wknd
notes


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  Building Trust

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wknd
notes

Each Sunday morning for over a decade, One River’s CIO, Eric Peters, has published “Wknd Notes.” It is an unorthodox take on markets, politics, and policy that’s widely read across our industry and within global policy/political circles. Eric has written for as long as he has traded and the discipline is part of his investment process. Drawing on wide-ranging, multi-disciplinary research, historical study, and discussions with interesting characters throughout the world, Eric collects those things he finds most thought-provoking each week and distills them into a concise letter. At times the ideas and views are consistent with his own, but just as often, they challenge his positions and it is this openness to opposing views that helps him maintain a flexible mind in the search for emerging opportunities and risks. His writing is a reflection of how he thinks, and as such it is as focused on identifying the right questions to ask as it is on seeking answers. The publication of this work is Eric’s way of exchanging ideas/information and developing dialogue with a network grown over his thirty-one-year career.

wknd note: Building Trust

I take late summer off from writing weekend notes. Reading more, recharging. And been working on a longer form piece for next Sunday, exploring the wild decade ahead. But in the meantime, I dusted off an old anecdote about building trust, its centrality to everything truly important (see below). Enjoy your Labor Day weekend. All the best, E

Week-in-Review (expressed in YoY terms): Mon: Energy prices jump with refineries shut in (for up to 6w) as hurricane Ida makes landfall / most rigs/refineries survived but output cuts to remain, China regulators limit gamers under 18yo to 1h/weekday (from 3h), Huarong announced earnings ($15.9b loss and 1333x leverage ratio), Australia reports record covid cases (1,323/day), Japan ret sales 2.4% (2.1%e), Spain CPI 3.3% (2.9%e), EU economic conf 117.5 (118e), German infl 3.4% as exp, US pending home sales -9.5% (-8.8%e), Dallas Fed 9 (23e), S&P +0.4%; Tue: Chile CB hiked rates 75bps (50bps expected), ECB’s Holzmann advocate for slowing PEPP purchases in 4Q, last Americans leave Afghanistan marking the end of 20y conflict, Taliban in talks with Turkey and Qatar to manage Kabul airport, S. Korea IP 7.9% (7.2%e), Japan IP 11.6% (11.2%e) / cons conf 36.7 (36e), China mfg PMI 50.1 (50.2e) / serv PMI 47.5 (52e), France CPI 2.4% (2.1%e), Germany unemp 5.5% (5.6%e), HK ret sales 2.9% (10%e), Poland CPI 1.3% (1.1%p), Italy CPI 2.6% (2.1%e), EU Core CPI 1.6% (1.5%e) / headline CPI 3% (2.7%e) – highest since 2011, India 2Q GDP 20.1% (21%e), Brazil unemp 14.1% (14.4%e), US Home Prices 19.08% (18.6%e), US Cons conf 113.8 (123e), S&P -0.1%; Wed: Taliban parade captured US military equipment in Kandahar on first day without US presence, OPEC+ sees oil demand rising and pushed forward with 400k b/d supply boost for October, Japan capital spending 5.3% (3.5%e), Australia 2Q GDP 9.6% (9.1%e), China Caixin mfg PMI 49.2 (50.1e), Indonesia core CPI 1.31% (1.3%e), Germany ret sales -0.3% (3.6%e), UK house prices 11% (8.6%e), Italy unemp 9.3% (9.6%e), EU mfg PMI 61.4 (61.5e), EU unemp 7.6% as exp, US ADP 374k (625k exp), US mfg PMI 61.1 (61.2e), US ISM mfg 59.9 (58.5e), S&P +0.1%; Thur: Moody’s downgrades Peru due to political risk, WHO tags Mu variant as variant of interest, 45 dead along east coast as Tropical Storm Ida causes severe flooding, US supreme court votes 5-4 to not ban Texas new abortion law, S. Korea CPI 2.6% (2.4%e), Swiss CPI 0.9% (0.7%e) / 2Q GDP 7.7% (8.9%e), EU PPI 12.1% (11.1%e), Brazil IP 1.2% (2%e), US init claims 340k (345k exp), US factory orders MoM 0.4% (0.3%e), S&P +0.3%; Fri: US NFP 235k (733k exp) / unemp rate 5.2% as exp / AHE 4.3% (3.9%e) / Participation 61.7% (61.8%e), Japan PM Suga will not participate in a vote in September thus ending his tenure as PM after ~1y, senator Manchin says will not support $3.5t social spending package, US democrats prepare more sweeping tax reform targeting the wealthy, China Caixin serv PMI 46.7 (52e), Turkey CPI 19.25% (18.75%e) / PPI 45.52% (44.92%p), EU Serv PMI 59 (59.7e) / comp PMI 59 (59.5e), EU ret sales 3.1% (4.5%e), S&P flat.

