“I pulled an Icarus, flew too close to the sun,” said SEAL on speakerphone, headed for a surf with my oldest son, the two of them out at Camp Pendleton. “Got cocky right at the end.” Three weeks into the second phase of SEAL training, there’s a twenty-minute underwater test. Instructors rip your mask off, your air out, and beat the crap out of you, all while you’re attempting to work your way through various high pressure recovery procedures, at the bottom of the pool, timed. “Sixteen minutes in, I thought I had it handled, until I didn’t,” said SEAL, mentally preparing to restart phase-two from the beginning.

Overall: “Priceless,” said Laurent Nunez, France’s mistaken interior minister, estimating the value of the collateral stolen from the second story of the Louvre. On a continent not known for its efficiency or entrepreneurial ambition, the robbery was breathtakingly well executed and bold. It had been over a year since Mario Draghi published his scathing European Competitiveness Report, and virtually nothing had changed. Naturally, the technological gap between Europe, China and the US expanded its widening chasm. The continent’s abject failure to credibly join the AI race has left it so far behind that its only remaining strategy is to hope that the whole thing turns out to be a mistake. It is a Napoleonic strategy, of course. Back in the days when France matched ambition with action, Napolean said, “Never interrupt your enemy when he is making a mistake.” And it could be that AI spending is a capital misallocation of historic proportion, but Napoleon also said, “I have fought sixty battles, and I have learned nothing which I did not know at the beginning. Take the initiative.” Anyhow, the thieves stole his jewels in a 7-minute raid. Broad daylight. If just one tenth of Parisians worked with such initiative, the Chinese would be speaking French in a decade. But alas, such bursts of European productivity gains are isolated events, and the continent continues to draw down on its accumulated wealth. It is what happens to all nations that fail to take risks and fight to win. Argentina was once the world’s 10th richest nation, and it struggled this week to get US banks to agree to a $20bln emergency financing. Goldman, JP Morgan, Bank of America, and Citi sought to back the loans with commodities like copper, uranium, and future oil revenues. Argentina’s promises are now worthless. And creditors are unwilling to bet that its economy will produce sufficient wealth to secure the principal and interest. You see, the capacity to produce material wealth is rare. In economic terms this capacity is the only thing that is truly priceless. Everything else is just collateral.

Week-in-Review: Mon: Poland PPI-1.2% (-1.0%e). Amazon Web Services outage highlighted the internet’s dependance on the company’s cloud services. Trump signs rare earths deal with Australia to counter China. Trump reiterated his threat to follow through on tariff hike on Chinese goods if no deal is reached by the Nov 1 deadline. S&P +1.1%. Tue: Canada CPI 2.4% (2.2%e). Hungary rate decision 6.5% as exp. Gold and silver see a steep selloff following record-breaking rally. Sanae Takaichi becomes Japan’s first female Prime Minister. S&P flat. Wed: UK CPI 3.8% (4.0%e), Core 3.5% (3.7%e), RPI 4.5% (4.7%e). South Africa CPI 3.4% as exp, Core 3.2% (3.1%e). Russia IP 0.3% (1.4%e). South Korea base rate unch 2.50% as exp. Indonesia BI-Rate 4.75% (4.50%e). US set to announce a substantial new round of sanctions against Russia, following Trump backing off plans for a meeting with Putin. S&P -0.5%. Thu: US home sales 4.06m as exp. Mexico ret sales 2.4% (2.6%e). Eurozone cons conf -14.2 (-15.0e). Turkey one-week repo rate 39.50% as exp. Ukraine key rate 15.50% (14.50%e). Oil gains after US blacklisted Russia’s biggest oil companies to cut off Russian revenue for the war. Air traffic controllers face a payless payday next Tuesday as US government shutdown continues, potentially exacerbating staffing shortages and causing flight disruptions. US confirms Trump-Xi meeting for next Thursday at APEC summit. S&P +0.6%. Fri: US CPI 3.0% (3.1%e), Core 3.0% (3.1%e), UMich sent 53.6 (54.5e). Russia key rate 16.50% (16.00%e). Trump terminates trade talks with Canada following a critical Ontario sponsored ad aired. Trump to name Michael Selig for CFTC Chair. S&P +0.8%.

