“Would I want my eldest son, who is 15 years old, eventually joining the types of formations that we are currently wielding,” asked Pete Hegseth, rhetorically, to 150 high-ranking commanders gathered in Quantico, Virginia. America’s new Secretary of War outlined his plan to lift standards across our armed forces. “Every parent deserves to know their son or daughter that joins our ranks is entering exactly the kind of unit that the secretary of War would want his son to join.” Hegseth, father of a 15-year-old, called this the War Department’s new “Golden Rule”: “Do unto your unit as you would have done unto your own child’s unit.”

Overall: “The government shutdown will begin at 12:01 a.m. EDT on October 1, 2025, after Congress failed to pass appropriations legislation for the new fiscal year,” flashed across my feed. I was flying home from Washington, a day of meetings, so many exciting things underway as global markets transition to blockchain-based infrastructure, now led by the United States. I asked most folks about the likelihood of a shutdown. And the national guard that patrols their streets. No one seemed terribly bothered by the former and welcomed the latter. The stock market traded lower that evening as equity futures opened on electronic exchanges, providing those of us with money on the line to place our bets. Someday soon, equity markets, fixed-income, commodity, derivative, and everything you could ever imagine trading, will open, one by one, and then never close, ever, just like crypto. The government shutdown wasn’t the only thing happening this week. America approved the use of longer-range weapons by Ukrainians against the world’s second largest nuclear power. Hamas was pressed by President Trump to return the hostages or face annihilation. And Elon Musk had just become the first human to be worth $500bln. The dollar index barely budged on the shutdown news. The Swiss franc strengthened slightly. Japan’s Yen too. Treasury bond prices moved imperceptibly higher. Gold hit a new record high. But the reality is not one market move was mildly noteworthy considering the shutdown news. Except for bitcoin, which traded noticeably higher even as equity markets struggled. It was the kind of move that broke recent patterns and tends to mean the balance between buyers and sellers is shifting in favor of the former. Beneath the surface, the fundamentals for crypto assets have been quietly improving in recent months and progress is accelerating. At least that’s what I’ve observed. But in the end, what we see is of little consequence. The only fundamental that truly matters is whether there are more buyers than sellers in a market, or vice versa.

Week-in-Review: Mon: Mexico unemp rate 2.93% (2.85%e). China mfg PMI 49.8 (49.6e). Japan IP -1.3% (-0.9%e). South Korea IP 0.9% (2.6%e). Israel base rate 4.50% as exp. Netanyahu to meet Trump amid Gaza truce push. Gold hits high as concerns mounted over a US government shutdown. S&P +0.3%. Tue: US cons conf 94.2 (96.0). UK GDP 1.3% (1.2%e). Australia cash rate target unch 3.60% as exp. US Government is set for shutdown, as funding expires at midnight, with essential workers to work without pay and non-essential federal employees to be furloughed. S&P +0.4%. Wed: US ISM mfg 49.1 (49.0e), ADP emp change -32k (+51k e). Eurozone CPI est 2.2% as exp, core 2.3% as exp. South Korea CPI 2.1% (2.0%e). India repurchase rate unch 5.50% as exp. US government shutdown for the first time since 2019. US Supreme Court order states Trump cannot oust Lisa Cook, who will remain in her position until January. S&P +0.3%. Thu: Eurozone unemp rate 6.3% (6.2%e). Trump weighs slashing “thousands” of federal jobs as the government shutdown extends into a second day. OpenAI completes share sale at record $500b valuation. S&P +0.1%. Fri: US ISM services index 50.0 (51.7e). Turkey CPI 33.29% (32.45%e). Hamas agrees to release all Israeli hostages as part of Trump’s terms for peace ahead of Sunday deadline. S&P flat.

