Where There’s Smoke…

Markets Surge, Then Stumble

Investors briefly lifted the S&P 500 above 6,400 for the first time yesterday after the announcement of the U.S.–EU trade deal.

Hopes for a new wave of transatlantic cooperation — plus a commitment from Brussels to purchase $750 billion in U.S. energy — fueled a short-lived euphoria.

But as attention turned to the coming week’s data dump, the rally stalled.

AI chips still made a showing: Tesla jumped 3.02% after inking a $16.5 billion AI chip deal with Samsung. AMD’s price hikes added fuel, sending Super Micro up 10.24%, ASML up 2.63%, and Nvidia up 1.87%.

Followed by one remarkable crypto standout. CEA Industries (with the clever ticker: VAPE) exploded 548.85% after raising $500 million to pivot from ag tech to crypto — buying up BNB, Binance’s native coin.

Red Flags and Rumblings from the Fed

We’re almost done. 83% of S&P 500 companies reporting their Q2 numbers have topped expectations.

And in any other earnings season, that would be something to write home about.

This year, it didn’t inspire as much. The bar was reset so low after the Liberation Day tariffs that corporate earners barely had to lift their feet to get over it.

Against the earnings backdrop, the Fed begins its two-day meeting. Given Trump’s open desires for lower rates, Jerome Powell and the Fed governors are under political scrutiny as much as they usually are under the watchful eye of Wall Street.

While most big analysts expect no change in rates, one voice is warning markets that the Fed might… raise rates.

Raise rates…what?! Now?! Sacrilege!

“The unemployment rate is low, but the rate of inflation is somewhat elevated,” economist William Silber argues in The Wall Street Journal.

“That suggests, if anything, the target interest rate should be higher to push down inflation.”

Inflation is still running hot — 2.7% in June, up from 2.4% in May — and unemployment ticked down to 4.1%. Despite pressure, the Fed hasn’t budged since December, holding rates steady at 4.25–4.50%.

In a moment of weakness yesterday, Trump offered Powell a kindness:

Turn Your Images On

Despite the president’s social media campaign, Karoline Leavitt, speaking on behalf of the White House, insists Powell’s job is safe. For now.

Smoke Signals: Margin Mania, Consumer Cracks

The parade of contrary indicators continues…

We’ve been monitoring historic retail investor buying amid record insider selling in recent months.

Now, we’re adding a few more historic markers to the pile.

Margin investing is skyrocketing: In June, margin debt jumped +9.4% to a record $1.01 trillion, the largest monthly increase in history.

Turn Your Images On

That’s a $400 billion surge over the last two years, surpassing even dotcom and Financial Crisis levels. Relative to M2 money supply, margin debt is now the highest since 2018.

Risk appetite is through the roof.

Cracks in the real economy: Housing defaults just hit their highest level since 2011.

Turn Your Images On

Credit card defaults from small lenders are also at record highs.

Turn Your Images On

There are clear signs the consumer — who’s been propping up growth in the real economy — is starting to buckle.

That Trump is turning up the heat on Powell is not an enigma.

The President wants, needs, interest rates cut — not just to juice markets and finance the national debt… but to help everyday households teetering on the edge – not to mention help Uncle Sam refinance a few trillion in debt at lower rates.

An “End of the World as We Have Known It” Quiz

Amid the economic stress fractures and market excess, historian Hal Brands offered up a multiple-choice quiz in Bloomberg this morning.

The US-led world order may be heading for collapse via one of three paths:

A) A major military catastrophe.

B) Soaring federal debt that cripples growth.

C) Trump bulldozes through the rules.

*** D) All of the above.

“History tells us there are many ways in which orders unravel,” Brands writes. “A worrying marker of our current moment is that America is courting all of them at once.”

The Pentagon is stretched thin, from Russia in Europe to China and North Korea in Asia. Beijing is hoarding food and fuel while racing to build a nuclear arsenal that could outmatch ours.

