“It should be borne in mind that there is nothing more difficult to arrange, more doubtful of success, and more dangerous to carry through than initiating changes,” wrote Machiavelli in The Prince, circa 1532. “The innovator makes enemies of all those who prospered under the old order, and only lukewarm support is forthcoming from those who would prosper under the new. Their support is lukewarm ... partly because men are generally incredulous, never really trusting new things unless they have tested them by experience.”
Overall: “The US has the world’s premier military, the strongest economy and financial center with the dollar as the world’s reserve currency, and is the world’s leader in technology and innovation,” said Treasury Secretary Bessent, trade negotiations done for now, the rivalry ongoing. “President Trump is cementing and expanding these strengths, and the Chinese know this.” Skeptics of every stripe took great issue with Bessent’s statement. And who knows, time may prove them to be broadly right, or utterly wrong - the pace of change in today’s world is accelerating at such a speed that almost any outcome is now possible. What we do know is that markets handicap the odds. Nvidia became the first company to attain $5trln market capitalization (Germany’s GDP). Apple and Microsoft hit the $4trln mark. Meta posted disappointing Q3 earnings. “We want to make sure we’re not underinvesting,” said Zuckerberg, undeterred, signaling an acceleration in AI investment to $72bln in 2026. “I think that it’s the right strategy to aggressively front-load building capacity.” SpaceX launched its 139th mission this year, more than NASA’s space shuttle flew in its 30yr history. It launched its 10,000th Starlink satellite into orbit. Only 0.08% of the world’s population uses Starlink, and almost no one has yet grasped its potential. A SpaceX reusable booster rocket completed its 31st flight. You know, Lockheed Martin flew the first F-35 in 2006; it had taken 3,287 days from initial design to first flight. Anduril flew America’s first semi-autonomous fighter-jet this week. The YFQ-44A went “from clean-sheet design to wheels-up in just 556 days,” and will begin production in Ohio, in H1 2026. This is the sort of thing that happens after many decades of Moore’s law compounding, in an economic system that aligns income with innovation. Time compresses and advances accelerate, in ways that when we’re lucky, become non-linear. And this, of course, is the only escape for Bessent’s treasury department, which took 200-years to incur its first $1trln in Federal debt, and incurred it’s 38th $1trln of debt in the past 71 days.
Week-in-Review: Mon: Eurozone M3 2.8% (2.7%e). South Korea GDP 1.7% (1.5%e). Argentina markets soar after Milei’s election win, easing fear of crisis. Trump reaffirmed US Japan alliance after meeting with new Prime Minister Takaichi. Trump to meet with Xi on Thursday. S&P +1.2%. Tue: US cons conf 94.6 (93.4e). Mexico unemp rate 2.98% (2.86%e). India IP 4.0% (2.9%e). OpenAI is giving Microsoft a 27% ownership stake worth about $135b. Nvidia CEO Jensen Huang announced a number of new partnerships, including plans to make a $1b investment in Nokia. The Mideast ceasefire came under threat after Netanyahu ordered strikes on Gaza in response to attacks on Israeli soldiers. S&P +0.2%. Wed: US FOMC rate decision upper bound 4.00% as exp, lower bound 3.75% as exp. Powell cautioned investors against assuming another cut in December; Stephen Miran and Jeff Schmid dissented. Canada rate decision 2.25% as exp. UK mortgage approvals 65.9k (64.0k e). BOJ target rate unch 0.50% as exp. Nvidia becomes the first $5T company by market value, amid a spree of AI deals. S&P flat. Thu: Germany CPI 2.3% (2.2%e). Trump and Xi agree to extend a tariff truce, with the US to halve fentanyl-related tariffs on Chinese goods effective immediately and China to resume soybean purchases with a pause on rare earths controls. S&P -1.0%. Fri: Eurozone CPI MoM 0.2% as exp. France CPI 1.0% as exp. US courts ruled that the Trump administration’s decision to suspend food-aid benefits is likely unlawful and that contingency funding must be used to keep the program at least partially operational. US air travel faces disruptions as US government shutdown continues. S&P +0.3%. Sat: China suspends rare earth export controls and terminates probes on US tech firms. Berkshire sells stocks for 12th consecutive quarter (cash reserves hit record $382bln).
