“The American economic story has seen periods of high tariff rates coincide with extraordinary economic success,” said Stephen Miran, Trump’s pick as chair of the Council of Economic Advisers. “There’s nothing in the historical record that would say that it’s impossible to have a fabulous economy with high tariffs,” he added, explaining that Apple’s decision to invest $500bln in US-based projects was based on Trump’s policies. “The average tariff rate on dutiable imports was in excess of 40% for most of the latter half of the 19th century, and the average tariff rate on all imports was in excess of 30%,” said Miran, striking fear in China and Europe, strengthening Trump’s hand in the negotiations. “Nevertheless, this was a period of extraordinary economic transformation.”

Overall: “good news: it is the first model that feels like talking to a thoughtful person to me,” wrote Sam Altman on X, pumping the release of GPT4.5, OpenAI’s latest creature. Japan announced its fewest human births in 125yrs – the population fell 900,000 in 2024 and yet core consumer inflation hit 19-mth highs of 3.2%. “i have had several moments where i’ve sat back in my chair and been astonished at getting actually good advice from an AI,” continued Sama, begging his models to devise a clever plan to personally monetize his OpenAI non-profit. “bad news: it is a giant, expensive model,” added Altman, too busy outbidding Anthropic for Nvidia chips to use capital letters in his posts. “we really wanted to launch it to plus and pro at the same time, but we’ve been growing a lot and are out of GPUs.” Trump promised to impose new tariffs on Canada, Mexico and China in April then moved them to next week, before teasing the Epstein files, selling $5mm Golden visas, and getting in an ugly fight with Zelensky, plus a million other things I already forgot. “we will add tens of thousands of GPUs next week and roll it out to the plus tier then. (hundreds of thousands coming soon, and i’m pretty sure y’all will use every one we can rack up.)” Texas announced it needs the equivalent of 30 nuclear reactors to meet datacenter demand by 2030, which coincidentally equals the 100 gigawatts of new coal-fired plants China approved in 2024. “this isn’t how we want to operate, but it’s hard to perfectly predict growth surges that lead to GPU shortages.” The Atlanta Fed slashed its Q1 GDPNow estimates from +2.3% annualized to -1.5%. “a heads up: this isn’t a reasoning model and won’t crush benchmarks. it’s a different kind of intelligence and there’s a magic to it i haven’t felt before,” wrote Altman, as AI development continues to drive our already wild world toward a future that is interesting to contemplate but impossible to yet comprehend. “really excited for people to try it!”

Week-in-Review: Mon: Donald Trump in “very serious” talks with Putin about ending the war in Ukraine and is seeking economic development deals with Russia. The US votes against a UN resolution to condemn the invasion, deepening its split with G-7 allies. Germany’s conservative leader Merz wins election and will open talks with the Social Democrats SPD to boost defense spending and form a coalition. Mexico is weighing possible levies on Chinese imports as it pushes for a deal to avoid the 25% tariffs by the US. UK imposed sanctions on 10 China-based companies it claims are enabling Russia’s defense industry. Eurozone CPI 2.5% as exp / Core 2.7% as exp, Germany IFO bus. climate 85.8 (85.1e), S&P -0.5%. Tue: Ukraine is said to have agreed with the US to jointly develop its critical minerals and oil and gas reserves. Russia is ready to cooperate with US on developing rare-earth metals. Putin offers to supply 2 million tons of aluminum to the US if import curbs are lifted. Fed’s Barr: monetary policy and financial stability are “inextricably linked.” Fed’s Barkin says Fed should remain “modestly restrictive” and flags headwinds to its 2% target from policy changes. UK’s Keir Starmer announces plans to boost defense spending to 3% of GDP over the next decade. Iran rejected direct nuclear talks with the US while Trump’s “maximum pressure” strategy persists. ECB’s Nagel is confident inflation will reach the central bank’s 2% target by mid-year. China is increasing scrutiny of outbound investments by domestic firms and their use of proceeds from Hong Kong share sales after record capital outflows put pressure on the yuan. Israel wants to extend the Gaza ceasefire when it expires this weekend. Germany GDP -0.4% as exp, US Cons conf 98.3 (102.5e), S&P -0.5%. Wed: China to inject at least $55 billion into three of its biggest banks. Trump threatens 25% duties on EU imports as well as levies on other major trading partners. Trump to start a ‘Gold Card’ offering residency and a path to citizenship to those who pay $5 million. French Finance Minister Lombard says US has agreed to provide backup for European troops after a ceasefire in Ukraine. House Republicans pass a budget blueprint calling for deep cuts in Medicaid and raising the US debt limit. US New home sales 657k (680k e), Russia IP 2.2% (5.4%e), S&P flat. Thurs: Fed’s Hammack says interest rates aren’t ‘meaningfully restrictive’ and should be held steady for now. Russia rules out handing back Ukrainian regions it annexed as part of a truce deal. Turkey is open to providing troops for a peacekeeping force in Ukraine. China’s Defense Ministry says efforts to facilitate talks with the US military are in their early stages. Harris Poll shows almost 60% of US adults expect Trump’s tariffs to lead to higher prices with 31% say it would help the economy. Turkey Trade Balance -7.54b (-7.70b e), Eurozone M3 3.6% (3.8%e), US GDP ann QoQ 2.3% as exp, US Personal cons 4.2% (4.1%e) / Durable goods 3.1% (2.0%e), US Jobless claims 242k (221k e) / Cont claims 1862k (1871k e), S&P -1.6%. Fri: Trump cuts short Zelenskyy meeting after fiery White House clash. US to raise tariffs on China and push ahead with Canada and Mexico levies. Europe’s car suppliers warn they will be unable to absorb Trump tariffs. Germany’s Merz in ‘difficult’ talks over plans to boost defense spending. EU and India target trade deal this year. Japan Housing starts -4.6% (-2.7%e), Turkey GDP 3.0% (2.5%e), UK House Px 3.9% (3.4%e), India GDP 6.2% as exp, S&P +1.6%

