Dusted off an anecdote from 2017 about risk taking, examining anxiety, and learning how to tell the few opportune times from all the others. See you next Sunday with full weekend notes. Happy 4th. E

Week-in-Review (expressed in YoY terms): Mon: Delta variant ravages UK – most daily cases since January - Portugal requires non vaccinated UK travelers to quarantine - HK bans flight from UK, S. Africa bans all gatherings/closes schools, UK restricts Binance from doing business in the country, Fed Quarles restates transitory view, Ethiopia announces ceasefire in violent civil war, German impt price index 11.8% (11.4%e), Sweden ret sales 10.3% (7.2%p), S. Africa cons conf -13 (-9p), US Dallas Fed 31.1 (32.5e), S&P +0.2%; Tue: over half of Australian population now in lockdown as delta variant spreads, PBOC emphasizes comfort with current growth trajectory, former SA president Zuma sentenced to 15m in prison, United orders 270 new planes – biggest addition to its fleet ever, Japan ret sales 8.2% (8.1%e), UK home prices 13.4% (13.6%e), France cons conf 102 (100e), Spain ret sales 19.6% (41%p), Spain CPI 2.4% as exp, EU cons conf -3.3 unch, German CPI 2.1% as exp, Brazil PPI 32.52% (31.72%p), US house prices 14.88% (14.70%e), US cons conf 127.3 (119e), S&P flat; Wed: Fed gov Waller favors tapering earlier – starting with MBS, WHO declares China malaria free, Feds RRP utilization climbs to just shy of $1trln, FINRA fines Robinhood $70m, SKorea IP 15.6% (18.3%e), Japan IP 22% (27%e), Japan cons conf 37.4 (35e), China mfg PMI 50.9 (50.8e) / nonmfg PMI 53.5 (55.3e), Australia credit growth 1.9% (1.6%e), S. Africa credit growth -0.42% (-0.95%e), France PPI 7.2% (7.3%p) / CPI 1.9% as exp, German unemp 5.9% as exp, HK ret sales 10.5% (6.9%e), Italy CPI 1.3% (1.4%e), EU Core CPI 0.9% as exp, Brazil unemp 14.7% as exp), US ADP 692k (600k exp), S&P +0.1%; Thur: 100th anniversary of the Chinese Communist Party – Xi vowed to defeat any attempt toward Taiwan independence, Riksbank unch as exp / revised up inflation expectations, UAE blocks OPEC+ output increase deal, US House of Rep passes $700bn infrastructure bill, Indonesia announces 2w lockdown, key holdouts (China, India, Turkey) sign up global corporate tax reform, Russia unemp 4.9% (5.1%e) / ret sales 27.2% (26.3%e), China Caixin mfg PMI 51.3 (51.9e), Indonesia CPI 1.33% (1.45%e), German ret sales -2.4% (-1%e), Swiss CPI 0.6% (0.7%e), Italy unemp 10.5% (10.7%e), EU unemp 7.9% (8%e), US initial claims 364k (388k exp), US Markit mfg PMI 62.1 (62.6e), ISM Mfg 60.6 (60.9e), S&P +0.5%; Fri: US NFP 850k (720k exp) / unemp rate 5.9% (5.6%e) / AHE 3.6% as exp, UN says 400k people in Ethiopia’s Tigray region suffering from famine, OPEC+ fails to come to agreement, the last American troops leave Afghanistan – ending 20y military presence, S. Korea CPI 2.4% (2.5%e), EU PPI 9.6% as exp (7.6%p), Brazil IP 24% (24.8%e), US durable goods 2.3% as exp, S&P +0.8%

Manufacturing PMI (high-to-low): Netherlands 68.8 (previous month 69.4), Austria 67 (previous 66.4), Switzerland 66.7 (prev 69.9), Sweden 65.8/66, Germany 65.1/64.4, UK 63.9/65.6, Czech Republic 62.7/61.8, Italy 62.2/62.3, Norway 60.8/58.52, US 60.6/61.2, Spain 60.4/59.4, Poland 59.4/57.2, France 59/59.4, Greece 58.6/58, Taiwan 57.6/62, Canada 56.5/57, Brazil 56.4/53.7, Hungary 54.7/53.1, South Korea 53.9/53.7, Indonesia 53.5/55.3, Japan 52.4/53, China 51.3/52, Turkey 51.3/49.3, Singapore 50.8/50.7, Russia 49.2/51.9, Mexico 48.8/47.6, India 48.1/50.8, Vietnam 44.1/53.1. Services PMI: US 64.8/70.4, UK 61.7/62.9, Germany 58.1/52.8, France 57.4/56.6, Japan 47.2/46.5.