Manufacturing PMI (high-to-low): India 57.7 (previous month 59.3), Sweden 54.6 (previous month 55), Netherlands 53.7 (previous mth 51.9), Greece 52 (prev mth 54.5), Hungary 51.5/49.1, Spain 51.5/54.3, China 51.2/50.5, South Korea 50.7/48.3, Indonesia 50.4/51.5, Vietnam 50.4/50.4, South Africa 50.2/50.1, Singapore 50.1/50, Norway 49.9/49.56, Mexico 49.6/50.2, Germany 49.5/49.8, Czech Republic 49.2/49.4, US 49.1/48.7, Italy 49/50.4, Japan 48.5/49.7, Russia 48.2/48.7, France 48.2/50.4, Poland 48/46.6, Canada 47.7/48.3, Austria 47.6/49.1, Taiwan 46.8/47.4, Turkey 46.7/47.3, Brazil 46.5/47.7, Switzerland 46.3/49, UK 46.2/47. Services PMI: India 61.6/62.9, Sweden 57.7/53.8, Spain 54.3/53.2, US 54.2/54.5, Ireland 53.5/50.6, Japan 53.3/53.1, China 52.9/53, Italy 52.5/51.5, Australia 52.4/55.8, Germany 51.5/49.3, UK 50.8/54.2, France 48.5/49.8, Russia 47/50, Brazil 46.3/49.3.

Weekly Close: S&P 500 +1.1% and VIX +1.36 at +16.65. Nikkei +0.9%, Shanghai +1.4%, Euro Stoxx +2.9%, Bovespa -0.9%, MSCI World +1.4%, MSCI Emerging +3.6%, Bitcoin +12.2%, and Ethereum +12.3%. USD rose +0.6% vs Chile, +0.4% vs Turkey, +0.2% vs Mexico, +0.1% vs Canada, and +0.1% vs India. USD fell -1.6% vs Russia, -1.4% vs Yen, -1.2% vs Indonesia, -0.9% vs Australia, -0.6% vs South Africa, -0.6% vs Sterling, -0.4% vs Sweden, -0.3% vs Euro, -0.2% vs China, and -0.1% vs Brazil. Gold +2.6%, Silver +2.8%, Oil -7.4%, Copper +7.1%, Iron Ore -1.7%, Corn -0.7%. 10yr Inflation Breakevens (EU -3bps at 1.76%, US -4bps at 2.34%, JP +3bps at 1.61%, and UK -4bps at 3.09%). 2yr Notes -7bps at 3.58% and 10yr Notes -6bps at 4.12%.

Sept Mthly Close: S&P 500 +3.5% and VIX +0.92 at +16.28. Nikkei +5.2%, Shanghai +0.7%, Euro Stoxx +1.5%, Bovespa +3.4%, MSCI World +3.1%, MSCI Emerging +7.0%, Bitcoin +5.2%, and Ethereum -5.0%. USD rose +2.2% vs Russia, +1.3% vs Canada, +1.1% vs Turkey, +1.1% vs Indonesia, +0.7% vs India, +0.6% vs Yen, and +0.4% vs Sterling. USD fell -2.2% vs South Africa, -2.0% vs Brazil, -1.8% vs Mexico, -1.1% vs Australia, -0.5% vs Chile, -0.4% vs Sweden, -0.4% vs Euro, and -0.1% vs China. Gold +10.2%, Silver +14.5%, Oil -1.7%, Copper +5.8%, Iron Ore -1.1%, Corn -1.1%. 10yr Inflation Breakevens (EU +1bps at 1.74%, US -4bps at 2.37%, JP +1bps at 1.59%, and UK +5bps at 3.11%). 2yr Notes -1bps at 3.61% and 10yr Notes -8bps at 4.15%.

Q3 Quarterly Close: S&P 500 +7.8% and VIX -0.45 at +16.28. Nikkei +11.0%, Shanghai +12.7%, Euro Stoxx +3.1%, Bovespa +5.3%, MSCI World +7.0%, MSCI Emerging +10.1%, Bitcoin +6.1%, and Ethereum +64.9%. USD rose +5.8% vs Russia, +4.5% vs Turkey, +3.5% vs India, +3.3% vs Chile, +2.7% vs Yen, +2.6% vs Indonesia, +2.3% vs Canada, +2.1% vs Sterling, and +0.5% vs Euro. USD fell -2.5% vs South Africa, -2.3% vs Mexico, -2.0% vs Brazil, -0.6% vs China, -0.5% vs Australia, and -0.4% vs Sweden. Gold +15.2%, Silver +27.4%, Oil +0.5%, Copper -5.7%, Iron Ore +10.5%, Corn -2.4%. 10yr Inflation Breakevens (EU flat at 1.74%, US +9bps at 2.37%, JP +6bps at 1.59%, and UK +8bps at 3.11%). 2yr Notes -11bps at 3.61% and 10yr Notes -8bps at 4.15%.

