U.S. stocks ended last week lower, with tech dragging the whole market despite a small Friday bounce. Gold and silver, meanwhile, gleamed brighter.
Tomorrow ends the government’s fiscal year — and likely begins a shutdown. That is, if 80% of the folks betting on Polymarket are correct.
Two stopgap plans are on the table. Neither appeals to the other side.
“Republicans are proposing to extend current funding through Nov. 21 to buy more time for bipartisan negotiations,” The Washington Post reports. Democrats countered with an Oct. 31 extension that comes with their policy riders—proving they don’t understand the idea of a stopgap.
For Trump, a shutdown isn’t a political failure. It’s a tool. The administration has already told agencies to use the moment to send Reduction in Force notices — permanent layoffs instead of the usual furloughs.
Smaller government has been a rhetorical goal; now the moment arrives to make it flesh.
Russell Vought, budget director and Trump loyalist, frames it bluntly: “The bureaucracy… is a cartel working behind closed doors.” He keeps a portrait of Coolidge in his office as inspiration, waiting for this fight.
“Presidents have the ability to spend less if they think it’s important,” he told a conference this month. From Washington’s day until Nixon’s, that was accepted. Then the Impoundment Control Act turned ceilings into floors.
For investors, the drama isn’t abstract. Shutdowns cut consumer spending, gum up loans, and might cause a flight delay or two (ahem).
The Quarter in Review
As we close out the third quarter, we recognize familiar themes: Trump pressing the Fed, tariffs pressing the economy, and retail traders pressing higher than we skeptics of the AI rally expected.
This quarter, you’ll recall that big tech has swelled even larger — Nvidia and Microsoft above $4 trillion, Alphabet crossing $3 trillion.
And now, as Adam O’Dell outlined in Grey Swan Live!, small caps are set to benefit from the Fed’s first rate cut and a new wave of money coming out of money market funds.
The Fed’s cut adds to a flood of new cash globally, too, colloquially known as M2:
Global broad money hit $140 trillion in July, with China at $46 trillion — twice the U.S. (Source: Econvisuals)
The American M2 supply reached a record $22.2 trillion. Much of it is bank lending, debt dressed as liquidity. It explains why gold surged $100 as Powell whispered there’s no “risk-free path.”
“Gold is a refuge from political instability, economic uncertainty, inflation, deflation, and currency depreciation,” Steve Forbes reminded readers. The metal closed near records last week while Powell stressed data dependence. Relief in equities was brief, like a squall passing. The barometer still says unsettled.
Tether’s $500 Billion Waltz
Stablecoins, too, are playing a new tune. Tether’s rumored $500 billion valuation would rank it alongside OpenAI and SpaceX.
For context: Tether sits on $173 billion in cash. Circle, its next rival, has $74 billion, yet is valued at $30 billion.
The alchemy lies in Treasuries.
Tether earns interest on taxpayer-backed bonds; those flows, channeled through an Italian ex-plastic surgeon named Giancarlo Devasini, build a fortune north of $200 billion.
As Bloomberg’s Matt Levine quipped, stablecoins are winner-take-all. The U.S. government, ironically, props up the wealth of a man who doesn’t pay U.S. taxes.
Saquon’s Second Game
On the field, Saquon Barkley racks up rushing yards. Off it, he’s been quietly building one of the sharpest portfolios in pro sports.
He invested his $31.5 million rookie contract in the S&P 500, living off endorsements. The index is up 144% since.
In 2021, he took endorsements in Bitcoin at $32,000. Today it’s over $113,000. He’s since seeded Anthropic, Neuralink, Anduril, Polymarket. Forget Buffett — maybe the best investor wears an Eagles jersey.
Designing the AI Market
Paul Milgrom, Nobel laureate and Emmy-winner, is turning his firm Auctionomics toward compute — the raw processing power behind AI.
Until now, compute was sold one bespoke contract at a time. Milgrom envisions futures markets in compute, just as oil futures unlocked capital in the 1980s.
AI itself makes it possible, with natural-language “expressive bidding” turning goals into auction-ready orders.
Will it flood the market with supply, or send prices higher by accelerating demand? We’ll soon find out. Once launched, compute futures will become the hidden plumbing of the AI boom.
AI Debt Piling Up
Like dotcoms of old, the AI boom is encouraging new tech to gorge on debt.
Corporate bond sales surged to records in September: $190 billion in investment-grade, $43 billion in junk. Oracle led with a $26 billion issue, its debt-to-equity soaring above 500%.
Tech firms overall have raised $157 billion year-to-date, up 70% from last year. Investors hungry for yield are funding it all.
How much leverage is too much? That’s a question investors seem to feel comfortable asking every 10 years or so. History shows manias often look strongest just before they stumble.
Civil War 2.0
This quarter put political violence squarely on the ticket for next year’s midterm campaign season, too.
James Howard Kunstler warns: “When Charlie Kirk was murdered in 2025, Civil War 2.0 kicked off.” Unlike 1861, there’s no command, no goal, only “an army of nihilists.”
Antifa, he writes, are “crazed young women too untamed to find a mate… young men, hormones afire, escaping into fetish and psychotic obsessions.”
The language is harsh, even grotesque, but his point is plain: unrest isn’t ideological, it’s personal disintegration spilling into politics.
For markets, civil disorder is the shadow that doesn’t show on the balance sheet — until it’s too late.
The Tylenol Parallel
On this day in 1982, seven Chicagoans died after taking cyanide-laced Tylenol. The panic changed medicine forever, ushering in tamper-proof packaging.
Now Tylenol is back in the headlines. The Trump administration has linked acetaminophen to autism, urging pregnant women to avoid it — a claim denounced by scientists, the WHO, and Tylenol’s maker, Kenvue. Still, the FDA is preparing to add warnings.
Kenvue thought litigation had ended after last year’s court dismissals. Traders on Kalshi see only a 20% chance of lawsuits this year.
Yet, like 1982, perception matters. Packaging may reassure — but suspicion lingers.
In the early 80s, the same might have been said of gold’s rally as a warning to the financial system… and so it is again today.
Addison Wiggin,
Grey Swan
P.S.: Last Thursday’s Grey Swan Live! covered the whole gamut in commodities. Portfolio Director Andrew Packer and Grey Swan Contributor Shad Marquitz reviewed:
The most fascinating commodity we’re tracking right now, you’ll be surprised to learn what and why.
The safest gold play as the metal continues higher – and why silver’s big move hasn’t even happened yet.
A one-off opportunity to buy into “Dr. Copper,” even if it’s diagnosing poor health for the real economy.
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