Disorderly Conduct

Markets opened yesterday with hope… and closed with a thud.

We, too, were fixated on the Federal Reserve decision and its subsequent press conference.

As we’re sure you’re aware, the Federal Reserve refused Trump’s insistence that they cut rates — again. In return, the president launched a fresh barrage of tariffs, triggering confusion across trade desks in lower Manhattan.

And underneath it all? An aggressive rollover of (ballooning) national debt, tech valuations at historic extremes crowding out all kinds of otherwise healthy businesses, and tremors — both literal and economic — shaking the ground beneath us.

Powell 1, Trump 0… Your Move, Mr. Trump

The Federal Reserve held interest rates steady for a fifth straight meeting, keeping the target range at 4.25%–4.50%, despite immense pressure from the White House. As expected, no rate cuts came… but the fireworks came anyway.

At his 2 p.m. press conference, Chair Jerome Powell was characteristically cautious: “We have made no decisions about September,” he said. “We don’t do that in advance.”

Internally, the consensus is cracking. Fed Governor Christopher Waller and Vice Chair Michelle Bowman, both Trump appointees, voted to cut rates — the first such dissent from not just one, but two sitting governors since 1993.

Meanwhile, Trump accused Powell of bungling the Fed’s $2.5 billion headquarters renovation and jabbed again yesterday: “He is always too late, even if he does it today.”

Beware the bond market reaction, click for our research here.

Markets Fall Off a Cliff

The major indexes opened strong, but tumbled hard after Powell’s remarks. Optimism about future rate cuts quickly gave way to anxiety about how long the Fed plans to “wait and see.”

In commodities, copper prices plunged after Trump announced a universal 50% tariff on copper imports and semi-finished goods like pipes and wires. Input materials like ore were exempted, but the market wasn’t comforted.

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Typically, we’d view this sharp drop in copper as a bad sign for the economy, but in Trump’s Reality Distortion field, things ain’t what they typically seem. (Source: barchart)

Meanwhile, Trump imposed a new 25% tariff on imports from India, citing retaliation for their purchases of Russian military gear.

Copper took the brunt, and India may yet face further “penalties,” Trump warned.

Please note: Our very first recommendation in the Grey Swan Trading Fraternity seeks to capitalize quickly on copper’s whopper price action. Details for new paying members are on the way. Check your inbox.

Ports, Power Struggles, and Panama

A quiet showdown is unfolding over the Panama Canal, where the U.S., China, and BlackRock are entangled in a global chess match. The canal is only one item on the list of non-tariff trade barriers that Treasury Secretary Scott Bessent and the Chinese delegation in Stockholm are bickering over.

Panama’s comptroller wants to void a key 2021 port contract with CK Hutchison, a Hong Kong-based operator. Meanwhile, China’s largest shipping firm is jockeying for influence in a deal involving 43 ports.

Trump called for the U.S. to “retake control” of the Panama Canal in his January inaugural. The question is — can he?

Elon SECEDING from the US?

Elon and Trump are at each other’s throats. And considering Elon just got his own city in Texas… Could Elon be looking to break away from the US entirely? Or is something else going on in his new city? According to one financial analyst, a man who’s spent nearly 30 years deep in the trenches of Wall Street… This city points to Elon Musk’s next trillion-dollar opportunity. One that could change your life in the coming years. Click here for the full details.

GDP Looks Rosy… Until You Read the Footnotes

The economy grew 3.0% in the second quarter. Sounds great, right? Not so fast. Much of that came from a 30.3% plunge in imports, a mechanical boost to GDP due to the way it’s calculated. Consumer spending rose 1.4%, better than Q1’s 0.5%, but well below trend.

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A more honest gauge — final sales to private domestic purchasers — rose just 1.2%, the slowest since 2022. It excludes exports and government spending, giving a clearer view of real economic momentum.

Bottom line: the headline looks great, but underneath it’s a data shuffle trying to account for tariffs.

That said, that’s not how the financial press interprets it. They print and repeat the headline number and run with it. Beware.

