Historic Leverage Meets Frigid Winter, What’s Next?

Last week, all three major U.S. indexes fell as traders tracked President Trump’s Davos diplomacy and Greenland tariff threats, followed by the familiar pattern of escalation, retreat, and relief.

Tensions cooled briefly. New ones surfaced almost immediately.

Macroeconomics and geopolitics remain fused at the hip, and neither is offering the courtesy of predictability.

Underneath the headlines, leverage continues to build.

U.S. margin debt surged another $11.3 billion in December, pushing the total to a record $1.23 trillion.

That makes eight consecutive months of increases. Since spring, margin balances have risen by $375 billion — a 44% expansion.

Here’s a number individual investors should take heed: Margin debt growth is now running 20 percentage points ahead of S&P 500 gains year over year. Excluding the meme-stock frenzy of 2021, you have to go back to 2007 to find a comparable gap.

Chipmaker Intel reminded investors on Friday, dropping more than 17% after issuing weak guidance.

This week, earnings season accelerates: Meta, Microsoft, and Tesla report on Wednesday. Apple follows on Thursday. Tesla investors want updates on robotaxis. Everyone wants clarity on AI spending and productivity, especially as Alphabet begins to assert leadership.

The Magnificent Seven still dominate market psychology, but their own margins – for error – are narrowing. Even some earnings that exceed expectations could trigger sell-offs in this environment.

 Japan Signals Before It Breaks

At the same time, the bond market situation in Japan is itself entering historic territory. Even as Japanese government bond yields push higher, the yen is weakening. Typically, rising yields strengthen a currency.

In Japan, the opposite is happening.

(Source: Global Markets Investor)

The yen again approached 160 per dollar last week — a level widely understood as Tokyo’s line in the sand after nearly $100 billion was spent defending it in 2024.

Over the weekend, Prime Minister Sanae Takaichi warned that Japan stands ready to intervene if moves become “abnormal or speculative.”

The move fits the pattern, when the yen weakens, the Bank of Japan has made a custom of stepping in to support the nation’s currency.

This time around, because Japanese bonds are weakening at the same time, the Federal Reserve Bank of New York openly signaled it is preparing for intervention in the yen.

The New York Fed contacted financial institutions to check current yen exchange rates. The United States has not participated in coordinated yen intervention since the Fukushima nuclear disaster in 2011.

Markets reacted immediately.

The dollar fell for a third straight day to its lowest since September. The yen rallied roughly 1% to around 154 per dollar. Options positioning now shows the most bearish sentiment on the U.S. dollar in over a decade.

When Japanese yields rise and the yen strengthens, capital repatriates. That forces selling across U.S. equities, Treasurys, crypto, and credit.

We saw this in July and August of 2024. And again in October of 2025. Japan’s internal stress rarely stays internal.

 Storm Fern and the Physical Limits of AI

While currency markets adjusted, Winter Storm Fern swept across the United States, affecting more than 200 million people.

Nearly 13,000 flights were canceled Sunday — the highest total since March 2020. Delays exceeded 20,000. Almost 900,000 customers lost power, concentrated in Tennessee, Mississippi, and Louisiana.

Here in Baltimore, we got 8 inches of fluffy snow followed by 4-5 hours of sleet. The surface of the snow is bulletproof this morning.

Reuters noted that wholesale electricity prices in Northern Virginia’s data-center corridor exploded from $200 per megawatt-hour to $1,800 in roughly 24 hours as the freeze tightened. PJM Interconnection now forecasts an all-time winter demand record of 147.2 gigawatts, driven in part by the energy requirements of AI infrastructure.

Northern Virginia houses the world’s largest concentration of data centers. This is what the AI revolution looks like on the ground: servers competing with households for electricity during Arctic blasts. Hence, Trump’s announcement that he wants price caps on residential electricity in the Mid-Atlantic.

 Minnesota and the Fracturing of Trust

Meanwhile, domestic tensions escalated sharply in Minnesota after Border Patrol agents shot and killed Alex Pretti, a 37-year-old ICU nurse at Minneapolis’s VA Hospital.

DHS initially claimed Pretti approached officers with a handgun. Video analyzed by The Wall Street Journal showed him assisting a pepper-sprayed woman before being tackled by agents while holding only his phone. Officers reportedly discovered and removed his concealed firearm before he was shot multiple times.

Pretti was a U.S. citizen with a legal permit to carry and no criminal record.

More than 60 Minnesota-based CEOs — including leaders from Target, Best Buy, General Mills, Mayo Clinic, and U.S. Bancorp — issued a joint statement urging de-escalation. Governor Tim Walz called on President Trump to withdraw federal law enforcement. The White House blamed local officials.

Senate Democrats are now threatening to block DHS funding unless ICE reforms are negotiated, pushing the federal government toward another partial shutdown by Friday.

Bill Ackman captured the broader problem: America now lives inside competing echo chambers, each supplied with curated facts and selective footage. Judgments arrive before investigations.