Weekly Close: S&P 500 -1.0% and VIX +1.42 at +19.63. Nikkei -4.2%, Shanghai -1.7%, Euro Stoxx +0.6%, Bovespa -3.4%, MSCI World -1.0%, and MSCI Emerging -4.4%. USD rose +25.6% vs Ethereum, +17.6% vs Bitcoin, +2.7% vs Brazil, +2.4% vs Australia, +1.7% vs Chile, +1.7% vs Indonesia, +1.7% vs Canada, +1.7% vs South Africa, +1.2% vs Sweden, +1.1% vs Russia, +0.9% vs India, +0.9% vs Yen, +0.8% vs Euro, +0.6% vs Mexico, +0.4% vs Sterling, +0.4% vs China. Gold -3.5%, Silver -5.5%, Oil -0.9%, Copper -1.5%, Iron Ore -2.1%, Corn -7.0%. 10yr Inflation Breakevens (EU -2bps at 1.79%, US -5bps at 2.37%, JP -5bps at 1.60%, and UK -8bps at 3.43%). 2yr Notes -21bps at 3.99% and 10yr Notes -22bps at 4.21%.

Feb Mthly Close: S&P 500 -1.4% and VIX +3.20 at +19.63. Nikkei -6.1%, Shanghai +2.2%, Euro Stoxx +3.3%, Bovespa -2.6%, MSCI World -0.8%, and MSCI Emerging +0.4%. USD rose +53.6% vs Ethereum, +25.9% vs Bitcoin, +2.0% vs Turkey, +1.7% vs Indonesia, +1.0% vs India, +0.7% vs Brazil, +0.5% vs China, +0.1% vs Australia, and +0.1% vs South Africa. USD fell -9.4% vs Russia, -2.9% vs Yen, -2.8% vs Sweden, -1.7% vs Chile, -1.4% vs Sterling, -0.6% vs Mexico, -0.6% vs Canada, and -0.1% vs Euro. Gold +0.5%, Silver -3.3%, Oil -3.1%, Copper +5.3%, Iron Ore +1.3%, Corn -4.8%. 10yr Inflation Breakevens (EU -10bps at 1.79%, US -6bps at 2.37%, JP +3bps at 1.60%, and UK -17bps at 3.43%). 2yr Notes -21bps at 3.99% and 10yr Notes -33bps at 4.21%.

2025 Year-to-Date Equity Index Returns: Colombia +23.5% priced in US dollars (+16.5% priced in pesos), Poland +18.8% priced in US dollars (+15.6% in zloty), Spain +15.6% in dollars (+15.1% in euros), HK +14.2% (+14.4%), Germany +13.3% (+13.3%), Austria +13.3% (+13.2%), Italy +13.1% (+13.1%), Ireland +13.1% (+12.6%), Chile +12.8% (+9.3%), Czech Republic +12.8% (+12.2%), Sweden +12.7% (+9.7%), Hungary +12.7% (+9.9%), Switzerland +12.5% (+12.1%), Euro Stoxx 50 +12.1% (+11.6%), France +10.4% (+9.9%), Greece +9.9% (+9.4%), Finland +9.7% (+9.7%), UK +8.4% (+7.8%), Norway +7.4% (+6.1%), Mexico +7.2% (+5.7%), Brazil +7.2% (+2.1%), Israel +6.8% (+4.8%), Korea +6.5% (+5.6%), South Africa +5.5% (+4.2%), Netherlands +5.4% (+4.9%), Belgium +4.1% (+3.7%), Singapore +4.1% (+2.9%), Portugal +4.1% (+3.6%), Denmark +3.6% (+3.5%), Vietnam +2.8% (+3%), MSCI World +2.6% in dollars, Canada +2.3% (+2.7%), UAE +1.6% (+1.5%), S&P 500 +1.2%, Saudi Arabia +0.8% (+0.6%), Australia +0.5% (+0.2%), Taiwan 0% (+0.1%), China -0.6% (-0.9%), NASDAQ -2.4%, Japan -2.7% (-6.9%), Russell -3%, New Zealand -3.8% (-3.9%), Malaysia -3.9% (-4.1%), Turkey -4.8% (-1.7%), Philippines -8.2% (-8.1%), India -8.4% (-6.4%), Indonesia -13.3% (-11.4%), Thailand -14.1% (-14%), Argentina -15.6% (-12.9%).