Weekly Close: S&P 500 +0.7% and VIX +1.07 at +17.44. Nikkei +6.3%, Shanghai +0.1%, Euro Stoxx -0.7%, Bovespa +2.3%, MSCI World +0.2%, MSCI Emerging +1.6%, Bitcoin -1.0%, and Ethereum -1.5%. USD rose +1.4% vs Russia, +1.2% vs Sterling, +1.0% vs India, +1.0% vs Sweden, +0.8% vs Euro, +0.7% vs Yen, +0.5% vs Mexico, +0.4% vs South Africa, +0.3% vs Turkey, +0.2% vs Indonesia, +0.1% vs Canada, and +0.1% vs Chile. USD fell -0.5% vs Australia, -0.2% vs Brazil, and flat vs China. Gold -3.4%, Silver -0.9%, Oil -0.8%, Copper -0.7%, Iron Ore +2.2%, Corn +1.9%. 10yr Inlfation Breakevens (EU +1bp at 1.76%, US +2bps at 2.32%, JP +1bp at 1.59%, and UK -2bps at 2.93%). 2yr Notes +9bps at 3.58% and 10yr Notes +8bps at 4.08%.
Oct Mthly Close: S&P 500 +2.3% and VIX +1.16 at +17.44. Nikkei +16.6%, Shanghai +1.9%, Euro Stoxx +2.5%, Bovespa +2.3%, MSCI World +1.7%, MSCI Emerging +4.9%, Bitcoin -3.9%, and Ethereum -6.3%. USD rose +4.1% vs Yen, +2.2% vs Sterling, +1.7% vs Euro, +1.3% vs Mexico, +1.1% vs Turkey, +1.0% vs Australia, +1.0% vs Brazil, +0.8% vs Sweden, +0.6% vs Canada, and +0.4% vs South Africa. USD fell -2.4% vs Russia, -2.1% vs Chile, -0.2% vs Indonesia, flat vs China, and flat vs India. Gold +3.2%, Silver +3.3%, Oil -1.6%, Copper +4.8%, Iron Ore +2.4%, Corn +3.9%. 10yr Inflation Breakevens (EU +2bps at 1.76%, US -5bps at 2.32%, JP +1bp at 1.59%, and UK -18bps at 2.93%). 2yr Notes -3bps at 3.58% and 10yr Notes -7bps at 4.08%.
2025 Year-to-Date Equity Index Returns: Korea +76.4% priced in US dollars (+71.2% priced in won), Colombia +64.7% priced in US dollars (+44% in pesos), Hungary +59.1% in dollars (+35.3% in forint), Poland +56.1% (+40.1%), Czech Republic +56% (+36.2%), Israel +54% (+37.6%), Spain +54% (+38.3%), Greece +51.2% (+35.8%), Portugal +49.9% (+34.6%), Chile +48% (+40.5%), South Africa +47.4% (+35.2%), Austria +45.5% (+31.3%), Brazil +42.7% (+24.3%), Mexico +42.4% (+26.8%), Italy +40% (+26.3%), Finland +38.8% (+25.2%), Ireland +35.6% (+21.7%), Japan +34% (+31.4%), Germany +33.4% (+20.3%), Taiwan +30.8% (+22.6%), Sweden +29.3% (+11.4%), HK +29.1% (+29.1%), Norway +29% (+14.7%), Euro Stoxx 50 +28.8% (+15.6%), Belgium +28% (+15%), Canada +25.6% (+22.4%), Vietnam +25.4% (+29.4%), UK +24.7% (+18.9%), Netherlands +23.1% (+10.6%), NASDAQ +22.9%, Singapore +22.8% (+16.9%), France +22.5% (+10%), China +21% (+18%), Switzerland +18.7% (+5.5%), MSCI World +18.2% in dollars, S&P 500 +16.3%, Australia +15.1% (+8.9%), Indonesia +12.1% (+15.3%), Russell +11.2%, UAE +7.2% (+7.2%), New Zealand +5.7% (+3.3%), India +4.9% (+8.8%), Malaysia +4.6% (-2%), Thailand -1.3% (-6.5%), Saudi Arabia -3% (-3.2%), Turkey -6.1% (+11.6%), Philippines -10.7% (-9.2%), Argentina -15.5% (+18.5%), Denmark -20.6% (-28.3%).
