Feature: “Terrifying Bull Bull”

August 18, 2025 • 1 minute, 50 second read

How is there such a relentless bid for big-cap tech names?

Part of it is structural. Companies like Nvidia and Microsoft can make up a combined 15% of the S&P 500 thanks to their sheer size.

And week after week, 401k and other passive investment plans put more money into market indices, benefitting these already large plays.

But we’re seeing another trend at play too. Today’s investors are increasing their stakes in big companies by moving out of small companies:

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Investors aren’t just going all in on big-tech stocks, they’re selling off better-valued small caps to do so. (Source: BofA)

It’s a feature of the most terrifying bull market of our lifetimes.

Year-to-date, over $80 billion has flowed out of small-cap U.S. stock funds. These are the companies that can include the proverbial next Nvidia or next Microsoft.

Many of these companies trade at far more reasonable valuations than Microsoft and Nvidia today. And their growth rates can be just as impressive. It’s easier for a small-cap company to double earnings than a company that’s already earning tens of billions per year.

It’s likely that investors won’t rediscover these stocks until the big-cap names falter. But for all our criticism of investor enthusiasm and high-flying valuations in the overall market today, small cap stocks are starting to look like a relative value, especially for more patient investors.

The ol’ timers will tell you “small caps lead the way out” of a bust. For now, big tech continues to suck up global capital.

~ Addison

P.S.: With the Federal Reserve on track to cut interest rates at its September meeting, the stock market as a whole may get a shot in the arm – small caps and large caps alike.

Our research has found several pockets of opportunity in small-cap stocks this year, particularly in areas that can benefit from President Trump’s Great Reset of the U.S. economy.

Key areas that have already been attractive include the cryptocurrency space, resource stocks, and plays on next-generation nuclear technologies.

As always, your reader feedback is welcome: feedback@greyswanfraternity.com (We read all emails. Thanks in advance for your contribution.)

Dave Hebert: How Long Could That $1.8 Billion Powerball Jackpot Fund the Government?

September 16, 2025 • Addison Wiggin

Our fiscal reality is clearly unsustainable. With the passage of the “Big Beautiful” budget reconciliation bill, Congress has already given itself permission to grow the national debt to $41 trillion. Interest payments on the national debt are already the second-most-expensive item on the federal budget, behind only Social Security (and ahead of defense spending). As the national debt continues to grow, debt service will become our number one spending obligation. History suggests it’s only a matter of time until we hit that limit and, unless things change, once again raise the debt ceiling. This cannot continue indefinitely.

Dave Hebert: How Long Could That $1.8 Billion Powerball Jackpot Fund the Government?

When Trust Runs Thin, Markets… Rally?

September 16, 2025 • Addison Wiggin

Bloomberg’s September survey of economists found that the majority are “somewhat or extremely worried” that the Fed’s decisions will be influenced by political loyalties.

If that happens, borrowing costs for the U.S. government rise as risk premia creep into Treasury markets.

Public confidence is already threadbare.

In 2001, 74% of Americans trusted Alan Greenspan to do the right thing. In 2025, only 37% say the same of Jerome Powell. For the first time, trust in Trump to manage the economy is higher than trust in the Fed chair.

The Tech Meltup, Exhibit A

September 16, 2025 • Addison Wiggin

Overall, the S&P 500’s RSI hit 70, the low side of overbought territory — for the entire index.

“Fed rate cuts tomorrow are likely priced in,” writes portfolio director, Andrew Packer, “it may not trigger a selloff, but at these levels, investors may be disappointed with a .25 cut.”

Tech investors will remain bullish on the prospect of multiple rate cuts over the next few meetings.

But be wary of any indication the Fed tries to rebuff Trump’s overtures and, God forbid, remain independent tomorrow.

Plowshares into Swords

September 15, 2025 • Bill Bonner

The empire is in decline. Demographics, regulatory tightening, fake money and the mis-allocation of trillions of dollars (much of it on pointless wars) have sapped the vitality of the economy. The Federal government gets bigger and bigger, but there is no longer enough output to pay for it.

The interest on the debt alone takes more more than a trillion dollars a year. The US faces a financial crisis. And for the first time in history, our children face a poorer future.

The welfare state model no longer works; the center — consensual democracy — wobbles towards the extremes. What to do? Beat our plowshares into swords?