Weekly Close: S&P 500 +1.9% and VIX -4.41 at +16.37. Nikkei +3.6%, Shanghai +2.9%, Euro Stoxx +1.7%, Bovespa +1.9%, MSCI World +1.7%, MSCI Emerging +2.0%, Bitcoin +3.9%, and Ethereum +2.5%. USD rose +1.5% vs Yen, +0.9% vs Sterling, +0.4% vs Mexico, +0.2% vs Euro, +0.1% vs Indonesia, and +0.1% vs Turkey. USD fell -1.8% vs Russia, -1.7% vs Chile, -0.6% vs South Africa, -0.6% vs Sweden, -0.4% vs Brazil, -0.2% vs Australia, -0.2% vs Canada, -0.1% vs India, and -0.1% vs China. Gold -1.8%, Silver -3.0%, Oil +7.6%, Copper +3.1%, Iron Ore -0.6%, Corn +0.2%. 10yr Inflation Breakevens (EU +3bps at 1.75%, US +3bps at 2.30%, JP +3bps at 1.58%, and UK -8bps at 2.95%). 2yr Notes +2bps at 3.48% and 10yr Notes -1bp at 4.00%.

2025 Year-to-Date Equity Index Returns: Korea +68.2% priced in US dollars (+64.3% priced in won), Colombia +61% priced in US dollars (+41% priced in pesos), Poland +57.8% in dollars (+40% in zloty), Hungary +55.3% (+31.3%), Czech Republic +54.8% (+33.7%), Greece +53.7% (+36.9%), Spain +53.7% (+36.8%), Portugal +50% (+33.6%), South Africa +49.7% (+36.8%), Israel +49.5% (+35%), Chile +44.3% (+36.9%), Austria +42.5% (+27.4%), Mexico +40.1% (+23.5%), Brazil +39.4% (+21.5%), Italy +39% (+24.3%), Finland +38.4% (+23.8%), Germany +36.2% (+21.8%), Ireland +35.5% (+20.6%), Norway +33.7% (+17.7%), Sweden +31.6% (+12.2%), Belgium +31.6% (+17.1%), HK +30.4% (+30.4%), Euro Stoxx 50 +30.2% (+15.9%), Vietnam +28.7% (+32.9%), Taiwan +27.3% (+19.5%), Japan +27.1% (+23.6%), Canada +26.1% (+22.7%), UK +25.3% (+18%), France +25.2% (+11.4%), Netherlands +25.2% (+11.4%), Switzerland +23.2% (+8.3%), Singapore +22.9% (+16.8%), China +20.8% (+17.9%), NASDAQ +20.2%, MSCI World +17.1% in dollars, Australia +16.3% (+10.5%), S&P 500 +15.5%, Indonesia +13.8% (+16.8%), Russell +12.7%, UAE +8.3% (+8.3%), India +6.3% (+9.1%), New Zealand +4.9% (+2.1%), Malaysia +4% (-1.8%), Thailand -1.7% (-6.2%), Saudi Arabia -3.4% (-3.5%), Turkey -6.1% (+11.3%), Philippines -9.4% (-8.3%), Denmark -17% (-25.7%), Argentina -43.3% (-18%).

Collateral: When I started as a pit trader in Chicago in 1989, we deposited cash into our clearing house capital account. Based on the amount deposited, we were given trading limits for each futures and options market that was traded on the exchange. You could exceed those limits during the day for brief periods, provided you brought your positions back below your caps. But you could not exceed them on positions held overnight. If your account balance grew, your limits increased. Vice versa. That was my first practical introduction to the concept of collateral.

