Dan Denning: The Hollow Class, Part I

“To preserve their independence, we must not let our rules load us with perpetual debt. We must make our election between economy and liberty, or profusion and servitude.”

– Thomas Jefferson

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America’s middle class has declined with the loss of manufacturing jobs and a sound dollar.

November 11, 2025 — Nearly 75% of US households cannot afford a median priced home in America, according to the National Association of Home Builders (NAHB).

That’s with a median house price of around $460,000 and a 30-year fixed mortgage at between 6% and 6.5%. Almost a third of renters spend about 30% of their income on rent (Redfin reports that it’s closer to 40% for home owners with a mortgage on a median priced home).

Housing has never been more expense or unaffordable in America. You can thank the intervention of the Federal government (especially the Federal Reserve) for that.

Since I published my most recent weekly research note, we learned the Trump administration is advocating the introduction of 50-year mortgages in the US. Federal Housing Finance Agency Director Bill Pulte made the announcement on Saturday. Trump posted something on social media comparing himself to FDR, who introduced the 30-year mortgage.

A 50-year mortgage doesn’t make housing cheaper. But by stretching the repayment period over time, it DOES lower the monthly payment on your principal. That lowers the percentage of your total income you’re spending on repayment. And in a strange way, it makes sense.

With a fixed rate mortgage and inflation running in the high upper digits, the real value you of your total debt goes down over time (inflation pays off your loan, as long as your income rises faster in nominal terms). Of course you pay off a lot more interest over 50 years than 30 years. And it takes a lot longer to build up equity (assuming also that house prices don’t fall).

But the point is…the government now knows to keep the housing market functioning and prevent a mean reversion in house prices, more intervention is required. By the way, Pulte also said Fannie Mae and Freddie Mac are thinking of investing in tech firms. Why?

Asset prices of any sort—stocks and houses—must not be allowed to crash. Especially before next year’s mid-term elections. The economic and social consequences of a crash are too dire to imagine. What happens next and what should you do?

Quite a bit to think about. The hollowing out of the American middle class has been thorough.

Dan Denning
Bonner Private Research & Grey Swan Investment Fraternity

P.S. from Addison: A small personal note re: Mr. Denning. Dan and I met in the mid-90s while we were both studying philosophy in graduate school at St. John’s College in Santa Fe, New Mexico.

The anecdotes vary depending on whom you talk to and what hour of the evening it is… but, what I remember is having a proper dust up in one of our seminar classes while reading Nietzsche’s Thus Spoke Zarathustra.

We’ll have the second part of the Hollow Class tomorrow with a follow-up from Bonner Private Partners guest analyst Joe Winthrow. Stay tuned.

A 50-year mortgage may not sound so bad. After all, it will allow homeowners to pay a lower total amount each month, and could thaw out a frozen housing market.

But, much like the increasing length of car leases, it underscores a harsh reality – that we live in an economy where everything needs to be financed for longer and longer periods of time.

America’s middle class used to be about owning their own car and throwing a party to burn the mortgage paperwork when it was paid off. Many Americans still do. But an increasing number are sliding below middle class while their expenses to keep up with that lifestyle soar.

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

“To preserve their independence, we must not let our rules load us with perpetual debt. We must make our election between economy and liberty, or profusion and servitude.”

– Thomas Jefferson

Turn Your Images On

America’s middle class has declined with the loss of manufacturing jobs and a sound dollar.

November 11, 2025 — Nearly 75% of US households cannot afford a median priced home in America, according to the National Association of Home Builders (NAHB).

Housing has never been more expense or unaffordable in America. You can thank the intervention of the Federal government (especially the Federal Reserve) for that.

Quite a bit to think about. The hollowing out of the American middle class has been thorough.

Dan Denning
Bonner Private Research & Grey Swan Investment Fraternity

P.S. from Addison: A small personal note re: Mr. Denning. Dan and I met in the mid-90s while we were both studying philosophy in graduate school at St. John’s College in Santa Fe, New Mexico.

We’ll have the second part of the Hollow Class tomorrow with a follow-up from Bonner Private Partners guest analyst Joe Winthrow. Stay tuned.

A 50-year mortgage may not sound so bad. After all, it will allow homeowners to pay a lower total amount each month, and could thaw out a frozen housing market.

But, much like the increasing length of car leases, it underscores a harsh reality – that we live in an economy where everything needs to be financed for longer and longer periods of time.

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

Back in April, when we published what we called the Trump Great Reset Strategy, we described the grand realignment we believed President Trump and his acolytes were embarking on in three phases.

At the time, it read like a conceptual map. As the months passed, it began to feel like a set of operating instructions written in advance of turbulence.

As you can expect, any grandiose plan would get all kinds of blowback… but this year exhibited all manner of Trump Derangement Syndrome on top of the difficulty of steering a sclerotic empire clear of the rocky shores.

The “phases” were never about optimism or pessimism. They were about sequencing — how stress surfaces, how systems adapt, and what must hold before confidence can regenerate. And in the end, what do we do with our money?!

Relative to GDP, the net international investment claim on the U.S. economy was 20% in 2003. It had swollen to 65% by 2023. Practically every type of American company, bond, or real estate asset now has some degree of foreign ownership.

But it’s even worse than that. As the federal deficit has pumped up the GDP figures, and made a larger share of the economy dependent on government spending, the quality and sustainability of GDP have deteriorated. So, foreigners, to the extent they are paying attention, are accumulating claims on an economy that has been eroded by inefficient, government-directed spending and “investments.” Why should foreign creditors maintain confidence in the integrity of these paper claims? Only to the extent that their economies are even worse off. And in the case of China, that’s probably true.

As global government interest expense climbed, gold quietly followed it higher. The IIF estimates that interest costs on government debt now run at nearly $4.9 trillion annually. Over the same span, gold prices have tracked that burden almost one-for-one.

Silver has recently gone along for the ride, with even more enthusiasm.

Since early 2023, Japan’s 10-year government bond yield has risen roughly 150 basis points, touching levels not seen since the 1990s.

Over that same period, gold prices have surged about 135%, while silver is up roughly 175%. Zoom out two years, and the divergence becomes starker still: gold up 114%, silver up 178%, while the S&P 500 gained 44%.

According to the American Association of Individual Investors, the average retail investor has about a 70% allocation to stocks. That’s well over the traditional 60/40 split between stocks and bonds. Even a 60/40 allocation ignores real estate, gold, collectibles, and private assets.

A pullback in the 10% range – which is likely in any given year – will prompt investors to scream as if it’s the end of the world.

Our “panic now, avoid the rush” strategy is simple.

Take tech profits off the table, raise some cash, and focus on industry-leading companies that pay dividends. Roll those dividends up and use compounding to your overall portfolio’s advantage.