The Great Rollover Begins

The Treasury Department announced another $125 billion in notes and bonds for auction next week. The U.S. must roll over $722 billion in debt this week alone.

Since early July, the national debt has jumped $519 billion, now totaling $36.73 trillion. If forecasts hold, we’ll end the year at $37.8 trillion.

The debt tsunami unleashed during the pandemic is now crashing ashore.

Tech Bubble 2.0?

Another historic hallmark has been achieved.

The Nasdaq Composite’s ratio to the Russell 2000 hit an all-time high: more than 9x, surpassing even the dotcom peak.

Tech stocks have never outperformed small caps by such a margin.

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Meanwhile, Microsoft’s blowout earnings pushed its market cap toward $4 trillion, second only to Nvidia, the first to cross that line. Meta is also surging this morning as it ups its AI bets, while Google and Amazon are still on deck for earnings.

PCE and the Data Ahead

Tomorrow’s Personal Consumption Expenditures (PCE) Index is the Fed’s favorite inflation gauge. Economists expect it to rise from 2.3% to 2.5% as tariff pressures bleed through. Core PCE, which strips out food and energy, is widely expected to hold at 2.7%.

Earnings season update: We’ll also hear from Apple, Amazon, Mastercard, Coinbase, Ferrari, and S&P Global, among many others. It’s a crucial read on whether this earnings rally has legs—or if it’s a sugar high.

Retail investors are likely to respond when the indexes move in a clear direction up or down. We suspect it’s going to take an exogenous event to make record retail investor sentiment come down off market euphoria.

In other words, the market remains a bubble in search of a pin… ‘cept earnings seem to be keeping a few key stocks aloft.

Seriously, Where’s Hoffa?

On this day in 1975, Jimmy Hoffa, the labor titan who once ran the Teamsters with an iron grip, disappeared without a trace. Was it the mob? The feds? The Teamsters themselves?

No one knows, but we think it might now be easier to find out where Jimmy is than identify any of the names that appear on Epstein’s list.

~ Addison

P.S.: Grey Swan Live! features the full replay of our Fed breakdown and Powell and the bond market vs. The Great Trump Reset scorecard. The question now: what’s Trump’s next move? Look for your link at 11 a.m.

Your thoughts? Please send them here: addison@greyswanfraternity.com

Markets opened yesterday with hope… and closed with a thud.

We, too, were fixated on the Federal Reserve decision and its subsequent press conference.

Powell 1, Trump 0… Your Move, Mr. Trump

At his 2 p.m. press conference, Chair Jerome Powell was characteristically cautious: “We have made no decisions about September,” he said. “We don’t do that in advance.”

Meanwhile, Trump accused Powell of bungling the Fed’s $2.5 billion headquarters renovation and jabbed again yesterday: “He is always too late, even if he does it today.”

Beware the bond market reaction, click for our research here.

Markets Fall Off a Cliff

The major indexes opened strong, but tumbled hard after Powell’s remarks. Optimism about future rate cuts quickly gave way to anxiety about how long the Fed plans to “wait and see.”

Turn Your Images On

Typically, we’d view this sharp drop in copper as a bad sign for the economy, but in Trump’s Reality Distortion field, things ain’t what they typically seem. (Source: barchart)

Meanwhile, Trump imposed a new 25% tariff on imports from India, citing retaliation for their purchases of Russian military gear.

Copper took the brunt, and India may yet face further “penalties,” Trump warned.

Ports, Power Struggles, and Panama

Trump called for the U.S. to “retake control” of the Panama Canal in his January inaugural. The question is — can he?

Elon SECEDING from the US?

GDP Looks Rosy… Until You Read the Footnotes

Turn Your Images On

Bottom line: the headline looks great, but underneath it’s a data shuffle trying to account for tariffs.

That said, that’s not how the financial press interprets it. They print and repeat the headline number and run with it. Beware.

The Great Rollover Begins

The Treasury Department announced another $125 billion in notes and bonds for auction next week. The U.S. must roll over $722 billion in debt this week alone.

Since early July, the national debt has jumped $519 billion, now totaling $36.73 trillion. If forecasts hold, we’ll end the year at $37.8 trillion.

