payrolls — a grim echo of June 2020.
U.S. manufacturing has shrunk in 31 of the last 33 months. It’s not just a soft patch — it’s structural erosion.
Trump’s Fed Shuffle Begins
With Adriana Kugler stepping down from the Fed board, Trump has “a couple of people in mind” to replace her with someone more open to cutting rates.
Meanwhile, Trump’s open hostility toward the BLS continues: “We need numbers we can believe in,” he said.
No one’s pretending objectivity will survive the year. But the move also puts President Trump’s Great Reset plan – which includes getting interest rates significantly lower – back on track after seemingly stalling out.
Tech Still Soars… For Now
The paradox? Big Tech is booming. Alphabet, Meta, Apple, and Microsoft all posted strong earnings.
Microsoft is now riding a 10-week win streak, its best since 2023. But with the tech-to-S&P ratio at 2.2x, well above the dotcom bubble peak, even seasoned investors are holding their breath.
As Jason Furman put it: “Tariffs are already boosting inflation and dampening growth. Stocks are the last bullish indicator — and I can’t explain why they’re holding up.”
Boeing Strike Takes Flight
Over 3,200 Boeing defense workers walked out this weekend — the first fighter jet strike since 1996. They build F-15s, F/A-18s, and missiles. Boeing says it’s “prepared,” but the tension is real. CEO Kelly Ortberg played it cool on last week’s earnings call — but investors aren’t buying the nonchalance.
Political Theater in Texas
Fifty-seven Texas Democrats fled the state to block a Republican redistricting vote. Their absence stalls Gov. Abbott’s special session, but only temporarily.
They face $500-a-day fines, and Ken Paxton warned, “They have to come home eventually.”
It’s a political sideshow — but in the Trump era, everything is connected – and everything’s a show.
Avalanche Warning from the Masters
Ray Dalio, Michael Burry, and Jeremy Grantham have liquidated major positions. Dalio calls it an “economic heart attack.”
Burry’s bet against Nvidia is now $98 million.
Grantham is warning of a 50% collapse.
What they’re describing isn’t a recession — it’s system failure.
In 2o13, we brought Jim Rickards to Agora because of his experience inside the collapse of LTCM in 1998. In short, Jim knows a thing or two about complex systems and how easily they can fail.
Take, for instance, Bayes’ Theorem.
The theorem is best analogized as the buildup and collapse of an avalanche.
When the last snowflake causes the whole precipice to fall, “you don’t blame the snowflake,” Jim says, “you blame the unstable snowpack.”
Whether it’s tariffs, manipulated data, or overstretched markets, we’re building toward something. And that something will likely look like market crashes of the past, mostly in an echo of the 90s internet buildup and dotcom bust.
The question isn’t what will trigger it. It’s whether you’re prepared.
~ Addison
P.S.: Grey Swan Live! with Mark Jeftovic will be this Thursday, August 7, at 11 a.m. ET. We’ll dissect Powell’s bind, Trump’s strategy, the latest in crypto markets, and how to position yourself for the next avalanche.
Your thoughts? Please send them here: addison@greyswanfraternity.com