Collateral II: When I was bored in the commodity pit, I’d sit on the steps, pull out a novel, and time travel to another world. Once I read The Pearl by John Steinbeck. It’s an utterly tragic story that explores greed, corruption, good, evil, and ultimately, how wealth tests human character. At the center of the story is a pearl of unusual size and beauty. In many places throughout history, collateral of this sort could have secured loans, funded productive projects, that in turn lifted the prosperity of a community. But not in this place/time. The pearl destroyed its owner.

Collateral III: I read Joseph Conrad in the pit. Nostromo is his masterpiece about a silver mine in a fictional South American country. If you read one book as an aspiring emerging market investor, it should be this. It provided my first glimpse into the value of silver as collateral. I learned the importance of being able to ship a commodity from its place of production. And I learned of the complications that arise from the fact that mines cannot be transported. Ownership can be transferred. But it requires government ascent, which inevitably leads to corruption.

Collateral IV: Ivory trading is elemental to Conrad’s book The Heart of Darkness, but it’s about much more. Commodities are always valuable if they can be transported to places where they are exchanged. They have value as collateral, provided they can be secured by creditors. But there are other sources of value in the world. Conrad explored the value of the savagery that comes from purity of purpose, stripped of moral compromise, compassion. This terrifying power periodically overwhelms the value of anything but mobile forms of collateral, gold, gemstones.

Collateral V: Until late February 2022, when the EU froze 200bln euros of Russian assets, the range of things that could be used as collateral had grown inexorably. In a rules-based global trading system at peace, virtually any form of collateral could be secured by contracts that were honored by rule of law. Even silver mines could be secured. But as that world recedes, and we return to the law of the jungle, the range of collateral that will be widely accepted must narrow, as it is now. We see this first in gold, digital assets too, but the process has only just begun.

Collateral VI: There are many ways throughout history that collateral has been confiscated and compromised. Silver mines shift hands as governments come and go, bribes are paid, extortion extracted. Companies nationalized. Funds frozen, as the wind blows right to left, back again. Taxes on wealth and income rise. Contractual rights are negated. Regulations are used to extort. The rich are imprisoned, sometimes killed. And the greatest form of confiscation has been via default, which comes either explicitly, or more typically and implicitly through inflation.

Anecdote: “Misfortune is needed to plumb certain mysterious depths in the understanding of men; pressure is needed to explode the charge,” said Edmond Dantes, protagonist in The Count of Monte Cristo. “My captivity concentrated all my faculties on a single point. They had previously been dispersed, now they clashed in a narrow space; and, as you know, the clash of clouds produces electricity, electricity produces lightning and lightning gives light.” Alexandre Dumas begins his classic in 1815, when Napoleon escaped exile on Elba and returned to power during the Hundred Days. The remarkable novel explores betrayal, revenge, redemption, transformation, wealth, power, honor, loyalty, love and money. Central to the story is a vast trove of treasure, through which we understand how money, credit and collateral were used in mid-19th century Rothschild’s Europe. Gold and silver were real money. The transition to paper was underway. French francs, Italian lire, Spanish reales. Bank notes were a way for a person with collateral to move sums throughout Europe without having to transfer physical assets. These notes were only as valuable as the reputational strength of the issuing bank and the authenticity of the physical note. Government bonds were highly speculative, prone to wild price fluctuations as the solvency/stability of governments rose and fell. Little has changed except for the speed at which information travels, which has generally made it easier to authenticate truth. Beneath it all, is collateral, of which there are many forms. The latest is Bitcoin, which is native to a network that is unambiguously the most secure system to authenticate ownership and transfer value that humans have ever developed. It allows the movement of collateral around the world virtually instantly, at effectively no cost. But unlike historical forms of collateral, like Monte Cristo’s treasure trove, or Napoleon’s crown jewels, faith in Bitcoin’s value as a form of collateral has yet to be universally accepted, firmly established. Perhaps it never will. No one yet knows. Nothing is ever certain; there is only initiative. And Dumas ends his masterpiece with this sentence: “All human wisdom is contained in these two words - Wait and Hope.”

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.