After yesterday’s meeting between Presidents Trump and Xi, the world’s two largest economies agreed to reduce the 20% fentanyl-related tariffs to 10%, while Beijing paused its rare earth export restrictions.
The markets would normally have cheered such détente. But investors were still haunted by Jerome Powell’s warning that the Fed may not cut rates again in December. And a renewed awareness that the AI bubble may, in fact, be in the “melt-up” phase… driven by expansive capital expenditures, financed by debt.
The result? A Halloween mood on Wall Street—uneasy calm, with a tremor.
That was enough to snap investors out of their sugar rush. With government data still delayed by the shutdown, the Fed is “flying blind” into December.
Sort of…
There are more reliable private sources of data than the recent oft-revised data spewing from the Bureau of Labor Statistics (BLS)
Meta’s Monster Budget
The bond market just reminded Meta, yesterday: the AI race isn’t free.
Mark Zuckerberg didn’t need a Halloween costume this week—his balance sheet did the trick. Meta’s Q3 earnings call delivered a jump scare for investors: earnings per share plunged to $1.05 from an expected $6.72 after a one-time tax hit, but the real fright came from the fine print.
AI capital spending ballooned to $70–$72 billion for 2025—roughly 37% of projected revenue.
The stock promptly fell 11%. The next morning, Meta tapped the debt markets for a $30 billion bond sale—the largest in the company’s history.
On Paper, Meta’s Not Alone
Microsoft and Alphabet are spending heavily on AI, too—but both are already earning back those costs through cloud computing. Meta’s payoff, meanwhile, hinges on algorithms that can make ads sharper and scrolls stickier. Visionary? Maybe. Cash-flow positive? Not yet.
Credit traders noticed.
The spread on Meta’s new 2054 bonds widened immediately after the issue, even as the stock rebounded. It was a quiet verdict from the people who don’t buy dreams—they lend to machines. The message was simple: slow down.
When bond spreads widen, it’s not panic—it’s caution priced in. Debt investors saw the scale of Meta’s borrowing, the decade-long horizon of its AI bets, and the uncertainty around payoff timelines. They wanted more yield for the risk.
This isn’t just a Meta story—it’s the broader AI arms race in miniature.
Big Tech is leveraging up to secure chips, energy, and compute before monetization catches up. The risk isn’t insolvency; it’s overextension in a high-cost world where hype front-runs revenue.
The bond market’s whisper is worth hearing: the era of “growth at any cost” has ended. From here on, the winners in AI won’t just be those who innovate fastest—they’ll be the ones who can finance it without drowning in their own ambition.
The AI Bubble Question
At Nvidia’s GTC summit in Washington, every badge and banner proclaimed the same gospel: AI will change everything. Ask a PR rep and you’ll hear about the dawn of a new industrial era. Ask the engineers, and you get something closer to ambivalence.
“Machine learning has been here for years,” said one. “But we’re in an AGI bubble, because we haven’t defined what AGI actually is.”
Others were more blunt. “There’s a lot of hype,” one researcher admitted. “It’s not the Metaverse, but it rhymes.”
The mood recalled 1999 in miniature—optimists building cathedrals out of data while veterans check the exits. The Economist this morning called it “an astonishing boom fueled by AI optimism.” P/E ratios near forty—precisely where they stood at the top of the dot-com bubble.
There’s plenty of optimism to fuel markets. Leverage may be the problem. On the heels of our “Anatomy of a Stock Market Bubble” last week, our friend and colleague Harry Dent has assembled an AI Crash Summit, set to be released next Wednesday, November 5th. Stay tuned for more.
Debt, Growth, and Denial
Goldman Sachs CEO David Solomon gave the day’s coldest dose of realism.
The U.S. debt load, now on track to hit $40 trillion by the next election cycle, “will demand a reckoning” if growth doesn’t accelerate, he warned.
“The path out is a growth path,” Solomon said. Translation: there’s no fiscal diet, no austerity plan, only the hope that GDP can outrun compound interest.
