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Ripple Effect

Strain Hits the Credit Markets

Loading ...Addison Wiggin

November 17, 2025 • 1 minute, 28 second read

credit default swaps
Strain Hits the Credit Markets

A few months back, shares of Oracle popped nearly 40% on news of a deal to expand its AI operations.

Shares have now round-tripped back down to that level, as many – including us – have looked at the rising level of circular financing deals in the AI space.

We’re not alone. The credit market is balking at some of the AI spend going on today:

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Credit default swaps on Oracle debt have more than doubled in the past month, and are higher than during the end of the 2022 bear market. (Source: Zerohedge via X)

Credit default swaps (CDS) are a tool that measures the cost to insure against a company’s debt.

A soaring CDS suggests that investors are demanding a higher return. The implication? That debt isn’t as safe as it may appear.

It’s also a sign that the liquidity crisis and dangers in the private credit market are starting to show up in the mega-cap companies that are raising debt to invest in AI and data centers. And if that starts a slowdown, it could mean that the stock market hits the brakes.

~ Addison

P.S. This echoes sentiment from last week’s call on Grey Swan Live! with Andrew Zatlin — the #1-ranked economic forecaster on Bloomberg.

Zatlin sees a pullback in stocks now, with a rip in 2026 ahead of the midterms. While the government closure is over, the real challenge now is in economic data – or the lack thereof. That’s increasing the chances of a Fed pause in lowering interest rates in December, which in turn is sending asset prices lower.

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.

Gideon Ashwood: The Bondquake in Tokyo: Why Japan’s Shock Is Just the Beginning

December 5, 2025 • Addison Wiggin

For 30 years, Japan was the land where interest rates went to die.

The Bank of Japan used yield-curve control to keep long-term rates sedated. Traders joked that shorting Japanese bonds was the “widow-maker trade.”

Not anymore.

On November 20, 2025, everything changed. Quietly, but decisively.

The Bank of Japan finally pulled the plug on decades of easy money. Negative rates were removed. Yield-curve control was abandoned. The policy rate was lifted to a 17-year high.

Suddenly, global markets had to reprice something they had ignored for years.

What happens when the world’s largest creditor nation stops exporting cheap capital and starts pulling it back home?

The answer came fast. Bond yields in Europe and the United States began climbing. The Japanese yen strengthened sharply. Wall Street faltered.

Gideon Ashwood: The Bondquake in Tokyo: Why Japan’s Shock Is Just the Beginning
Minsky, the Fed, and the Fragile Good Cheer

December 5, 2025 • Addison Wiggin

The rate cut narrative is calcifying into gospel: the Fed must cut to save the consumer.

Bankrate reports that 59% of Americans cannot cover a $1,000 emergency without debt or selling something. And yet stocks are roaring, liquidity junkies are celebrating, and the top 10% now account for half of all consumer spending.

Here’s the plot twist: before 2020, consumer confidence faithfully tracked equity markets. After 2020, that relationship broke. As one analyst put it, “The poor don’t hate stocks going up. They just don’t feel it anymore.”

So when the Fed cuts rates in one of the hottest stock markets in history, who exactly benefits? Not the 59%. Not the middle. Certainly not anyone renting and watching shelter inflation devour their paycheck.

Minsky, the Fed, and the Fragile Good Cheer
The Unsinkable S&P

December 5, 2025 • Addison Wiggin

Only the late-stage dot-com fever dreams did better in recent memory — back when analysts were valuing companies by the number of mammals breathing inside the office.

For the moment, stocks appear unsinkable, unslappable, and perhaps uninsurable. But this is what generational technology shifts do: they take a kernel of genuine innovation and inflate a decade of growth into a 36-month highlight reel. We’ve seen this movie. It premiered in 1999 and closed with adults crying into their PalmPilots.

And just as the internet continued reshaping the world long after Pets.com curled up and died, AI will keep marching on whether or not today’s multiples survive a stiff breeze. The technology is real. The valuations, however, will eventually need to stop hyperventilating and sit down with a glass of water.

The Unsinkable S&P
Dan Denning: So Much Depends on a Green Wheelbarrow

December 4, 2025 • Addison Wiggin

Wheelbarrows are not chickens. A chicken is a biological production unit. A wheelbarrow is a capital good. A wheelbarrow doesn’t produce work. But it CAN be a productivity multiplier.

And that’s how we have to think of all those GPUs the hyperscalers are spending money on. If their thesis is right, trillion in AI and data center spending now, will translate into a massive burst in productivity and new technologies in the next two decades. That is the only justification for the current valuations/multiples at which these stocks trade now.

The American poet William Carlos Williams wrote, “So much depends, upon a red wheelbarrow, glazed with rainwater, beside the white chickens.”

Today the wheelbarrow is Nvidia Green. And so much of the stock market depends on that wheelbarrow being a big enough productivity multiplier to offset $340 trillion in debt.

Dan Denning: So Much Depends on a Green Wheelbarrow