Well, it’s official: the lights are back on in Washington. Well, not really, but the announcement that a deal had been reached late into the night on a Sunday (boohoo) was enough to get markets into a good mood.
Futures popped, gold glistened, bitcoin twitched, and stock markets sighed in relief, adding to Friday’s market turnaround.
Speaker of the House Mike Johnson gave Republican members 36 hours to get their heinies back to Washington so the world’s most expensive daycare can reopen.
After thirty-nine days of finger-pointing, a few exhausted Democrats (not up for reelection) crossed the aisle to join Republicans in passing a continuing resolution. The Senate voted 60–40 to fund the government through January — just long enough to develop talking points for the next shutdown.
The herd mistook “business as usual” for good news. It’s likely to push markets into their year-end seasonal rally mode – and our own Andrew Packer in the Grey Swan Trading Fraternity just identified a trade to take advantage of a stock that hit a critical support zone at its Friday low.
But reopening the government in this economy is like restarting a leaky faucet — they’re just turning the deficit back up – and just like how most of the machinery of government kept turning the past few weeks, the deficit never really stopped growing.
For all their moral high ground, Democrats got… nothing.
The sole talking point from the DNC memo — extending healthcare subsidies — was punted to “a later vote,” which, after that 41-day tantrum, will translate to “the Twelfth of Never.”
Chuck Schumer thundered about “moral duty,” Elizabeth Warren called it “a terrible mistake,” and America collectively scrolled by.
In his prime, Mencken wrote that democracy is the art of keeping the populace alarmed so they’ll clamor for safety. In 2025, that safety gets delivered in the form of retroactive paychecks, trillion-dollar IOUs… and tariff rebates.
Fighting for What, Exactly?
The shutdown, we were told ad nauseam, was about extending tax credits for the Affordable Care Act (ACA) more derisively referred to as Obamacare.
Since the ACA became law, the cost of health insurance has risen faster than the national debt — no small feat. But easily forecastable.
Profit margins at major insurers have actually fallen, meaning the “greedy corporations” are making less on each policy. Yet premiums soar, deductibles explode, and the average American is struggling to afford getting sick.
Blaming capitalism has become the automatic reflex. The real problem is regulation piled on top of bureaucracy, smothered in moral panic. It’s like fixing a traffic jam by adding more traffic cops.
And allowing the cops to set their own hourly rate.
One Rhode Island jurist ordered billions in SNAP benefits to be paid “because this should never happen in America.” Stirring sentiment—unfortunately, the Constitution doesn’t recognize feelings as a funding source.
The shutdown’s price tag? Half a trillion dollars added to the national debt in six weeks. Six weeks. The U.S. already borrows to pay the interest on what it borrowed last year.
Foreign creditors and bond vigilantes alike know the score… the shutdown just makes their analysis clearer and more astute.
It’s absurd. The U.S. government is absurd. That used to be a snide comment. Now it’s business as usual.
The Great AI CapEx Mania
While Washington dithers, Wall Street is fully engaged in its own special mania — the spiritual sequel to the dot-com bubble, but with more electricity.
The current AI “industrial” bubble on Wall Street is starting to break away from the historical records set during the dotcom bubble. (Source: Bloomberg)
Tech capital spending has surged faster over the past five years than during the height of the 2000s telecom boom.
Back then, companies buried millions of miles of fiber that nobody needed. Today, they’re stacking server racks full of chips they will strive to power – chips that will be obsolete within two years as new models roll off the assembly lines.
In Nvidia’s hometown of Santa Clara, two massive data centers sit dark, waiting for enough grid capacity to come online. Nationwide, power near data hubs costs 267% more than five years ago. Amazon’s Oregon operations are fighting Warren Buffett’s utility arm for electricity.
Jefferies analysts call this “the glory days for green investors.”
A Swan Dive Translation: The more inefficient the system, not unlike Obamacare, the more money can be made by pretending to fix it.
On Wall Street, the dynamics look familiar — overbuild, overborrow, overpromise. When the AI CapEx wave breaks, it’ll wash away as many “visionaries” as the fiber glut did in 2002.