Weekly Close: S&P 500 +1.7% and VIX -0.55 at +15.07. Nikkei -1.0%, Shanghai -2.5%, Euro Stoxx -0.2%, Bovespa +0.3%, MSCI World +0.7%, and MSCI Emerging -1.8%. USD rose +2.5% vs Brazil, +1.5% vs Russia, +0.9% vs Australia, +0.8% vs India, +0.7% vs Indonesia, +0.7% vs South Africa, +0.6% vs Sweden, +0.6% vs Euro, +0.4% vs Sterling, +0.3% vs Yen, +0.3% vs China, +0.2% vs Canada, and +0.2% vs Chile. USD fell -11.5% vs Ethereum, -1.2% vs Bitcoin, -0.8% vs Turkey, and -0.3% vs Mexico. Gold +0.3%, Silver +1.4%, Oil +1.6%, Copper +0.1%, Iron Ore +1.3%, Corn +11.4%. 5y5y inflation swaps (EU flat at 1.58%, US -2bps at 2.34%, JP -2bps at 0.31%, and UK -5bps at 3.69%). 2yr Notes -3bps at 0.24% and 10yr Notes -10bps at 1.43%.

June Monthly Close: S&P 500 +2.2% and VIX -0.93 at +15.83. Nikkei -0.2%, Shanghai -0.7%, Euro Stoxx +1.4%, Bovespa +0.5%, MSCI World +1.4%, and MSCI Emerging -0.1%. USD rose +18.5% vs Ethereum, +5.5% vs Bitcoin, +4.0% vs South Africa, +3.1% vs Australia, +3.1% vs Euro, +3.1% vs Sweden, +2.8% vs Canada, +2.8% vs Sterling, +2.5% vs Turkey, +2.4% vs India, +1.7% vs Chile, +1.5% vs Indonesia, +1.4% vs Yen, and +1.4% vs China. USD fell -4.8% vs Brazil, -0.4% vs Russia, and -0.1% vs Mexico. Gold -7.1%, Silver -6.4%, Oil +10.6%, Copper -8.3%, Iron Ore +15.1%, Corn +7.9%. 5y5y inflation swaps (EU -1bp at 1.59%, US -11bps at 2.35%, JP +1bp at 0.33%, and UK -6bps at 3.69%). 2yr Notes +11bps at 0.25% and 10yr Notes -13bps at 1.47%.

Q2 Quarterly Close: S&P 500 +8.2% and VIX -3.57 at +15.83. Nikkei -1.3%, Shanghai +4.3%, Euro Stoxx +5.4%, Bovespa +8.7%, MSCI World +7.3%, and MSCI Emerging +4.4%. USD rose +69.0% vs Bitcoin, +5.5% vs Turkey, +2.1% vs Chile, +1.7% vs India, +1.3% vs Australia, and +0.4% vs Yen. USD fell -14.2% vs Ethereum, -11.8% vs Brazil, -3.3% vs South Africa, -3.3% vs Russia, -2.4% vs Mexico, -2.1% vs Sweden, -1.5% vs China, -1.3% vs Canada, -1.1% vs Euro, -0.3% vs Sterling, and -0.2% vs Indonesia. Gold +3.5%, Silver +7.2%, Oil +24.5%, Copper +7.6%, Iron Ore +26.3%, Corn +23.2%. 5y5y inflation swaps (EU +5bps at 1.59%, US -8bps at 2.35%, JP +7bps at 0.33%, and UK -13bps at 3.69%). 2yr Notes +9bps at 0.25% and 10yr Notes -27bps at 1.47%.

