| A GREY SWAN PUBLICATION | Friday April 4, 2025 | Swan Dive — April 4, 2025 If you've ever watched a demolition video where an old building collapses in a cloud of dust and disbelief, you've seen a near-perfect metaphor for what happened in the markets this week.
The market video of April 3, 2025 — Controlled Demolition Day — will be replayed a billion times.
Not because it was unexpected but because it was inevitable.
A 40-year system of offshoring jobs, borrowing to police the world (while your allies build more comfortable welfare states for their own citizens), and pretending debt-fueled consumption could pass for prosperity finally came crashing down.
Like so many crumbling housing blocks in Baltimore — built on political patchwork and regulatory graft — Trump hit the detonator, and the façade fell in real-time. 📉 Market Fallout: The Facade Collapses The S&P 500 dropped 4.8% Thursday, the sharpest single-day fall since the early pandemic panic. It capped a 10-week stretch that now ranks as the worst market start for a new president in 24 years. As of this writing, the market is down nearly 10% since Trump took office. 
The Fear & Greed Index — as a reliable measure of investor sentiment as CNN can muster — has cratered near an all-time low, falling below levels reached during both the COVID crash and the 2008 financial crisis. 
In other words, it's darker now than when governments around the globe colluded to shut the economy down amid a steep bear market. Somehow, today's "vibe" is worse, even as stocks are yet to officially fall into a bear market.
It might be worth remembering this old Warren Buffett chestnut: "Be fearful when others are greedy, and greedy when others are fearful."
If genuine fear is a buy signal, Trump just lit the bulb. And many are realizing why the Oracle of Omaha is sitting on over $350 billion in T-bills and sold off much of his Apple stake over the past year. 🧨 Trump's Economic Blast Radius The tariff policy rolled out this week is the steepest in a century. All imports are now subject to a 10% baseline tariff, with higher penalties aimed squarely at adversaries like China, and frenemies in Europe and Asia. Energy commodities were spared — no tariffs on oil or gas — but semiconductors, steel, and autos were not. 
Economists at JPMorgan and Renaissance Macro have already issued warnings: if these tariffs are enacted in full, a U.S. recession in 2025 is more than likely.
Inflation, which had been gently receding, is expected to spike back toward pandemic-era levels. The selloff we just witnessed may be the beginning — not the end — of the fallout.
Traders know that tariffs will eat into corporate profits – the same profits that have been generated by years of cheap manufacturing and labor costs overseas and products sold at discount rates to a consumer market fueled on credit card debt. 📊 MAG 7: Big Tech Takes the Hit The tech sector, which had been propping up the broader market, has become a source of instability. The so-called Magnificent Seven — Nvidia, Meta, Amazon, Microsoft, Alphabet, Apple, and Tesla — saw sharp losses across the board. Nvidia is down 28% since January.
The others have lost more than 20% from their recent highs and are in a bear market.
The Nasdaq 100 just closed out its worst quarter in three years, down 8.3%. Behind the scenes, much of the institutional money — pensions, IRAs, sovereign wealth — had quietly concentrated in these few names. Now, as valuations fall, retirement savings are quietly evaporating.
Before this week's trade war went nuclear, the S&P 493, that is to say, the S&P 500 index sans the Mag 7, was flat for the year. 🏗️ The Manufacturing Mirage For years, Democrats and Republicans alike agreed the U.S. had to rebuild its manufacturing base. COVID laid bare how reliant we'd become on foreign suppliers for critical goods — medicine, microchips, PPE, rare earths.
And yet, all the legislation and subsidies — the CHIPS Act, the CARES Act — haven't moved the needle. When you factor in the trillions of additional debt they created, it's arguably made things worse off.
Manufacturing employment stands exactly where it did in 2019: 12.8 million jobs.
The problem is structural. Global tariffs average 6.7%, while America's hovered at 2.7% — until this week.
Even chipmakers like Intel and TSMC couldn't justify building on U.S. soil without additional protection. Now they have it. Whether that leads to a real industrial revival remains to be seen. You can review our latest research on the "Chip Wars" right here. It's Deja Vu All Over Again We've lived through this movie before. The tech wreck of 2001 wasn't just a market correction — it was a revelation.
It became the source material for our first book, Financial Reckoning Day, and the reason we launched The Daily Reckoning — what we believe was the first daily financial newsletter delivered by email, long before Substack and Twitter threads turned everyone into an expert.
That era taught us what centuries of financial history already knew: credit cycles and government-directed malinvestment are the tinder for every market bubble, from the South Sea to Silicon Valley.
We didn't just write about it — we lived it, invested through it, and built a daily habit of warning readers when the system starts to crack.
As a consequence, last July, we were already concerned we were seeing a repeat of the tech wreck… and the '08 global financial crisis… only the third go 'round is much larger.
In the July Grey Swan Bulletin, we even stated to our paid Fraternity members a warning on AI stock valuation: Goldman Sachs issued a report on June 24, 2024 entitled "Gen AI: Too Much Spend, Too Little Benefit?". The report states its opening premise: "Tech giants and beyond are set to hand over $1 trillion on AI capex in coming years with little to show for it. So, will the large spend payoff?"
Goldman's report made headlines at the time of release and the ripple effect in the markets led to a pullback in Nvidia and Microsoft as a proxy for AI spend and "picks and shovels" plays respectively. We also noted further on: "What happens next will be no picnic."
In its June investment survey, Insight, Goldman Sachs flagged dangerous overinvestment in AI infrastructure — data centers, chips, and cloud capacity — all feeding a closed loop where Big Tech bought from Big Tech, inflated one another's valuations and pulled in trillions, literally, in outside capital.
As happens in all bubbles, pensions, IRAs, 401(k)s, sovereign wealth funds, and everyday investors piled in, all thinking they were buying into the future.
Indeed they were.
The bubble exploded this week. This time, it is the Trump Tariffs that are taking their turn as the powder in the blasting cap.
Now, here we are — if the media and political spin doctors do as is their wont to do, we'll all be modern Prometheus rolling the proverbial wrecking ball up the hill over and over.
Except this time, we'll be able to watch the replay on a continuous loop.
Addison
P.S. Even with the media crying doom and dismay this week, there are some pockets of value worth noting. Gold is holding up strong, still trading around $3,100 before the market open. We still see further upside ahead, especially with the metal emerging as a safe-haven play today.
Bitcoin is also trading flat on the week and not breaking to new lows, and some crypto investors point to rising global liquidity as a sign that the crypto could be ready to move higher.
For our paid-up members, we'll be covering our model portfolio positions in-depth next week. Stay tuned, and have a restful weekend. As always, your cheerful reader feedback is welcome: feedback@greyswanfraternity.com (We read all emails. Thanks in advance for your contribution.)
How did we get here? Find out in these riveting reads: Demise of the Dollar, Financial Reckoning Day, and Empire of Debt — all three books are now available in their third post-pandemic editions. You might enjoy one or all three. 
(Or… simply pre-order Empire of Debt: We Came, We Saw, We Borrowed, now available at Amazon and Barnes & Noble or if you prefer one of these sites: Bookshop.org, Books-A-Million or Target.)
Please send your comments, reactions, opprobrium, vitriol and praise to: feedback@greyswanfraternity.com |
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