Solomon dismissed fears of an immediate credit crisis, but he knows how math works. When debt compounds faster than productivity, politics becomes monetary improvisation.
In language that sounds vaguely familiar, a Bloomberg headline characterized Solomon’s comments as a “debt reckoning.”
Ford’s India Reawakening
Even as Trump, Bessent and Lutnick chant reshoring, Ford has announced it will spend $370 million reopening a shuttered factory in southern India to build high-end engines for export.
Four years ago, the same plant was mothballed.
Now, as AI-driven vehicles demand new engines and markets demand cheaper labor, Ford’s logic is global again. Trump’s trade rhetoric may be nationalist, but industrial reality remains transnational.
AI Comes for the Consultants
Nearly 150 ex-consultants from McKinsey, Bain, and BCG have been quietly hired to train AI systems on entry-level tasks. The project—code-named Argentum—aims to automate the very workflows they once sold for millions to corporate America.
This is the second wave of such programs. Earlier this year, ex–ex-investment bankers trained OpenAI’s models to build financial models that might soon replace them. Capitalism, as ever, eats its young—and now it’s feeding the algorithm.
We haven’t yet seen the impact of AI replacement of entry level white collar jobs in the unemployment roles. History suggests we will… then there will be a pause… and newly trained AI operators will proliferate like rats.
Recession in All but Name
Here’s a chilling statistic for Halloween: 82% of the U.S. population now lives in regions officially classified as “in recession,” according to the Fed’s Beige Book. That’s double the share at the start of the year.
(Source: Rosenberg Research)
Meanwhile, the Atlanta Fed pegs national GDP growth at +3.9%. It’s the ghost of 2020—macro numbers up, micro reality down. For younger Americans, the slowdown is already biting. Chipotle and Shake Shack both warned that their core demographic—late-twenties, early-thirties—is “financially challenged.”
There’s your real indicator: the burrito index.
Luxury Beliefs in the Big City
In New York, candidate Zohran Mamdani is promising to soak the rich and “reclaim” Wall Street for the people. The Economist calls it “an experiment in luxury beliefs”—policies that only the privileged can afford to espouse.
Mamdani’s proposals—a 2% millionaire surtax and a corporate rate hike to 11.5%—aren’t even legal without state approval. But the rhetoric sells.
“Luxury belief” is the sociological term for status-signaling ideology: moral prestige at no personal cost. As one analyst quipped, “He wants to be the mayor of Gotham without realizing Bruce Wayne has already moved to Florida.”
Research Note: History’s Hammer and the Five Metacycles
Yesterday, we opened a new line of inquiry—a long-range research project examining the convergence of five historical cycles: political centralization, institutional renewal, generational turnover, monetary redefinition, and technological disruption.
All five, remarkably, appear to be syncing near America’s 250th anniversary in 2026. When cycles that long phase-lock, you don’t get a business correction—you get a regime quake.
We’ll be tracking how this convergence reframes investing: from fiat assets to real collateral, from centralized institutions to functional jurisdictions, from information monopolies to networked markets.
You can’t time a metacycle. But you can position for what survives it.
The world looks calm from the surface. Trade deals, rate cuts, debt ceilings, and election polls. But beneath the waterline, the structure is shifting. The empire of debt is creaking under its own optimism. The AI boom is burning capital and will need to find new forms of energy.
Central banks, once masters of liquidity, now chase the tide. The Fed announced on Wednesday that it would halt the programs intended to reduce its balance sheet, also known as “quantitative tightening” (QT).
It’s All Hallows’ Eve, and already 2026 looks like it’s shaping up to be pretty spooky.
~Addison
P.S. Catch the replay of Grey Swan Live! with John Robb—on Trump’s economic nationalism, autonomous warfare, and what the next military-industrial realignment means for investors, right here.
If you have any questions for us about the market, send them our way now to: feedback@greyswanfraternity.