Turn Your Images On

Meanwhile, federal debt is now over $37 trillion – 123% of GDP and on track to exceed 200% by 2050 if current spending patterns hold.

And with Trump threatening to replace Powell, re-engineer trade rules, and reframe democratic norms, the political foundations are all lining up for the Trump Great Reset… but the engine is burning hot and whining loud.

Big Data, Bigger Stakes

The mood on Wall Street may feel ebullient, but make no mistake: this week marks a make-or-break stretch. CNBC dubbed it the “Olympics for market watchers.”

Today is a light warm-up. Tomorrow, the main event: The Fed press conference following their rate decision.

Watch UPS earnings before the open. Analysts hope automation will offset the 50% drop in Amazon shipments, but tariffs could weigh on the company.

All of this will shape what the Fed does next — and what they say tomorrow could send markets spinning. Even as some of the big tech names are also scheduled to report earnings after the close on Wednesday and Thursday.

That’s why we’re gathering today, ahead of what may prove to be a chaotic week. Our urgent investor summit at 10 a.m. will connect the dots before Powell does.

~ Addison

P.S. This morning’s investor summit at 10 a.m. will cover the full spectrum of risk and reward heading into the Fed decision. If you’re managing serious capital in uncertain times, you’ll want to be there.

Your thoughts? Please send them here: addison@greyswanfraternity.com

Markets Surge, Then Stumble

Investors briefly lifted the S&P 500 above 6,400 for the first time yesterday after the announcement of the U.S.–EU trade deal.

Hopes for a new wave of transatlantic cooperation — plus a commitment from Brussels to purchase $750 billion in U.S. energy — fueled a short-lived euphoria.

But as attention turned to the coming week’s data dump, the rally stalled.

Red Flags and Rumblings from the Fed

We’re almost done. 83% of S&P 500 companies reporting their Q2 numbers have topped expectations.

And in any other earnings season, that would be something to write home about.

This year, it didn’t inspire as much. The bar was reset so low after the Liberation Day tariffs that corporate earners barely had to lift their feet to get over it.

While most big analysts expect no change in rates, one voice is warning markets that the Fed might… raise rates.

Raise rates…what?! Now?! Sacrilege!

“The unemployment rate is low, but the rate of inflation is somewhat elevated,” economist William Silber argues in The Wall Street Journal.

“That suggests, if anything, the target interest rate should be higher to push down inflation.”

In a moment of weakness yesterday, Trump offered Powell a kindness:

Turn Your Images On

Despite the president’s social media campaign, Karoline Leavitt, speaking on behalf of the White House, insists Powell’s job is safe. For now.

Smoke Signals: Margin Mania, Consumer Cracks

The parade of contrary indicators continues…

We’ve been monitoring historic retail investor buying amid record insider selling in recent months.

Now, we’re adding a few more historic markers to the pile.

Margin investing is skyrocketing: In June, margin debt jumped +9.4% to a record $1.01 trillion, the largest monthly increase in history.

Turn Your Images On

That’s a $400 billion surge over the last two years, surpassing even dotcom and Financial Crisis levels. Relative to M2 money supply, margin debt is now the highest since 2018.

Risk appetite is through the roof.

Cracks in the real economy: Housing defaults just hit their highest level since 2011.

Turn Your Images On

Credit card defaults from small lenders are also at record highs.

Turn Your Images On

There are clear signs the consumer — who’s been propping up growth in the real economy — is starting to buckle.

That Trump is turning up the heat on Powell is not an enigma.

An “End of the World as We Have Known It” Quiz

Amid the economic stress fractures and market excess, historian Hal Brands offered up a multiple-choice quiz in Bloomberg this morning.

The US-led world order may be heading for collapse via one of three paths:

A) A major military catastrophe.

B) Soaring federal debt that cripples growth.

C) Trump bulldozes through the rules.

*** D) All of the above.

“History tells us there are many ways in which orders unravel,” Brands writes. “A worrying marker of our current moment is that America is courting all of them at once.”