Year-to-Date Close through Sept 30th: S&P 500 +13.7% and VIX -1.07 at +16.28. Nikkei +12.6%, Shanghai +15.9%, Euro Stoxx +10.0%, Bovespa +21.6%, MSCI World +16.2%, MSCI Emerging +25.2%, Bitcoin +21.7%, and Ethereum +23.5%. USD rose +17.6% vs Turkey, +3.7% vs India, and +3.5% vs Indonesia. USD fell -27.0% vs Russia, -14.9% vs Sweden, -13.9% vs Brazil, -12.1% vs Mexico, -11.8% vs Euro, -8.3% vs South Africa, -6.9% vs Sterling, -6.4% vs Australia, -5.9% vs Yen, -3.3% vs Chile, -3.2% vs Canada, and -2.4% vs China. Gold +40.0%, Silver +52.5%, Oil -8.9%, Copper +17.2%, Iron Ore +2.6%, Corn -6.4%. 10yr Inflation Breakevens (EU -3bps at 1.74%, US +3bps at 2.37%, JP +12bps at 1.59%, and UK -41bps at 3.11%). 2yr Notes -63bps at 3.61% and 10yr Notes -42bps at 4.15%.

2025 Year-to-Date Equity Index Returns: Greece +60.3% priced in US dollars (+41.3% priced in euros), Czech Republic +57.7% priced in US dollars (+34.6% priced in koruna), Korea +55% in dollars (+47.9% in won), Poland +54.2% (+35.7%), Colombia +53.5% (+34.9%), Spain +52.5% (+34.4%), Hungary +51.6% (+26.6%), South Africa +49.5% (+36.2%), Israel +47.1% (+33.9%), Portugal +46.9% (+29.5%), Austria +46.7% (+29.9%), Italy +42.9% (+26.5%), Mexico +42% (+25.2%), Brazil +38.7% (+19.9%), Germany +38.3% (+22.5%), Norway +36.6% (+19.3%), Ireland +36.4% (+20.2%), Chile +36.4% (+32.5%), HK +35.1% (+35.3%), Finland +32% (+16.9%), Belgium +31.2% (+15.6%), Euro Stoxx 50 +31% (+15.4%), Sweden +29.4% (+9.9%), Canada +27.1% (+23.2%), Vietnam +25.5% (+29.9%), Taiwan +25.4% (+16.2%), UK +25% (+16.1%), France +24.2% (+9.5%), Netherlands +24.1% (+9.4%), Singapore +23.5% (+16.5%), Switzerland +22.7% (+7.8%), Japan +22.2% (+14.7%), China +18.7% (+15.8%), NASDAQ +18%, Australia +17.7% (+10.2%), MSCI World +17% priced in US dollars, S&P 500 +14.2%, Indonesia +12% (+14.7%), Russell +11%, New Zealand +7.5% (+3.1%), UAE +6.9% (+6.9%), Malaysia +5.8% (-0.4%), India +1.5% (+5.3%), Thailand -2.2% (-7.6%), Saudi Arabia -4.3% (-4.5%), Turkey -6.3% (+10.5%), Philippines -6.4% (-6.4%), Denmark -13.1% (-23%), Argentina -48.5% (-28.8%).

Abrrrations: Investors and traders seem to be projecting patterns from 1999 onto today’s markets. Jeff Bezos joined the chorus this week, and he’s rich, so he should know, right? They see parallels and think history repeats. In some ways it often does. But in the boom that started with the Netscape IPO in Aug 1995 and ended in the summer of 2000, the price of gold went down. Over that 5yr period, the S&P nearly tripled, while gold prices fell 25%. It’s one of those inconvenient facts that are easy to set aside, ignore as an aberration, and carry on in ignorance.