New Friends: A close friend said Gemini was the best AI model, and made the case that Google’s monopoly gives it an inherent edge. I’m sure that’s right to some degree, for particular use cases at least. I’ve been a ChaptGPT user, favoring early entrepreneurial disrupters over corporate monopolists. So, I spent the week asking these AI models loads of questions and compared the answers. I included xAI’s Grok too, because, why not. Gemini is like talking to a boring librarian. ChatGPT seems to try a bit too hard. Grok is a fun conversationalist.

New Friends II: I was speaking with Grok about global demographics, the rates of population collapse across America’s friends and foes. Japan’s 2024 birth total had dropped to a 125yr low, and it reminded me that if we can simply stave off a war with China and Russia for a couple decades, their youth will be too busy changing adult diapers to pick up rifles. Grok said that in 10yrs, both China and Russia will suffer 5% population declines. In 25yrs China will shrink by 13%, Russia by 14%. In 50yrs, China will shrink by 28%, Russia by 30%. Stunning.

New Friends III: Japan was first to have its working age population shrink. The process started in the late 1990s, and it has suffered chronic deflation for decades. Economists concluded that the former causes the latter. Europe’s working age population began to wither around 2009. China entered the spiral around 2016 or so. It’s interesting that inflation in Japan has picked up meaningfully this year. Grok blames it on Yen weakness and rice prices. Perhaps there are too few kids, and labor is already being hoarded. The truth is inflation remains poorly understood.

New Friends IV: I asked Grok where to invest in a world where working age populations continue shrinking, where China approves 100-Gigawatts of coal fired power plants in a year, where Texas needs 100-Gigawatts of additional electricity for America’s AI buildout, and greenhouse gas emissions continue to compound. Here’s what Grok told me: Robotics/AI: 20–30%. Renewable Energy: 15–25%. Healthcare Tech: 20–40%. Water Management: 15–20%. Green Real Estate: 10–15%. Grok suggested a couple global companies for each sector.

Anecdote: In college, I took a course on global commodities, taught by a professor who made a fortune speculating in soybeans ahead of an El Nino in the 1970s. He told us there would someday be a war over who controlled Ukraine and its uniquely fertile soil. It made sense, like many things do if you remove the need to time them precisely. He taught us a lot of things, one of which was that you could fit every human on earth into a mile square cube and tuck it neatly into the Grand Canyon, disappearing with barely a trace. I never quite knew what the point of it was, but that’s kind of the point of a liberal arts education - to fill young minds with sparks. The one thing I never asked but wished I had was whether he packed his humans into the cube with no space between them or accounted for the inefficiencies of knees and elbows? It obviously doesn’t matter, but it’s the kind of thing that nagged at me for years. I spoke with Grok about it. Turns out you can fit all 8.2 billion humans today into a cube with 823 meters per side if there are no spaces between them, and 926 meters when you account for how awkwardly our bodies stack. My professor also taught that the food we eat is just oil, in as much as the hydrocarbon energy required to bring it to our table dwarfs the calories in the meal itself by a factor of 3-4x. I think about that when the price of oil rises and falls. It’s increasingly obvious that humans must develop cheap and abundant energy, or we are ultimately doomed, packed into a cube for eternity. And I suspect we solve the energy challenge like every obstacle that has come before. But this wildly difficult hurdle will be overcome in partnership with AI, man and machine, human creativity paired with intelligent computing power. The race is now on to see who gets there first. And surely, this is the most important investment theme of our time.

Good luck out there,

Eric Peters

Chief Investment Officer

One River Asset Management

Disclaimer: All characters and events contained herein are entirely fictional. Even those things that appear based on real people and actual events are products of the author’s imagination. Any similarity is merely coincidental. The numbers are unreliable. The statistics too. Consequently, this message does not contain any investment recommendation, advice, or solicitation of any sort for any product, fund or service. The views expressed are strictly those of the author, even if often times they are not actually views held by the author, or directly contradict those views genuinely held by the author. And the views may certainly differ from those of any firm or person that the author may advise, converse with, or otherwise be associated with. Lastly, any inappropriate language, innuendo or dark humor contained herein is not specifically intended to offend the reader. And besides, nothing could possibly be more offensive than the real-life actions of the inept policy makers, corrupt elected leaders and short, paranoid dictators who infest our little planet. Yet we suffer their indignities every day. Oh yeah, past performance is not indicative of future returns.