The Pentagon is stretched thin, from Russia in Europe to China and North Korea in Asia. Beijing is hoarding food and fuel while racing to build a nuclear arsenal that could outmatch ours.

Turn Your Images On

Meanwhile, federal debt is now over $37 trillion – 123% of GDP and on track to exceed 200% by 2050 if current spending patterns hold.

Big Data, Bigger Stakes

The mood on Wall Street may feel ebullient, but make no mistake: this week marks a make-or-break stretch. CNBC dubbed it the “Olympics for market watchers.”

Today is a light warm-up. Tomorrow, the main event: The Fed press conference following their rate decision.

Watch UPS earnings before the open. Analysts hope automation will offset the 50% drop in Amazon shipments, but tariffs could weigh on the company.

That’s why we’re gathering today, ahead of what may prove to be a chaotic week. Our urgent investor summit at 10 a.m. will connect the dots before Powell does.

~ Addison

Your thoughts? Please send them here: addison@greyswanfraternity.com

The Bureau of Labor Statistics changed the way it calculated productivity. It began to look at what it called a “hedonic” price index that took into account not just the price of computer equipment, but its computational power.

On the surface, this makes some sense. If a dollar buys twice as much computational power one year as the next, it is as if the price of computing power had fallen in half. The third quarter of 1995 was the first time this change took effect. It miraculously transformed $2.4 billion in computer spending into $14 billion of output, instantly boosting GDP by 20%, lowering inflation, and increasing productivity (output per hour).

The number for the fourth quarter, to repeat, was spectacular. Incredible. It was revised later to an even more incredible 6.9%. The only trouble was that it was not real.

It was, like the New Era that supposedly made it possible, a fraud. More computational power is not the same as economic growth. And being able to turn out more computational power for each hour of labor input is not the same as an increase in labor productivity.

CPI, which drives inflation, is usually based on the costs of about 90,000 goods across the economy. But with one-third of the data now based on an estimate — or worse, a guesstimate — it makes CPI data suspect.

This makes other measures, like PPI, suspect, making it impossible for the Fed to accurately determine inflation or its trend.

Margin debt just hit a record $1.01 trillion, jumping $87 billion in June alone—the largest monthly increase in history. That surpasses the peaks seen before both the dotcom bust and the 2008 crisis. Relative to M2 money supply, it’s the highest since 2018. Risk appetite is off the charts.

Meanwhile, in the real economy: housing defaults just hit their highest level since 2011, and credit card defaults at small lenders are at record levels.

These pressures explain Trump’s desperate push for rate cuts… but if Powell resists, the fallout could be swift and severe.

Never in the history of man had any people been able to get rich by spending money . . . nor had investment markets ever made the average buy-and-hold investor rich . . . nor had paper money, unbacked by gold, ever retained its value for very long.

In the late 1990s, however, all these things seemed not only possible, but inevitable. Everything seemed to be going in Americans’ favor. Then, suddenly, at the beginning of this new century, everything seemed to be going against them.

How could US consumer capitalism, which had been phenomenally successful for so long, fail them now? It can’t, they will say to themselves. Why should they have to accept a decline in their standards of living, when everybody knew that they were getting richer and richer? It cannot be.

Besides, said Americans to themselves in early 2003, if there were problems, they must be the fault of others: terrorists, greedy CEOs, or policy errors at the Fed.

The number for the fourth quarter, to repeat, was spectacular. Incredible. It was revised later to an even more incredible 6.9%. The only trouble was that it was not real.

This makes other measures, like PPI, suspect, making it impossible for the Fed to accurately determine inflation or its trend.

Meanwhile, in the real economy: housing defaults just hit their highest level since 2011, and credit card defaults at small lenders are at record levels.

These pressures explain Trump’s desperate push for rate cuts… but if Powell resists, the fallout could be swift and severe.

Besides, said Americans to themselves in early 2003, if there were problems, they must be the fault of others: terrorists, greedy CEOs, or policy errors at the Fed.