Harry Dent gave us a brilliant rundown of how historical bubbles have enriched investors – and turned many an unwitting speculator into paupers. At the same time, he celebrated the cycle. Dent’s Grey Swan Live! from last week will go on the Live! Hall of Fame and is a must-listen, in our view.
Phase Two: Mr. Market Meets Mr. Regime
On X this morning, we found an interesting post by Michael Every. Mr. Every was analyzing “Phase Two” of the global economic reset—where markets no longer move money, but governments do. Every is brilliant. His analysis matches ours exactly!
A broad overview: Just this past week, tariffs, antitrust cases, and 50-year mortgages were proposed: social policy disguised as economics; the Department of Justice sued meatpackers to lower prices; the White House toyed with half-century home loans to make housing “affordable.” Trump also announced he’ll be issuing tariff rebate checks.
We’ve entered into a bizarro-world of government redistribution with better branding—a blend of populism and protectionism sold as “America First.” The invisible hand of the market is being replaced by the jittery hand of the regime, rapidly and on purpose.
Even the Fed is confused, which we suppose is not saying too much given the prior decade of ZIRP and QE .
Officially, Powell warned that inequality could spark the next downturn, but the FOMC (and the Shadow Fed) are on track to cut rates for a third time, inflate asset prices even more, and further widen inequality.
The snake is learning how to eat its own tail. Outside the terrarium glass, the Treasury is going to pick up the tab and pay the onlookers.
You really can’t make this stuff up.
Dollar 2.0’s Quiet Coup
All the while Congress talked about and balked at getting back to work, the real monetary shift was quietly whirring away.
Stablecoins — those blockchain-backed dollars like USDC and Tether — are expanding faster than any traditional banking product in history.
Each new token represents demand for short-term U.S. assets, deepening global liquidity while quietly helping finance the national deficit.
The catch? It moves power from banks to algorithms. That’s a good thing for you and me.
However, Treasury collateral will ultimately replace bank credit as the foundation of money. The U.S. dollar will gain reach, but further lose control.
When the next crisis hits, it won’t be the Fed you’ll be watching—it’ll be whoever controls the digital rails. Treasury Secretary Bessent is on board with it… so long as it helps pay the interest on the national debt.
If you joined Grey Swan for Dollar 2.0 investment recommendations, please refer to your special report, 3 Stocks Driving America’s Dollar 2.0 Revolution, right here.
Private Data Show Unemployment Going Up
The Chicago Fed estimates unemployment hit 4.36% in October, the highest since 2021. That’s a polite way of saying the “soft landing” just turned bumpy.
More than 1.09 million layoffs this year, nearly matching 2009’s bloodletting. Challenger Gray blames AI for most of it — machines are taking jobs faster than HR can print severance letters.
And so the government reopens. Airlines, we assume, will stop cancelling flights and a population the size of Canada will be able to get their SNAP benefits again.
We’re feeling snarky today. This is an economy in transition. If not, decline — it’s regime-driven inertia in a top hat. We’re not falling apart exactly, but circling the drain elegantly, hoping the AI capex spending can pull us through… to the mid-terms next November, a year from now.
“For every complex problem,” Mencken also said, “there’s an answer that is clear, simple, and wrong.” The stock market is the saving grace of the capitalist system. But during every bubble period we get all kinds of wacky political opinions to the contrary.
Just wait until this historic bubble bursts. Oy.
~Addison
P.S. Grey Swan Live! — Last week, Harry Dent joined us and cheerfully forecast that this “mother of all bubbles” is about to pop. He expects a 40–60% stock market collapse, followed by a deflationary hangover that could – and should – last a decade.
“It’s not the end of the world,” he said, “it’s just the end of make-believe.”
Dent’s prescription? Hold cash, own some gold, and keep your humor—it’s the only asset class that always appreciates in hindsight. We recommend you listen to his guest appearance on Grey Swan Live! You can find it right here on replay.
If you’re not a paid-up annual member of the Grey Swan Investment Fraternity, you can review the benefits of being one here.
