Merry Christmas, Happy Hanukkah. To you and your families. Resurrected one of my favorite little memories, an opening note from Christmas past…

Christmas Day 2013: “Santa slipped down the chimney. Left big boot prints in the ash that spilled across our hearth. And the jolly fella stuffed stockings. Built a train set too. Sprinkled magic everywhere. Moments before the kiddies emerged, sporting their finest bedhead, Santa lit candles, warming our chilly pre-dawn living room. And hours later, as Mara and I basked in the Christmas morning afterglow, Osama bin Charlie (4yrs old), filled with sugar and spice, turned to his big brother. “Hey, you want some of my crap?” he asked, and threw a rubber eraser at Jackson’s head, officially ending our Christmas.

Dusted off an anecdote from 2015 about sparks, oxygen, illumination (see below). Back again with full wknd notes in early 2024. All the very best, E

Week-in-Review: Mon: US Steel to be bought by Nippon Steel, Israel rebuked calls for ceasefire by some if closest western allies, Fed’s Goolsbee confused by outsized mkt reaction to the updated dot plot / Fed’s Daly signals could cut 3x in ’24 / Mester says markets are a bit ahead of Fed on cuts, BP announces pause in tanker traffic through Red Sea, ECB’s Kazimir says premature easing worse than staying tight for too long, BoE’s Broadbent needs a clearer decline in wages before easing, Chile’s vote for a new constitution fails (as exp), Germany IFO Business climate 86.4 (87.7e) / Current assessment 88.5 (89.5e) /Expectations 84.3 (85.6e), Poland Core CPI 7.3% as exp, US NAHB housing mkt index 37 as exp, S&P +0.5%; Tue: BOJ unch as exp / Ueda fails to suggest imminent exit of NIRP as mkt had come to expect, Israeli president says prepared to agree to 2nd humanitarian pause, RBA mins show it was a close call keeping rates on hold – hawkish, Hungary CB cut 75bp as exp, Chile CB cut 75bp as exp, Fed’s Bostic sees no urgency to cut, ECB’s Villeroy expects a rates plateau before cuts / Simkus sees mkt pricing on cuts as too optimistic, BOC’s Macklem says cuts following a further number of months of deceleration in infl, EU CPI 2.4% as exp / Core 3.6% as exp, US Housing starts 1.56m (1.36m exp) / Building permits 1.46m (1.465m exp), Canada CPI 3.1% (2.9%e) / Core 3.4% (3.3%e), S&P +0.6%; Wed: Large ODTE SPX put initiated quick sell off during illiquid markets, Fed’s Harker says rates should be cut but not soon, Trump ruled ineligible for election by Colorado supreme court, China keeps 1y & 5y LPR unch as exp, Germany PPI -7.9% (-7.5%e) / cons conf -25.1 (-27.0e), UK CPI 3.9% (4.3%e) / Core 5.1% (5.6%e) / RPI 5.3% (5.6%e), Poland PPI -4.7% (-3.8%e), Mexico Ret sales 3.4% (2.0%e), Brazil eco activity 1.54% (1.75%e), US Existing home sales 3.82m (3.78m e), US cons conf 110.7 (104.5e), EU cons conf -15.1 (-16.3e), Russia PPI 21.9% (22.6%e), S&P -1.5%; Thu: Indonesia CB unch as exp, Turkey CB hikes 250bp as exp, Czech CB cut 25bp as exp, Brazil approves bill for lower fiscal deficit, 40% drop in tanker traffic into Red Sea due to increased recent attacks, UK public sector borrowing 14.3b (13b exp), France mfg conf 100 (98e), Poland ret sales 2.6% (3.7%e), US 3Q GDP (3rd rev) 4.9% (5.2%e) / Core PCE 2% QoQ (2.3%e) – reinforces soft landing narrative, Canada ret sales 0.7% MoM (0.8%e), US init claims 205k (215k exp), US Philly Fed outlook -10.5 (-3e), US Leading index -0.5% as exp, US KC Fed mfg activity -1 (-4e), S&P +1.0%; Fri: China curbs amount of time allowed spending on online games, Fed’s BTFP program increases as cost of funding declines due to greater cuts expected from Fed, Japan CPI 2.8% as exp / Core CPI 3.8% as exp, Germany impt prices -9% (-9.3%e), UK ret sales 0.1% (-1.3%e) / Core 0.3% (-1.4%e), UK 3Q GDP (final) 0.3% (0.6%e), Italy cons conf 106.7 (104e), Poland unemp 5% as exp, Canada Oct GDP 0.9% (1%e), US PCE deflator 2.6% (2.8%e) / Core 3.2% (3.3%e), US Durable Goods 5.4% (2.3%e), US new home sales 590k (690k exp), US UofMich sentiment 69.7 (69.4e) / 1y infl exp 3.1% as exp / 5-10y infl exp 2.9% (2.8%e), S&P +0.2%.