One investigative writer we know, who cut his teeth at Rolling Stone, is convinced he’s found a funding source for the organized protesters in Minneapolis. He writes:

These ICE-Out riots are organized and funded by a network created by one Neville Roy Singham (American, b. 1954), now based in Shanghai. Singham funds the Party for Socialism and Liberation, The Peoples’ Forum, Code Pink, the United Community Fund and a web of other money laundries that supply all the logistics for Lefty-left mobs going back to the George Floyd / BLM operations of 2020 and including the pro-Palestinian uproars of 2024.

Singham’s father, Archibald, was a Sri Lankan poly-sci prof at Brooklyn College, specializing in Third World revolution; his mother was a Cuban-born Marxist. Singham founded a software development company called Thoughtworks in 1993, and sold it to a London-based private equity firm, Apax, for $785-million in 2017, after which he devoted himself to the cause of “dismantling capitalism,” and destroying the USA.

If ever there was a James Bond villain come to life, it’s Neville Roy Singham.

 Tariffs, the Fed, and Monetary Politics

Trump added to the weekend’s volatility by threatening Canada with 100% tariffs over its China posture, after Prime Minister Mark Carney’s recent visit to Beijing.

Carney denied pursuing a trade agreement.

Trump rescinded his invitation to the Board of Peace anyway. Tariffs remain Trump’s preferred diplomatic punctuation. Markets have barely noticed the tiff between the US and Canadian political leaders.

 A New Name Enters the Powell Replacement Bid

The Federal Reserve meets this week. The CME’s FedWatch tool assigns a 97% probability to no rate change. After three cuts, policymakers appear inclined to pause.

Chairman Jerome Powell insists that an ongoing federal investigation into his congressional testimony is an attempt to pressure the Fed into easing further. Trump has made clear that he expects 1% rates from the next Fed chair.

Martin Small, the Chief Investment Officer of BlackRock, is now widely viewed as the leading candidate… because its CEO, Larry Fink, serving as co-chair to this year’s World Economic Forum (WEF) in Davos, apparently wasn’t enough.

Betting markets show meaningful odds that Trump bypasses all four finalists and selects a surprise “door number five.”

Two decades ago, in the first editions of both Empire of Debt and Financial Reckoning Day, we warned that central banks would eventually become overt political instruments. Seems like a quaint notion now.

 Corporate Stress Builds Quietly

U.S. large-company bankruptcies reached 749 in 2025, the highest level in 15 years.

Filings have doubled since 2022. Over the past three years, more than 2,000 companies have gone under.

“Corporate bankruptcies are rising at a recession like pace,” observes the Kobeissi Letter.

 Gold, Silver, and the Referendum on Fiat

Which brings us to the part of the story that requires less interpretation.

Gold and silver are making new highs. Gold knocked on the door of $5,100 in overnight trading in Shanghai this morning. Silver, not to be outdone, is driving resource traders wild, cracking $116 up 15% today alone.

A year ago, one bitcoin bought roughly 40 ounces of gold. Today it buys 18.

Bitcoin was marketed as digital gold. Instead, Wall Street wrapped it in ETFs, margin accounts, and structured products.

(Source: Tavi Costa on X)

Then, as we detailed in the December issue of our Grey Swan Monthly Bulletin,  over 216 hours ending on December 2, 2025, the big players on Wall Street – BlackRock, Vanguard, Bank of America – executed a well-timed effort to “capture” bitcoin and add a small fee on every transaction. JPMorgan followed up a few days later with a copycat attempt.

The divergence prompted this viral meme on X:

All the while, gold stayed physical. Gold stayed boring. Gold stayed outside the system. Gold went up in price.

And yet, it’s historically still very cheap.

The Dow-to-gold ratio has now returned to levels seen only four times in history: 1929, 1973, 2008 — and today. Each marked a fundamental shift in the global financial architecture.

Gold relative to a balanced 50/50 stock-bond portfolio just reached its highest level in 12 years — yet remains 29% below its 2012 peak and 87% below the 1980 inflation-crisis high.

Back then, gold rose 133% in a single year.

To match that episode, gold would need to rise another 600%, assuming stocks and bonds remain flat.

Reserve currencies rarely collapse in dramatic fashion. They erode through portfolio decisions, reserve reallocations, and quiet confidence shifts. That process is underway now.

Gold and silver are responding to leverage, demographics, politicized central banking, fragile energy grids, sovereign debt loads, and a global system that increasingly struggles to reconcile promises with math.

Their message is simple: trust is migrating.

Thus far, the monetary metals are giving us the most important market signal of 2026.

~ Addison

P.S. Grey Swan Live! continues this week with Ronan McMahon.

Ronan’s going to treat us to real estate deals he’s got cooking in Mexico, Panama and Paraguay… it’s going to be a welcome tropical topic after this week’s bout with winter weather in North America.

Ronan’s also been scouting property in Venezuela – yes, Venezuela – following Trump’s abrupt capture of Nicolas Maduro to kick off the new year.

We haven’t spoken to him yet about this property, but we’ve heard he found beachfront condos for $15,000. Not everyone’s cup of tea, for sure. But if you’re into crisis investing… well, we’ll find out what deals Ronan has found.

If you have requests for new guests you’d like to see join us for Grey Swan Live!, or have any questions for our guests, send them here.