First Half-Year Close: S&P 500 +14.4% and VIX -6.92 at +15.83. Nikkei +4.9%, Shanghai +3.4%, Euro Stoxx +13.5%, Bovespa +6.5%, MSCI World +12.2%, and MSCI Emerging +6.5%. USD rose +17.0% vs Turkey, +7.6% vs Yen, +3.9% vs Sweden, +3.4% vs Chile, +3.2% vs Indonesia, +3.0% vs Euro, +2.6% vs Australia, +1.7% vs India, and +0.1% vs Mexico. USD fell -65.6% vs Ethereum, -17.3% vs Bitcoin, -4.3% vs Brazil, -2.8% vs South Africa, -2.6% vs Canada, -1.2% vs Russia, -1.2% vs Sterling, and -1.1% vs China. Gold -7.4%, Silver -1.2%, Oil +52.2%, Copper +21.6%, Iron Ore +28.1%, Corn +35.4%. 5y5y inflation swaps (EU +33bps at 1.59%, US +4bps at 2.35%, JP +20bps at 0.33%, and UK +19bps at 3.69%). 2yr Notes +13bps at 0.25% and 10yr Notes +55bps at 1.47%.

YTD Equity Indexes (high-to-low): Venezuela +38.5% priced in US dollars (+282.8% priced in bolivar), UAE +36.7% priced in dollars (+36.7% in dirham), Saudi Arabia +26.4% in dollars (+26.3% in riyal), Taiwan +20.6% (+20.2%), Austria +20.4% (+24.9%), Canada +20% (+16%), Russia +19.5% (+17.5%), Norway +17.2% (+17.6%), Sweden +17% (+22.1%), Russell +16.8%, S&P 500 +15.9%, Mexico +14.8% (+14%), Poland +14.8% (+17.5%), France +14.4% (+18%), South Africa +14% (+10.9%), Netherlands +13.8% (+17.4%), NASDAQ +13.6%, MSCI World +13.2% (+13.2%), Hungary +13.1% (+13%), Belgium +11.6% (+15.2%), UK +11.5% (+10.3%), Euro Stoxx 50 +11.4% (+15%), Finland +11.2% (+15.3%), Czech Republic +10.9% (+12.2%), Israel +10.6% (+12.6%), India +10.2% (+12.4%), Denmark +10.1% (+14.2%), Germany +9.9% (+14.1%), Korea +9.8% (+14.2%), Brazil +9.6% (+7.2%), Italy +9.6% (+13.7%), Ireland +9.2% (+12.8%), Argentina +8.6% (+23.6%), Australia +8.2% (+11%), Singapore +7.8% (+10%), Switzerland +7% (+11.8%), Spain +6.9% (+10.3%), Greece +6.2% (+9.6%), HK +3.8% (+4%), China +2.2% (+1.3%), Thailand +1.7% (+8.9%), Chile +0.3% (+3.3%), Portugal -2% (+1.2%), Indonesia -2.4% (+0.7%), Japan -2.6% (+4.9%), Philippines -4.3% (-1.9%), New Zealand -5.3% (-2.9%), Malaysia -9% (-5.8%), Colombia -18.3% (-10.3%), and Turkey -20.3% (-6.8%).

Anecdote (Feb 2017): “You either have risk on, or you do not,” said Simplicity, walking Occam’s Razor, “There are only these two states, nothing more.” He lifted both hands, palms up, to illustrate the point. “Now, reflect on the levels of anxiety you have experienced in each state throughout your career.” And decades of an agitated existence flashed before my eyes. “There are times when you are carrying an enormous amount of risk and sleep like a newborn. And there are times when you have a tiny amount of risk yet feel deeply perturbed.” Sometimes you carry no risk and feel supremely relaxed. “But the most interesting state is the one where you have no risk and experience intense anxiety.” There are only a few times in a year to make a lot of money. When those times occur, you need to be involved, aggressive, big. The rest of the year it is best to do as little as possible. “How do you tell the few opportune times from all the others?” asked Simplicity, weighing imaginary scenarios in each hand, “The answer is: you just do.” And I smiled, because of course, that is at once the simplest and most complex answer in all the world. “I was wrong about the election result,” he explained. “And I was then wrong about the reaction to the election.” He bought gold when Florida looked likely to fall. It rallied, then reversed unexpectedly. “I knew enough to immediately get out of all of my risk, everything.” Leaving him to observe the world with clear eyes. “For two days I watched, as a growing anxiety consumed me. I had no risk on at all but wanted to jump off a bridge.” And Simplicity paused, reflecting. “There are times when you just know that something important is happening. And that you must take risk.”

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, drink 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.