Preparing for today’s Grey Swan Live! has been a bit of a juggling act.
We’ve got bubbles on the brain — and after bingeing the third season of The Diplomat on Netflix, we’re seeing intrigue and interdependence everywhere.
As Alan Greenspan confessed not long after his “irrational exuberance” quip in 1996, spotting a bubble in real time is almost impossible. (The dot-com blow-up wouldn’t come for another four years.)
Now, add Trump’s grand realignment strategy to the mix, and the picture gets even murkier. Innovation, debt, and geopolitics have fused into one system. The same forces propelling today’s market euphoria — AI, tariffs, and dollar dominance — are also amplifying its fragility.
Every fix creates a new dependency.
Markets Jitter as Trade War Heats Up
With spooky season in full swing, investors gave themselves a fright yesterday.
The specter of a deeper trade war returned when President Trump floated new restrictions on software exports to China.
Stocks shuddered. Gold and crypto, exhausted from their speculative sprints, have each fallen. Gold’s off by 5% over the past two days. Bitcoin has given its historic gains earlier in the month and sits at $110K today.
Oil prices surged yesterday after the White House slapped sanctions on Russia’s biggest oil producers and pressured India and China to turn away from Russian crude.
The markets tell an interesting story.
In a single day, you can trace the world’s interdependence in motion: software bans, sanctions, tariffs, and a ripple through every market from Toronto to Taipei.
The illusion of decoupling never lasts long. Every attempt to isolate risk seems to create a new one.
Canada’s Countermove
While Washington tightens trade, Ottawa wants to loosen it. Canadian Prime Minister Mark Carney took to national television last night to unveil a plan to double exports to markets outside the U.S. within a decade.
It’s a hedge against overreliance on an increasingly erratic neighbor — and a subtle play to lure global talent disillusioned by American policy whiplash.
This is the quiet choreography of interdependence: each country dancing to its own tune, pretending not to hear the same band.
Corporate Earnings Mask the Cracks
Behind the daily headlines, the U.S. economy is still chugging.
Roughly 13% of S&P 500 companies have reported third-quarter results, and over 85% have beaten Wall Street’s estimates — the best ratio in four years. Coca-Cola, General Motors, JPMorgan, Halliburton, Danaher — they’re all reporting strong numbers, buoyed by steady demand and tariff-adjusted pricing.
Let’s take heed. When earnings surge while productivity is flatlining, it’s usually the last leg of a credit-fueled expansion.
Debt: The Silent Engine
On Tuesday, the national debt crossed $38 trillion, and the Treasury is borrowing roughly $1 trillion every five months. Congress responded with the “One Big Beautiful Bill Act,” promising to add $4.1 trillion more in deficits over the next decade.
Moody’s, Fitch, and S&P have all downgraded U.S. credit over the past decade, citing the inability to contain spending.
The United States’ Aa1 rating from Moody’s is so far down this Peterson Foundation list… we couldn’t fit it all into one screengrab, yikes (Source: Peter G. Peterson Foundation.)
The dollar’s reserve status keeps the party going. Without it, we’d be paying the same rates as Italy. The privilege of issuing the world’s money comes with the illusion that we can print away our problems indefinitely.
That illusion is what Ray Dalio calls the “late phase” of a long-term debt cycle: high polarization, rising debt, and a government that must choose between inflation and contraction. Innovation — especially AI — is the political cover for that choice.
When growth slows and real productivity lags, governments turn to technology and tariffs as twin narratives of control. Reference: our ongoing investigation of Dollar 2.0.
The Dollar and the Dominoes
Even as the U.S. wrestles with debt and credit downgrades, the dollar’s reserve status keeps global capital tethered to its orbit. The Fed’s recent “payments innovation” initiative — opening dialogue with the DeFi sector — signals how policymakers hope to future-proof that privilege.
By embracing blockchain-based settlement, the U.S. effectively brings private-sector ingenuity under its own monetary umbrella. Innovation isn’t just a hedge against China; it’s an insurance policy for the dollar itself
Argentina’s Cautionary Tale
At the other end of the world, Argentina is relearning old lessons about dependence. President Javier Milei’s fiscal revolution — slashing public spending, ending rent controls, and restoring budget surpluses — has worked in headlines, but not yet in wallets.
The peso’s managed float is draining reserves, and the IMF lifeline buys time, not solvency. Economists say he should let the currency float freely; faith in control is a costly delusion.
In Argentina, as in Washington, confidence is the last currency standing.
An AI Mirage
The AI boom is fast becoming a perfect case study in the interdependence trap. Meta just laid off 600 people in its AI division, even as it poured billions into new projects. OpenAI unveiled “ChatGPT Atlas,” its own web browser, sending Google executives scrambling.
At the same time, investors now value OpenAI at $500 billion — roughly equal to Netflix and three and a half times Spotify’s market cap. The company’s revenue, at best, will hit $13 billion this year.
That’s a price-to-sales ratio north of 38x.
When Netflix or Spotify was growing at this stage, it had hundreds of millions of subscribers, while OpenAI had barely 20 million subscribers.
The market is pricing in a future where everyone on earth becomes a paying user of artificial intelligence — and where the electricity to power it magically remains affordable.
It’s the Dunning-Kruger Effect at macro scale: a market so convinced of its own genius it can’t see the limits of what it doesn’t know.
Elon, Earnings, and Euphoria
Tesla’s latest results deepened the irony.
Record sales, plunging profits, and an Elon Musk begging investors to approve his $1 trillion compensation package while lashing out at those who hesitate.
It’s true. In every bubble, there’s a point when people stop asking, “What’s this worth?” and start saying, “Why not?”
The Bubble’s Field Guide
We’ve been teasing Anatomy of a Stock Market Bubble all week. We’re going to release the full report tomorrow during the quarterly review of our asset allocation and model portfolio. (If you haven’t paid your annual dues, but would like to join the zoom tomorrow, please click here.)
For today’s Dive, we can connect a few dots. A classic run-up needs three ingredients:
- A compelling growth story (AI, energy transition, de-risked supply chains)
- Abundant capital (buybacks, private credit, sovereign money, corporate cash, lower interest rates from the Fed)
- A policy backdrop that stays stimulative even when it says “discipline” (tariffs, subsidies, more rate-cut pressure.)
Add a spike in geopolitical risk – Russia sanctions, China export curbs – and you get volatility around a still-rising trend — until the hinge point: funding fragility.
At some point, when the Mag 7’s circular AI capex cash flows begin to lag, debt will become expensive, and momentum will quickly turn to air pockets. We’re not predicting the day — we’re applying historical analysis to recognize the pattern before it breaks.
See you in a bit,
~Addison
Grey Swan Live! — Today & Tomorrow
Today, Thursday, Oct. 23 @ 2 p.m. ET: Anatomy of a Stock Market Bubble. We’ll break down the historical markers — retail buy-in, record margin debt, capital concentration — and connect them to modern distortions in AI, private credit, and policy.
Tomorrow, Friday, Oct. 24 @ 2 p.m. ET (for annual members): our Asset Allocation & Model Portfolio Review, including the Plunge Protection Plan — what to do before the exits get crowded.
If you have any questions for us about the market, send them our way now to: Feedback@GreySwanFraternity.