The debt tsunami unleashed during the pandemic is now crashing ashore.

Tech Bubble 2.0?

Another historic hallmark has been achieved.

The Nasdaq Composite’s ratio to the Russell 2000 hit an all-time high: more than 9x, surpassing even the dotcom peak.

Tech stocks have never outperformed small caps by such a margin.

Turn Your Images On

PCE and the Data Ahead

In other words, the market remains a bubble in search of a pin… ‘cept earnings seem to be keeping a few key stocks aloft.

Seriously, Where’s Hoffa?

On this day in 1975, Jimmy Hoffa, the labor titan who once ran the Teamsters with an iron grip, disappeared without a trace. Was it the mob? The feds? The Teamsters themselves?

No one knows, but we think it might now be easier to find out where Jimmy is than identify any of the names that appear on Epstein’s list.

~ Addison

Your thoughts? Please send them here: addison@greyswanfraternity.com

Back in April, when we published what we called the Trump Great Reset Strategy, we described the grand realignment we believed President Trump and his acolytes were embarking on in three phases.

At the time, it read like a conceptual map. As the months passed, it began to feel like a set of operating instructions written in advance of turbulence.

As you can expect, any grandiose plan would get all kinds of blowback… but this year exhibited all manner of Trump Derangement Syndrome on top of the difficulty of steering a sclerotic empire clear of the rocky shores.

The “phases” were never about optimism or pessimism. They were about sequencing — how stress surfaces, how systems adapt, and what must hold before confidence can regenerate. And in the end, what do we do with our money?!

Relative to GDP, the net international investment claim on the U.S. economy was 20% in 2003. It had swollen to 65% by 2023. Practically every type of American company, bond, or real estate asset now has some degree of foreign ownership.

But it’s even worse than that. As the federal deficit has pumped up the GDP figures, and made a larger share of the economy dependent on government spending, the quality and sustainability of GDP have deteriorated. So, foreigners, to the extent they are paying attention, are accumulating claims on an economy that has been eroded by inefficient, government-directed spending and “investments.” Why should foreign creditors maintain confidence in the integrity of these paper claims? Only to the extent that their economies are even worse off. And in the case of China, that’s probably true.

As global government interest expense climbed, gold quietly followed it higher. The IIF estimates that interest costs on government debt now run at nearly $4.9 trillion annually. Over the same span, gold prices have tracked that burden almost one-for-one.

Silver has recently gone along for the ride, with even more enthusiasm.

Since early 2023, Japan’s 10-year government bond yield has risen roughly 150 basis points, touching levels not seen since the 1990s.

Over that same period, gold prices have surged about 135%, while silver is up roughly 175%. Zoom out two years, and the divergence becomes starker still: gold up 114%, silver up 178%, while the S&P 500 gained 44%.

According to the American Association of Individual Investors, the average retail investor has about a 70% allocation to stocks. That’s well over the traditional 60/40 split between stocks and bonds. Even a 60/40 allocation ignores real estate, gold, collectibles, and private assets.

A pullback in the 10% range – which is likely in any given year – will prompt investors to scream as if it’s the end of the world.

Our “panic now, avoid the rush” strategy is simple.

Take tech profits off the table, raise some cash, and focus on industry-leading companies that pay dividends. Roll those dividends up and use compounding to your overall portfolio’s advantage.

Back in April, when we published what we called the Trump Great Reset Strategy, we described the grand realignment we believed President Trump and his acolytes were embarking on in three phases.

At the time, it read like a conceptual map. As the months passed, it began to feel like a set of operating instructions written in advance of turbulence.

Silver has recently gone along for the ride, with even more enthusiasm.

Since early 2023, Japan’s 10-year government bond yield has risen roughly 150 basis points, touching levels not seen since the 1990s.

A pullback in the 10% range – which is likely in any given year – will prompt investors to scream as if it’s the end of the world.

Our “panic now, avoid the rush” strategy is simple.

Take tech profits off the table, raise some cash, and focus on industry-leading companies that pay dividends. Roll those dividends up and use compounding to your overall portfolio’s advantage.