Leveraged to the Hilt

Investors, so accustomed to buying any tiny market selloff, have run out of ready capital.

A constraint? Not at all. One can borrow and buy stocks on margin.

It’s a feature of late-stage bull markets, as we described in yesterday’s Grey Swan Live! : Anatomy of A Stock Market Bubble.

While margin requirements are tighter now than they were a hundred years ago in the roaring ‘20s (when a trader could leverage 2X their capital) today’s margin levels are approaching the peak of the dotcom era:

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Only during the dotcom peak have traders been more leveraged in the last 30 years. (Source: Cypress Capital)

Leverage is a two-way street. Investors get a tailwind on the way up. But small drops become a considerable problem – leading to “margin calls” when an investor is forced to settle the debt for a loss.

Forced sales are a downside feature of stock market bubbles. The forced sale of stocks and hard assets like gold push prices lower even if the participants don’t want to sell.

Even the market’s post-Liberation Day selloff – which briefly took markets to bear market territory – wasn’t as leveraged as stocks are now, a mere six months later.

For now, the trend is up. But beware, markets don’t move in a straight line in any direction.

~ Addison

P.S. If you missed part one of our Anatomy of a Stock Market Bubble Grey Swan Live!, the replay will be up on site later this morning. We reviewed several charts and indicators, including this one on margin debt.

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If you’re a paid-up annual member of the Grey Swan Investment Fraternity, join us today for part II of this week’s two-fer: a quarterly review of our asset allocation strategy and our model portfolio, including a 3-part AI Bubble Plunge Protection Strategy.

We’ll be going live at 2pm EST/11am PST. Stay tuned!

There’s still time to attend if you’re not an annual subscriber. Click here for details.

If you have any questions for us about the market, send them our way now to: feedback@greyswanfraternity.com.

Investors, so accustomed to buying any tiny market selloff, have run out of ready capital.

A constraint? Not at all. One can borrow and buy stocks on margin.

It’s a feature of late-stage bull markets, as we described in yesterday’s Grey Swan Live! : Anatomy of A Stock Market Bubble.

Turn Your Images On

Only during the dotcom peak have traders been more leveraged in the last 30 years. (Source: Cypress Capital)

Forced sales are a downside feature of stock market bubbles. The forced sale of stocks and hard assets like gold push prices lower even if the participants don’t want to sell.

Even the market’s post-Liberation Day selloff – which briefly took markets to bear market territory – wasn’t as leveraged as stocks are now, a mere six months later.

For now, the trend is up. But beware, markets don’t move in a straight line in any direction.

~ Addison

Turn Your Images On

We’ll be going live at 2pm EST/11am PST. Stay tuned!

There’s still time to attend if you’re not an annual subscriber. Click here for details.

If you have any questions for us about the market, send them our way now to: feedback@greyswanfraternity.com.

We believe the emergence of a USD stablecoin carries the potential to be a transformative event in monetary history, one as consequential as the day the United States severed its link to gold and as powerful in shaping the world’s financial order as the moment it abandoned Bretton Woods.

This paper does not offer reassurance of the status quo. It confronts a reality that few seem to have yet recognized and even fewer truly understand. It describes the quiet emergence of a tool whose strategic potential remains largely unseen, even as it begins to reshape the foundations of global finance.

After its blistering rally, gold shocked newcomers with a 6% two-day plunge this week, the steepest drop in twelve years. CNBC dubbed it “gold’s Halloween scare.”

In a welcome twist, J.P. Morgan called the decline “a much-needed breather,” predicting that prices will “reset for the next leg higher.” Goldman Sachs kept its $4,900 year-end target, saying “sticky, structural buying” from central banks remains intact.

“Gold isn’t falling,” Reuters happily agreed, “It’s catching its breath.”

When the government has to spend the bulk of its tax revenue just to service the debt, it means there’s substantially less money for everything else, from military spending to border patrol.

Now, the White House hopes to be able to reduce its annual interest bill by slashing interest rates.

Think about it— even with a $38 trillion national debt, if the average interest rate is just 0.5%, the annual interest bill (at < $200 billion) is extremely manageable.

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.

After its blistering rally, gold shocked newcomers with a 6% two-day plunge this week, the steepest drop in twelve years. CNBC dubbed it “gold’s Halloween scare.”

“Gold isn’t falling,” Reuters happily agreed, “It’s catching its breath.”

When the government has to spend the bulk of its tax revenue just to service the debt, it means there’s substantially less money for everything else, from military spending to border patrol.

Now, the White House hopes to be able to reduce its annual interest bill by slashing interest rates.

Think about it— even with a $38 trillion national debt, if the average interest rate is just 0.5%, the annual interest bill (at < $200 billion) is extremely manageable.