Weekly Close: S&P 500 +0.8% and VIX +0.75 at +13.03. Nikkei +0.6%, Shanghai -0.9%, Euro Stoxx +0.2%, Bovespa +2.0%, MSCI World +0.6%, and MSCI Emerging -0.3%. USD rose +2.6% vs Russia, +1.6% vs Chile, +0.8% vs Turkey, +0.7% vs South Africa, +0.2% vs China, +0.2% vs Yen, and +0.2% vs India. USD fell -3.9% vs Ethereum, -3.8% vs Bitcoin, -2.6% vs Sweden, -1.7% vs Brazil, -1.5% vs Australia, -1.3% vs Mexico, -1.1% vs Euro, -0.8% vs Canada, -0.2% vs Sterling, and -0.1% vs Indonesia. Gold +1.4%, Silver +1.3%, Oil +2.4%, Copper +0.3%, Iron Ore +3.0%, Corn -2.1%. 10yr Inflation Breakevens (EU +1bps at 1.97%, US -3bps at 2.20%, JP -15bps at 1.15%, and UK flat at 3.47%). 2yr Notes -12bps at 4.32% and 10yr Notes -2bps at 3.90%.

Year-to-Date Equities (high to low): Poland +51.9% priced in US dollars (+36.9% priced in zloty), Hungary +48% priced in US dollars (+37.7% in forint), NASDAQ +43.2% in dollars, Greece +42.8% in dollars (+38.8% in euros), Mexico +35.8% (+18.3%), Brazil +31.8% (+21%), Italy +31.7% (+28%), Ireland +27.3% (+23.8%), Denmark +26.8% (+23.6%), Venezuela +26.5% (+166.9%), Spain +26.4% (+22.9%), S&P 500 +23.8% in dollars, Germany +23.4% (+20%), Taiwan +22.7% (+24.5%), Euro Stoxx 50 +22.6% (+19.2%), Sweden +20.9% (+16.3%), MSCI World +20.8% in dollars, France +20.2% (+16.9%), Czech Republic +17.5% (+16.4%), India +17.3% (+17.9%), Netherlands +17.2% (+14%), Japan +16.9% (+27.1%), Russell +15.5% in dollars, Russia +13.9% (+43.6%), Colombia +13.2% (-9%), Korea +13% (+16.2%), Austria +12.1% (+9%), Switzerland +12% (+3.9%), Chile +11.2% (+16.9%), Saudi Arabia +11.2% (+10.9%), Portugal +10.3% (+7.2%), Canada +9.9% (+7.7%), UK +8.5% (+3.3%), Australia +6.4% (+6.6%), Indonesia +5.8% (+5.6%), Norway +4.4% (+8.7%), Argentina +3.3% (+369.3%), Belgium +2.3% (-0.6%), Israel +0.6% (+3.7%), New Zealand +0.5% (+1.4%), Philippines -0.6% (-1%), Singapore -2.3% (-3.4%), Finland -3.8% (-6.5%), South Africa -6.5% (+1.5%), UAE -7.1% (-7.1%), Malaysia -7.5% (-2.7%), China -8.8% (-5.6%), Turkey -12.2% (+37.2%), Thailand -15.7% (-15.8%), and HK -17.5% (-17.4%).

Anecdote (Nov 2015): “When Luca was four, I told his grandfather that soccer wasn’t ever going to be his thing,” said my buddy, an athlete. “He didn’t believe me. He couldn’t accept it. But I had. So I told him to go kick Luca a ball,” he explained, laughing. Grandad quickly concluded Luca should “stick to math.” Which is what he did, does. “As he grew, we spent our weekends exploring NY on the subway. Surfacing to look at monuments, statues, art.” Trains consumed his little life. He filled the apartment with tracks, designing complex paths up, over, and around obstacles of every sort. “Luca developed a love for subway maps, and after memorizing NYC he discovered Tokyo’s map, which blew his mind.” Manhattan celebrated its 110-year subway anniversary by running vintage trains. “We rode back and forth all day, with Luca marveling at the mechanisms opening and closing doors, developing theories on hydraulic principles.” Perhaps the greatest mystery of all, is the magical spark that defines us. And the challenge of parenthood is to recognize it, see it for what it is, embrace it, supply the space and oxygen to fuel its fire. “I took Luca to see Mike Massimino, the astronaut who fixed the Hubble.” Just a few kids showed up. Mike told stories of weightlessness, telescope repair, and hugged Luca. “Not the role model I’d expected for my son but can’t imagine anyone better.” Something beautiful happens when a child’s spark ignites. And we step away to let it burn. Illuminate. Things deep within them, within us. “Late one evening, after story time, he asked if I thought this is real? So I asked Luca what he meant. And he said, all of it, everything, every single thing. What if it’s all just some kind of amusement, and nothing’s real?”

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.