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Swan Dive

When Trust Runs Thin, Markets… Rally?

Loading ...Addison Wiggin

September 16, 2025 • 5 minute, 41 second read


AIFed

When Trust Runs Thin, Markets… Rally?

The market keeps setting records as if mistrust itself were a growth sector.

The S&P 500 and Nasdaq both notched new highs yesterday after President Trump said trade talks with China were “going very well.”

Nvidia’s partner CoreWeave surged on a $6.3 billion AI infrastructure order.

But beneath the cheering, even Wall Street’s old guard is on notice. Mutual funds, once the ballast of retail portfolios, are losing ground to ETFs and direct indexing.

The Financial Times reported this week that executives overseeing more than $35 trillion are under pressure to pursue “bigger deals or deeper cuts” to stay relevant.

Meanwhile, the SEC said it’s prioritizing Trump’s call to end quarterly earnings reports. The president wrote on Truth Social that such disclosures “waste money, and distract managers from properly running their companies.”

Many CEOs, including Jamie Dimon and Warren Buffett, have long complained that quarterly reporting forces short-termism. Yet the CFA Institute warns that less transparency “reduces the accuracy of analysts’ forecasts” and leaves small investors flying blind.

These debates aren’t entirely academic. They are about whether retail investors can still trust the numbers in front of them.

📉 Trust in the Fed, Trust in the Market

Tomorrow’s Fed rate decision is the week’s main event. The central bank is expected to cut rates, but the real story is the institution’s independence.

President Trump’s attempt to remove Governor Lisa Cook was denied by an appeals court yesterday, ensuring she’ll remain in her seat for the vote. At the same time, the Senate confirmed Stephen Miran, Trump’s nominee to replace a departing governor.

The Washington Post noted that Trump has “repeatedly pressed Fed officials to lower rates” and openly challenged the board’s authority.

Bloomberg’s September survey of economists found that the majority are “somewhat or extremely worried” that the Fed’s decisions will be influenced by political loyalties.

If that happens, borrowing costs for the U.S. government rise as risk premia creep into Treasury markets.

Public confidence is already threadbare.

In 2001, 74% of Americans trusted Alan Greenspan to do the right thing. In 2025, only 37% say the same of Jerome Powell. For the first time, trust in Trump to manage the economy is higher than trust in the Fed chair.

🏛️ Trade, TikTok, and the Thin Red Line

The U.S. and China struck a framework for TikTok’s future during talks in Madrid.

Surprise, surprise: Trump called the deal “a win for America.”

The details—who controls the algorithm, whether Oracle’s Larry Ellison takes charge—remain unresolved. A final handshake is expected when Trump meets Xi Jinping on Friday.

Trade tensions remain the bigger issue. If you pose the question to trade advisor Jamieson Greer, non-tariff trade barriers are by far the greatest challenge to his team engaged in Trump’s “grand realignment”.

The Financial Times reports tariffs will expire in November unless a broader deal is struck.
China has halted U.S. soybean purchases, tightened rare earth shipments, and launched probes into U.S. chipmakers, accusing Nvidia of violating antitrust law in its 2020 acquisition of Mellanox. Nvidia insists it has complied “with both the letter and spirit of the law.”

🚗 Musk Buys Into Tesla

Elon Musk bought $1 billion of Tesla stock yesterday — his first open-market purchase since 2020 — sending shares up 3.26% and helping erase this year’s losses. Musk called it a “vote of confidence” ahead of a shareholder meeting that could approve a record-breaking pay package.

Not everyone was impressed.

“If that is the only thing that has value anymore,” the American Pope Leo weighed in on the deal, “then we’re in big trouble.”

Heh. Seriously.


🎄 A Lopsided Christmas

It’s 100 days until Christmas, but only a fraction of households are doing the heavy lifting.

According to Moody’s, the wealthiest 10% of Americans now account for 49.2% of all consumer spending — the highest since records began in 1989.

That explains how the economy has avoided recession even as delinquencies rise and job growth is revised sharply lower. Black unemployment climbed to 7.5% in August, twice the rate for White Americans, erasing years of progress.

Turn Your Images On

“The top of the distribution is propping up the entire consumer sector,” Moody’s chief economist Mark Zandi told CNBC. “That is not sustainable.” (Source: Moody’s and the Fed)

The Fed can trim rates, but it cannot restore balance when half the country is standing on the sidelines, with credit cards in hand.

⚓ Lessons from the Mayflower?

On this day in 1620, the Mayflower sailed with 102 passengers — half dissenters fleeing persecution, half entrepreneurs chasing fortune. Storms forced them off course, yet they built a settlement that endured because of a fragile but functional social compact.

