JP Morgan CEO Jamie Dimon lit up the meme economy last week when he called bank failures “like cockroaches — where there’s one, there’s more.” It was a rare moment of candor from the head of the largest bank in the United States.
Maybe Dimon’s just talking his book. Maybe, and unfortunately, what Dimon said might also be true.
There are still two months left in 2025, but unless something intergalactically stupid happens soon, the collapse of First Brands Group Holdings will go down as the year’s most embarrassing Wall Street moment.
First Brands — a rollup of 24 auto-supply companies including Fram, Autolite, and Centric — managed to vaporize $10 billion in value and leave a trail of scorched lenders, hedge funds, insurers, and accountants.
The wreckage spans the entire financial ecosystem — from Jefferies Financial Group, which misjudged its debt load by nearly half, to private credit funds now scrambling to mark down their books.
Private Credit’s Dirty Secret
We’ve been watching private credit all year — the $3 trillion shadow banking machine that promises “nimble lending” but operates in the dark. Think of it as the modern heir to subprime mortgages: a system that works beautifully until it doesn’t.
According to Moody’s, U.S. commercial banks now hold $300 billion in loans to private credit firms, up from just $100 billion a decade ago. That’s more than 10% of total bank lending — and it means the “non-bank” lenders aren’t so non-bank after all.
When banks lend to private funds, which then lend to companies like First Brands, the risk just loops back into the same system regulators thought they’d insulated after 2008.
It’s like sweeping dust under the rug… until the rug catches fire.
“First Brands’ bankers thought they were refinancing $5.9 billion in debt,” writes the Wall Street Journal, “bankruptcy advisers now say the number was closer to $11.6 billion.”
Like critters in the dank crevices of a less-than-cleanly restaurant kitchen, these critters are worth paying for before you sit down to look at the menu.
Translation: a credit crisis is lurking in the U.S. banking system.
The Market’s Selective Amnesia
Stocks continued to float higher last week on a sea of optimism. The Dow, S&P 500, and Nasdaq all closed at record highs.
Traders are betting the Fed will deliver a second rate cut this week, and signs of a U.S.–China trade thaw have added rocket fuel to the rally.
The market’s new rallying cry might as well be: “Who cares about credit when we have cuts?”
But many Magnificent Seven stocks — Microsoft, Meta, Alphabet, Amazon, Apple, NVIDIA, Tesla —report earnings starting this week, and their numbers could determine whether this bull market keeps dancing or runs headfirst into the wall.
Warner Bros. Discovery, once left for dead, just had its best year ever, hitting $4 billion in box office sales and fielding multiple unsolicited buyout offers. It’s like Frank Sinatra said — “You’re nobody ’til somebody offers $23.50 a share for you.”
The Great Tariff Tantrum
“Reagan was right,” writes a Swan Dive reader commenting on the Province of Ontario’s unfortunate decision to run a political ad misrepresenting the Gipper’s views last week during the World Series.
For the record, we cleaned up some of the expletives said reader used.
“Tariffs are a killer,” the unsigned mail continues:
The problem is that Canada and all these other countries have been pounding us with them all these years. Trade has been extremely unfair, and Trump is trying to level the playing field.
He has repeatedly said if they go to zero, we go to zero. I am sick and tired of deceptive ads like the one mentioned. Reagan would have done equal to and/or more than what Trump has done. The United States has been paying the rest of the world’s bills, and it has to stop now!
The ad in question quoted Ronald Reagan’s 1987 warning that tariffs “hurt every American worker.” President Trump took it as a personal insult and promptly ended trade talks with Canada, slapped on a new 10% tariff, and threatened more to come.
Canadian Prime Minister Mark Carney — now the adult in the room — offered to reopen negotiations, but Trump said he’s “not planning to meet him anytime soon.”
“It’s not easy to weaponize Reagan,” the Economist commented, “but somehow both sides managed.”
Milei’s Market Miracle
Argentina’s Javier Milei had a better week. His libertarian party swept midterm elections, strengthening his hold on Congress and giving him a mandate to continue his radical economic overhaul — one that has both cut inflation and drawn Trump’s admiration (and $20 billion in U.S. aid).
Markets in Buenos Aires soared, even as skeptics warned that Milei’s strong peso policy risks draining reserves. “Argentina has tried this dance before,” The Economist noted. “Fiscal discipline is new — but the music is old.”
Xi, Trump, and the Great Thaw
Trump’s Asia trip is now the stage for a “cooling” in U.S.–China tensions. Trade negotiators struck preliminary deals on tariffs, fentanyl, and shipping fees, and a 100% tariff on Chinese goods that was supposed to take effect this week is “off the table.”
Treasury Secretary Scott Bessent called the progress “remarkable,” telling NBC, “We’ve gone from shouting matches to phone calls.” Trump will meet Xi Jinping in South Korea later this week — an event one Bloomberg analyst said could “reset the global mood, if not the balance sheet.”
Meanwhile, in Paris…
French police arrested two suspects in the Louvre jewel heist, including one man caught trying to flee to Algeria. DNA evidence sealed their fate, though the whereabouts of the stolen treasures remain a mystery. The BBC reported dryly: “Authorities have not yet confirmed whether any of the stolen jewels have been recovered — or if Dapper Man helped find them.”
In Washington, Trump is building a $300 million White House ballroom, funded by campaign donors and crypto moguls. The East Wing is already gone. “It’s the only infrastructure project in America that’s ahead of schedule,” joked Politico.
The ballroom, the markets, the trade deals — it all feels excessive, gilded, overbuilt, perhaps intentionally so.
You have to admit, the mainstream media are so gullible and easily distracted by Donald Trump’s art of the deal antics that it’s downright entertaining, even if you are suffering from TDS.
~Addison
P.S. Earnings week this week should give us more guidance on whether we’re nearing a top in the AI bubble.
To help understand how and why stock market bubbles happen — and how to plan accordingly, we dedicated a two-day Grey Swan Live! to the subject last week.
In all, Andrew Packer and I spent over two hours walking through what we call The Anatomy of a Stock Market Bubble — from AI hype to private credit leverage — and unveiled our Plunge Protection Plan for paid-up annual members.
If you missed it, our two-day event is up on the Grey Swan site, and our full-length special research report covering the Plunge Protection Plan insurance policy, will be posted shortly on the Special Reports section of the site.
This week, on Grey Swan Live! we’re back with John Robb, author of Brace New War, diving into the geopolitics of the Trump administration’s tariff strategy, the ongoing standoff in Ukraine, and innovations at the forefront of the rapidly developing technical future of warfare.
More details to come as we pull together the content and context for this week’s conversation.
If you’d like, you can drop your most pressing questions right here: Feedback@GreySwanFraternity.