Engineering Problems: “We’ve solved the invention phase of AI. Now it’s an engineering problem to make it work everywhere - in every industry, every device,” said Jensen Huang. “Once we solve the perception problem in AI - seeing and understanding the world - that’s the hard part. Then, reasoning and acting on it in physical spaces becomes an engineering challenge of integration and scaling,” continued Nvidia’s CEO. “The bottleneck in AI isn’t the algorithms anymore; it’s the engineering of data pipelines, compute clusters, and deployment.”
Engineering Problems II: “There has been a lot of debate about the viability of data centers in space. There are a lot hurdles, but they do seem more plausible if autonomous construction is a thing,” wrote a reporter on X. “Simply scaling up Starlink V3 satellites, which have high speed laser links would work. SpaceX will be doing this,” replied Elon, obsessed with engineering problems. Starlink V1 and V2 satellites weigh 300-600kg and are launched by Falcon 9 rockets. 10,000 have been launched. The V3 weighs 1,900-2,000kg and has a ~60-meter wingspan.
Engineering Problems III: Starships will deploy Starlink V3 satellites in 2026. Each launch will release 60 V3s, adding 60 Terabits per second (Tbps) of network capacity (over 20x the addition from a Falcon 9 launch). Upgrades include next-gen computing/modems, beamforming, and switching tech, enabling 1 Tbps downlink capacity (10x more than V2) and 160 Gbps uplink per satellite to deliver gigabit internet speeds to users and support emerging uses like orbital data centers. Full constellation envisions up to ~40,000 satellites for ubiquitous global coverage.
Engineering Problems IV: “We came up with a protocol called x402 to attach a stablecoin payment to any web request,” said Brian Armstrong, Coinbase CEO, reengineering the global financial system using blockchain. “Imagine if every HTTP request could include a USDC micropayment - seamlessly. It’s built on top of HTTP extensions, inspired by older ideas like HTTP 402 'Payment Required' status code. This could revolutionize web monetization, content access, and even prediction markets by enabling frictionless, on-chain settlements.”
Engineering Problems V: Qualcomm shares rose to 15mth highs after unveiling AI data center chips and computers, aiming to challenge Nvidia. The company’s new AI200 lineup will start shipping next year. The first customer will be Saudi Arabia’s AI startup Humain, which plans to deploy 200 megawatts’ worth of computing systems based on the chips starting in 2026. The UAE leads the region with its $1.4trln US Framework (a 10yr commitment). As the UAE sprints ahead, to reengineer its economy for a post-petroleum world before the window shuts forever.
Engineering Problems VI: “Argentines demonstrated they don’t want to return to the model of failure,” declared President Milei, his once proud nation a poster child for the impossibility of printing your way to prosperity. No democratically elected leader has ever willingly imposed such drastic fiscal austerity. Pundits believed an escape from Argentina’s deep economic hole presented an impossible engineering problem. Milei may prove them wrong. And if AI doesn’t bail out the developed world’s debtor nations, Milei’s path may provide us with the solution.
Anecdote: “A prince, therefore, being compelled knowingly to adopt the beast, ought to choose the fox and the lion; because the lion cannot defend himself against snares and the fox cannot defend himself against wolves. One needs, therefore, to be a fox to recognize snares and a lion to frighten wolves,” wrote Machiavelli. Teddy was home from West Point, where he is studying The Prince. “He who has always acted in one way and never changes must come to grief when the times change and are no longer in harmony with his way of proceeding,” wrote Machiavelli. I had asked Teddy what point stood out above all others in the remarkable book. “One must be adaptable to changing circumstances, at any cost whatsoever,” answered Teddy. “And yet, while this makes sense, I wouldn’t compromise my core principles to succeed, or even to survive.” So, I asked whether he would consider compromising everything he stood for to save the lives of his family, his town, his nation? “Ned Stark faced that choice in the Game of Thrones, when King Joffrey threatened to kill his daughters,” said Teddy, “Stark abandoned everything he stood for to save them. That’s why I find philosophy so hard; when you drill deep enough, it’s often that there are no clear answers, just choices, decisions.” And of course, my son is right, which is precisely what makes us eternally fascinating. In fact, in a universe governed by physics - once Artificial Super Intelligence has mapped every law, solved every mystery, even the trivial ones - humanity may still coexist peacefully with our ASI creation for one reason: we are the most interesting thing that has ever existed. Enigmas. Often illogical. Unknowable. A source of endless intrigue for an insatiable super intelligence. Perhaps that is why we exist.
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.