There are a lot of wonky things about the Mayflower legend.

First, as folks in Provincetown, Mass., will tell you, the idea that the Pilgrims landed on a rock a couple of hours West of what is today’s Plymouth is geographically implausible.

Second, that the Pilgrims celebrated the first Thanksgiving. In fact, Thanksgiving as an official holiday was a much more grim reminder of the carnage and death at the Battle of Gettysburg some 243 years later.

Having grown up in New Hampshire, we were happy to claim the Pilgrims for their New England heritage.

Until, that is, we read a few books as an undergrad and discovered much of the mystique for religious freedom was bestowed during a period of time known to historians as The Great Awakening, in which Puritan descendants veiled their economic hopes and dreams for the New World in a cloud of religious freedom… during the 1830s.

Either way, if the story is accurate, 102 people boarded a boat in England in 1620 and crossed the cold North Atlantic by wind and sextant. There aren’t too many American souls who would give up their Netflix subscriptions to venture as such into the unknown.

The Pilgrims’ ship carried ballast in its hold to steady against rough seas.

Today, our markets and politics rely on a different ballast: trust. When people trust institutions, capital flows, innovation thrives, and societies endure shocks. When trust runs thin, even record stock indexes can tip and capsize.

The Mayflower reminds us: survival isn’t about perfect conditions. It’s about whether the ballast holds.

~Addison

P.S.: Grey Swan Live! this Thursday with Adam O’Dell: we’ll explore how the $10 trillion “cash bubble” in money markets will rotate during a new rate cut cycle. Adam’s thesis: It’s a massive transfer of wealth, and getting in ahead of the move could earn you a safe return. And as always, we’ll identify where individual investors can find their best footing when trust in the markets and money itself is on the line.

Turn Your Images On

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


A Vote For The Yen Carry Trade

October 6, 2025 • Addison Wiggin

The Liberal Democratic Party victory has sent Japanese stocks soaring, as party President Sanae Takaichi – now set to become Japan’s first female Prime Minister – is a proponent of stimulus spending, and a China hawk. The electoral win is a vote to keep the yen carry trade alive… and well.

The “yen carry trade” is a currency trading strategy. By borrowing Japanese yen at low interest rates and investing in higher-yielding assets, investors have profited from the interest rate differential. Yen carry trades have played a huge role in global liquidity for decades.

Frankly, we’re disappointed — not because of the carry trade but because the crowd got this one so wrong!

A Vote For The Yen Carry Trade
Beware: The Permanent Underclass

October 3, 2025 • Addison Wiggin

Back in the Global Financial Crisis (2008), we recall mass layoffs were driving desperation.

Today, unemployment is relatively low, if climbing.

Affordability is much more of an issue. Food, rent, healthcare, and childcare are all rising faster than wages. Households aren’t jobless; they’re stretched. Job “quits” are at crisis-level lows.

In addition to the top 10% of earners, consumer spending is still strong. Not necessarily because of prosperity, but because households are taking extra shifts, hustling gigs, working late into the night, and using credit cards. The trends hold up demand but hollow out savings.

It’s the quiet form of financial repression. In an era of fiscal dominance, savers see easy returns clipped, workers stretch hours just to stay even, and wealth slips upward into assets while daily life grows harder to afford.

Beware: The Permanent Underclass
Is Tokenization Inevitable?

October 3, 2025 • Ian King

Last month, Nasdaq asked the Securities and Exchange Commission (SEC) for approval to let tokenized stocks and ETFs trade on its main exchange.

If approved, these digital shares would sit side-by-side with traditional equities. Meaning, they would fall under the same U.S. securities laws that govern $50 trillion in annual equity trades.

And this rollout could begin as early as 2026, once the Depository Trust Company — the clearinghouse that settles every U.S. stock trade — updates its systems to handle digital tokens.

If it happens, this won’t be a small tweak to the machinery of finance. It’ll represent the first major step toward moving Wall Street onto blockchain infrastructure.

And we don’t have to imagine what it might look like…

Because it’s already happening.

Is Tokenization Inevitable?
The Myth of Productivity, Again

October 3, 2025 • Addison Wiggin

The launch of ChatGPT in October 2022 ended the pandemic-era bear market in stocks. The AI story has been the predominant narrative for three years now. The indexes on Wall Street are at historic highs, surpassing 2000, 1968, 1929… the last three tech-inspired bubbles.

But ChatGPT did something else. It brought the idea of “productivity gains” back into the economic conversation.

The Myth of Productivity, Again