Abrrrations II: I was born 59 years ago today, and the annual inflation rate was 2.9% that year. The Consumer Price Index back then was 33. When I started trading, 22 years later, inflation was 4.8% and the CPI Index was 125. When Chairman Bernanke invented a clever term for money printing in Nov 2008, consumer prices had just fallen 1.7% in a month, gasoline had collapsed 30%, and the CPI Index was 212. Today the CPI Index is 317. Inflation cut 90% of the dollar’s purchasing power over my lifetime. 61% over my career. And 33% since Bernanke went Brrrr.

Abrrrations III: Why would gold suffer from outflows in the late-1990s tech boom, but attract record inflows in the AI tech boom? What might this aberration foreshadow? All the booms in my career have ended in deflationary busts. Policy stimulus has been increasingly swift and powerful, eroding the purchasing power of a dollar by 61% in that time. So perhaps markets are signaling that despite growing bubble fears, we are entering an inflationary boom. Or, possibly, that in the next bust, debt dynamics will force policy makers into a wild inflation. Maybe both?

Abrrrations IV: OpenAI released ChatGPT on Nov 30, 2022, kicking off the AI trade. Gold surged +120% since then, and the S&P 500 is +70%. Trillions will flow into Nvidia chips and data centers, mirroring dot-com exuberance. But key differences undermine the analogy: the dot-com frenzy relied on intangible software and unproven business models. Pets.com. In contrast, this cycle emphasizes infrastructure - hardware, networks, energy systems - creating durable assets with measurable productivity gains. Capex as a foundational force, not simply speculative.

Abrrrations V: AI infrastructure demands extend to essential resources, also differentiating today from prior tech cycles. LLMs consume electricity equivalent to small countries and vast water volumes for cooling, straining national supplies. Unlike the Pets.com website, AI requires investments in power grids, solar, wind, nuclear (someday fusion). These project commitments transform capital spending into a multi-decade buildout, not a short-lived hype cycle. Such large investments uncover our real-world supply constraints, evident in the surge of copper prices.

Abrrrations VI: More buyers than sellers, simultaneously, in the AI theme and gold appear to be signaling it’s time to recalibrate to an inflationary innovation paradigm. And it’s happening as the Fed cuts rates when they should probably be hiking, not unlike the 1990s. Having watched the Fed reaction function become more aggressive in each cycle, markets may be signaling an inflationary resolution for the globe’s $300 trillion debt overhang. As investors hiding in traditional value factor investments continue to get burrried in a world where tomorrow’s value is in innovation and inflation protection.

Anecdote: “If you haven't read hundreds of books, you are functionally illiterate, and you will be incompetent, because your personal experiences alone aren’t broad enough to sustain you.” It is one of my favorite quotes from General James Mattis, our former Defense Secretary. My son Jackson and I were discussing the unusual meeting that Pete Hegseth, our current Secretary of War, had called for his top 150 commanders this week in Quantico. I read more about the military these days, with three of our children already serving, and our 16-year-old leaning that way. “Reading is an honor and a gift from a warrior or historian who - a decade or a thousand decades ago - set aside time to write.” Mattis wrote a brilliant book, Call Sign Chaos, which is what his men call him. Chaos stands for Commander Has Another Outstanding Suggestion. “Risk aversion will damage the long-term health, even survival, of the organization, because it will undercut disciplined but unregimented thinking.” Mattis was critical of certain aspects of our military operations, especially of politicians who restrain our commanders and adjust strategy in self-serving ways to meet short-term domestic agendas. “You must unleash initiative rather than suffocate it.” History tells us the insider is rarely also the disrupter. Change agents are unpopular and celebrated only after they succeed. As remarkable as Mattis was, he stepped down as Defense Secretary in frustration. Perhaps he was too close to the institutions he cherished to bring about the change he sought. “How do you prepare your men for the shock of battle? For one thing, you need to make sure that your training is so hard and varied that it removes complacency and creates muscle memory - instinctive reflexes - within a mind disciplined to identify and react to the unexpected.” I told my son it’s too soon to know how new leadership will reshape our military, but disruption is certainly underway. Jackson felt anything done to lift standards, and strip away things that impair our mission are welcomed, no matter how disruptive and insensitive such actions may appear. Because the military is unlike any other institution. “Be polite, be professional, but have a plan to kill everybody you meet.”

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.