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:

Turn Your Images On

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.

Turn Your Images On

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.

The stock market “rebalancing” is a polite way to put it. Energy and health care are getting a healthy boost. But tech hardware and software makers are still getting dressed down and have been asked to report to the principal’s office.

The great rotation underway has triggered a series of “Hindenburg Omens.” Five have occurred in recent weeks.

The S&P 500 has traded in a 3.7% range over the past two months — less than half the 20-year median of 8.6%. One of the tightest ranges in modern history.

In trader parlance, the indexes are “flat,” a setup that often materializes before a sell-off at the top after a multi-year bull market.

Goldman Sachs told its own traders to be aware that institutional trading activity resembles a VIX reading near 35. Rather than a reading of 20, where the VIX has been trading over that same 2-month period.

The U.S. software ETF, IGV, tested its April 2025 lows last week and trades roughly 35% below its peak. The “SaaS-pocalypse” in software companies reflects the fear of Citrini’s 2028 scenario happening in real time. That divergence now exceeds the spread seen at the peak of the Great Financial Crisis.

Under the surface, the “great rotation” we wrote about last week is threatening to widen.

Despite its overly-educated 40-million-plus population, on a GDP per capita basis Canada is null. Collectively, the Great White North would rank as America’s second-lowest state, coming in above Mississippi, but below Alabama.

SpaceX is the most valuable private startup in history — and if its success continues, it might become the most valuable public company in history.

After all, as Musk famously said in 2023, “I have never lost money for those who invest in me and I am not starting now.”

For investors, SpaceX has been a wild, joyful ride — and now the journey continues!

The great rotation underway has triggered a series of “Hindenburg Omens.” Five have occurred in recent weeks.

The S&P 500 has traded in a 3.7% range over the past two months — less than half the 20-year median of 8.6%. One of the tightest ranges in modern history.

In trader parlance, the indexes are “flat,” a setup that often materializes before a sell-off at the top after a multi-year bull market.

Under the surface, the “great rotation” we wrote about last week is threatening to widen.

SpaceX is the most valuable private startup in history — and if its success continues, it might become the most valuable public company in history.

After all, as Musk famously said in 2023, “I have never lost money for those who invest in me and I am not starting now.”

For investors, SpaceX has been a wild, joyful ride — and now the journey continues!