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.

Real assets in general tend to hold their value during inflationary periods — because they’re not just paper promises. They’re tangible. They’re productive. They’re the raw inputs the economy is actually built on.

One of the most obvious opportunities right now — possibly the most mispriced sector in the entire market — is energy.

The world does not exist without energy. Full stop. People have been fed a ridiculous lie that oil is going to disappear and we’re all going to drive solar-powered EVs and Exxon is going to go out of business.

In the U.S., stablecoin rules remain tangled between crypto exchanges eager for new customers and small banks afraid of losing deposits.

China’s Ant Group is filing trademarks for “Antcoin” while the Party debates whether digital dollars threaten national sovereignty. And in Singapore, StraitsX cofounder Samson Leo frets about regulatory fragmentation: “If every jurisdiction requires us to split reserves across their banking systems, customer protection will diminish.”

Stablecoins today are where email was when businesses still faxed each other printouts of their inbox goes an apt analogy suggested by Bloomberg’s Andy Mukherjee.

The rails are there — the habits aren’t. But the shift is coming. And when it does, it won’t just change how we pay — it’ll change who gets paid.

Anticipating a sluggish labor market, the Fed has cut rates twice this fall.

Unfortunately, you can’t fix a reorganization with cheaper money. AI will eat the easy tasks first, so the pain you see — pink slips — is only half the story. Those jobs will likely never return.

If you’re from New York—or know anyone there—you’ll probably agree: most New Yorkers are fed up with crime, the outrageous cost of living, government incompetence and corruption—and, yes, the rats.

But the fact that a hard-core socialist like Mamdani is their favorite pick to solve those problems tells you that most voters have no idea why any of it is happening.

Their hatred of Donald Trump—and a steady diet of MSNBC—has made them blind to the obvious: it’s the Left’s policies creating these problems. You have rent control shrinking supply by forcing landlords to pull units from the market, union giveaways jacking up the cost of transportation, zero-bail laws putting criminals back on the streets, and so on and so forth.

One of the most obvious opportunities right now — possibly the most mispriced sector in the entire market — is energy.

In the U.S., stablecoin rules remain tangled between crypto exchanges eager for new customers and small banks afraid of losing deposits.

Stablecoins today are where email was when businesses still faxed each other printouts of their inbox goes an apt analogy suggested by Bloomberg’s Andy Mukherjee.

The rails are there — the habits aren’t. But the shift is coming. And when it does, it won’t just change how we pay — it’ll change who gets paid.

Anticipating a sluggish labor market, the Fed has cut rates twice this fall.

But the fact that a hard-core socialist like Mamdani is their favorite pick to solve those problems tells you that most voters have no idea why any of it is happening.