Dusted off an anecdote from 2023 about AI, trading, and the flaws that make us human (see below). I take late summer off from writing. Making more space for family, reading, wandering. Wishing the same for you. All the very best, Eric
Week-in-Review: Mon: Canada housing starts 294.1k (265.0k). Brazil eco activity 1.38% (1.20%e). Hamas said to agree to Gaza truce deal proposed by Qatar and Egypt that would free half the hostages in exchange for Palestinian prisoners and partial Israeli withdrawal. S&P flat. Tue: US housing starts 1428k (1297k e), building permits 1354k (1386k e). Canada CPI 1.7% (1.8%e). Trump continues to push for Putin-Zelensky meeting after talks with both. Wyoming launched the Frontier Stable Token, becoming the first US state to issue its own stablecoin. S&P -0.6%. Wed: Eurozone CPI 2.0% as exp, core 2.3% as exp. UK CPI 3.8% (3.7%e), core 3.8% (3.7%e), RPI 4.8% (4.5%e). Israel base rate 4.5% as exp. Sweden policy rate 2.00% as exp. Indonesia BI-Rate 5.00% (5.25%e). Fed’s Lisa Cook signaled her intention to remain at the central bank, despite calls for her resignation by Trump over allegations of mortgage fraud. S&P -0.2%. Thu: US init jobless claims 235k (225k e), cont claims 1972k (1960k e). Eurozone PMI mfg 50.5 (49.5e), serv 50.7 (50.8e), comp 51.1 (50.6e). UK PMI mfg 47.3 (48.3e), serv 53.6 (51.8e), comp 53.0 (51.6e). DOJ urges Fed’s Powell to remove Cook as investigation gets underway. S&P -0.4%. Fri: Powell struck dovish tone in Jackson Hole speech (stocks rally, yields, decline, crypto surges). US takes nearly 10% stake in Intel. Canada to remove several retaliatory tariffs, seeking to lower tensions with the US. S&P +1.5%.
Weekly Close: S&P 500 +0.3% and VIX -0.87 at +14.22. Nikkei -1.7%, Shanghai +3.5%, Euro Stoxx +1.4%, Bovespa +1.2%, MSCI World -1.0%, MSCI Emerging -0.8%, Bitcoin -0.4%, and Ethereum +9.6%. USD rose +1.1% vs Indonesia, +0.6% vs Russia, +0.5% vs Brazil, +0.3% vs Turkey, +0.3% vs Australia, +0.2% vs Sterling, and +0.1% vs Canada. USD fell -0.9% vs Mexico, -0.8% vs South Africa, -0.8% vs Chile, -0.6% vs Sweden, -0.2% vs China, -0.2% vs Yen, -0.1% vs Euro, and flat vs India. Gold +1.1%, Silver +2.8%, Oil +2.7%, Copper -0.6%, Iron Ore -0.4%, Corn +1.5%. 10yr Inflation Breakevens (EU -2bps at 1.73%, US +3bps at 2.42%, JP +7bps at 1.56%, and UK +3bps at 3.03%). 2yr Notes -5bps at 3.70% and 10yr Notes -6bps at 4.26%.
2025 Year-to-Date Equity Index Returns: Greece +62.1% priced in US dollars (+43.2% priced in euros), Hungary +56.1% priced in US dollars (+33% in forint), Poland +53.1% in dollars (+35.3% in zloty), Czech Republic +51.1% (+30.6%), Spain +50.4% (+32.8%), Colombia +48% (+34.7%), Austria +47.4% (+30.7%), Italy +42.9% (+26.7%), Portugal +42.6% (+25.9%), Korea +40.6% (+32.1%), Germany +38% (+22.4%), South Africa +36.5% (+26.1%), Chile +36.3% (+32%), Ireland +36% (+20.1%), Israel +34.7% (+26.3%), Norway +34.7% (+19%), Mexico +34.2% (+19.6%), Finland +31.1% (+16.3%), Brazil +30.6% (+14.7%), Belgium +28.8% (+13.7%), Euro Stoxx 50 +27% (+12.1%), Sweden +25.8% (+8.3%), HK +25.6% (+26.3%), Vietnam +25.5% (+29.9%), UK +23.2% (+14.1%), France +22.3% (+8%), Singapore +19.8% (+12.3%), Switzerland +19.4% (+5.7%), Canada +19.2% (+14.6%), Netherlands +17.7% (+3.9%), China +16.2% (+14.1%), Australia +15.3% (+9.9%), Japan +14.5% (+6.9%), MSCI World +11.4% in dollars, NASDAQ +11.3%, Indonesia +10.7% (+11%), Taiwan +10.7% (+3.2%), S&P 500 +10%, UAE +8.4% (+8.4%), Russell +5.9%, New Zealand +4.4% (-0.5%), India +3% (+5.2%), Malaysia +2.9% (-2.7%), Turkey -0.2% (+15.7%), Philippines -1.3% (-3.8%), Thailand -5.4% (-10.5%), Saudi Arabia -9.6% (-9.7%), Denmark -13.8% (-23.5%), Argentina -35.2% (-16.9%).
Anecdote (April 2023): “Why are we so often our own worst enemies?” I asked myself. I didn’t bother asking GPT4, it couldn’t possibly give me the real answer. We feed these large language models everything we’ve ever learned, which is why they tell us what we already know. And this question remains as deep a mystery as any in the universe. I first started to appreciate it as a young trader. The profession requires one to make frequent decisions, many of which are wrong. Both winning and losing trades can be cut short or left to run. And the profit/loss score card cannot be denied. In such a pursuit, each decision should be made coldly, rationally, with the sole objective of maximizing profit while minimizing loss. Yet there are times when traders act otherwise. We trade out of fear, greed, arrogance, stubbornness, narcissism, boredom, addiction. We add to losing longs in the irrational belief that by buying more, we may reverse a declining market. Or vice versa. We swear that if the market lets us get away with it one last time, we’ll never do it again. Sometimes a Hail Mary trade may work, even spectacularly. And so reckless behavior is occasionally rewarded. But of course, in time, the market hunts down those unable to control their self-destructive impulses and ruins them. The ones who survive this battle with themselves learn to make decisions that are hard, humbling, and exploit the behavioral weaknesses and lack of discipline in others. Naturally, such elemental flaws manifest in every aspect of who we are; personally, professionally, politically. They are the source of the world’s infinite complexity, our pain, political dysfunction too. It is why we must celebrate those rare dissenters with the courage to take a stand, forcing us to face our reflection when we succumb to our inner enemies. But these mysterious flaws are also the source of our sublime beauty. If we optimized for cold rationality, we would be utterly boring algorithms. Perhaps like the AIs we are creating. Which I suspect will never fully appreciate us.
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.