Manufacturing PMI (high-to-low): Switzerland 71.1 (previous 66.7), Netherlands 67.4 (previous 68.8), Germany 65.9 (prev 65.1), Sweden 65.3/65.4, Austria 63.9/67, Norway 63.31/61.3, Czech Republic 62/62.7, UK 60.4/63.9, Italy 60.3/62.2, Taiwan 59.7/57.6, US 59.5/60.6, Spain 59/60.4, France 58/59, Poland 57.6/59.4, Greece 57.4/58.6, Brazil 56.7/56.4, Canada 56.2/56.5, Hungary 55.6/55, India 55.3/48.1, Turkey 54/51.3, South Korea 53/53.9, Japan 53/52.4, Hong Kong 51.3/51.4, Singapore 51/50.8, China 50.3/51.3, Mexico 49.6/48.8, Russia 47.5/49.2, South Africa 46.1/51, Vietnam 45.1/44.1, Indonesia 40.1/53.5. Services PMI: Sweden 64.7/69.1, Ireland 63.7/66.6, Germany 60.8/61.8, Spain 60.1/61.9, Italy 58/58, India 56.7/45.4, France 56.3/56.8, US 55.1/59.9, Brazil 55.1/54.4, UK 55/59.6, Russia 49.3/53.5, China 46.7/54.9, Japan 42.9/47.4.

Weekly Close: S&P 500 +0.6% and VIX +0.02 at +16.41. Nikkei +5.4%, Shanghai +1.7%, Euro Stoxx -0.1%, Bovespa -3.1%, MSCI World +0.9%, and MSCI Emerging +3.1%. USD fell -19.1% vs Ethereum, -5.5% vs Bitcoin, -2.8% vs South Africa, -2.0% vs Chile, -2.0% vs Australia, -1.4% vs Mexico, -1.1% vs Sweden, -1.1% vs Indonesia, -0.9% vs India, -0.9% vs Russia, -0.8% vs Sterling, -0.8% vs Canada, -0.7% vs Euro, -0.3% vs Turkey, -0.2% vs China, -0.2% vs Brazil. Gold +0.5%, Silver +3.0%, Oil +0.6%, Copper +0.1%, Iron Ore -4.6%, Corn -5.6%. 5y5y inflation swaps (EU +1bp at 1.71%, US -2bps at 2.36%, JP -3bps at 0.13%, and UK -2bps at 3.81%). 2yr Notes -1bp at 0.21% and 10yr Notes +2bps at 1.32%.

Aug Mthly Close: S&P 500 +2.9% and VIX -1.76 at +16.48. Nikkei +3.0%, Shanghai +4.3%, Euro Stoxx +2.0%, Bovespa -2.5%, MSCI World +2.3%, and MSCI Emerging +2.4%. USD rose +2.0% vs Chile, +1.1% vs Canada, +1.1% vs Sterling, +1.0% vs Mexico, +0.5% vs Euro, +0.4% vs Russia, +0.4% vs Australia, +0.4% vs Sweden, and +0.3% vs Yen. USD fell -31.4% vs Ethereum, -18.0% vs Bitcoin, -1.9% vs India, -1.6% vs Turkey, -1.3% vs Indonesia, -1.2% vs Brazil, -0.5% vs South Africa, and flat vs China. Gold flat, Silver -6.5%, Oil -6.2%, Copper -1.8%, Iron Ore -10.6%, Corn -1.8%. 5y5y inflation swaps (EU +2bps at 1.69%, US -1bp at 2.36%, JP -2bps at 0.13%, and UK +2bps at 3.82%). 2yr Notes +2bps at 0.21% and 10yr Notes +9bps at 1.31%.

YTD Equity Indexes (high-to-low): UAE +51.7% priced in US dollars (+51.7% priced in dirham), Venezuela +32.5% priced in US dollars (+378.3% priced in bolivar), Saudi Arabia +30.3% in dollars (+30.3% in riyal), Austria +27.4% (+31.7%), Hungary +26.4% (+24.3%), Czech Republic +26% (+25.9%), Argentina +25.4% (+45.9%), Russia +24.7% (+21.7%), India +24% (+23.9%), Netherlands +22.9% (+26.4%), Poland +22.6% (+24.8%), Canada +21.8% (+19.4%), Sweden +21.3% (+26.4%), S&P 500 +20.7%, Taiwan +20.7% (+18.9%), Denmark +20.2% (+24.2%), NASDAQ +19.2%, Finland +19% (+23%), Norway +18.2% (+19.1%), Mexico +17.9% (+17.6%), MSCI World +17.5% (+17.5%), France +17.2% (+20.5%), Israel +16.6% (+16.3%), Russell +16.1%, Ireland +16% (+19.3%), Belgium +15.6% (+18.9%), Euro Stoxx 50 +15% (+18.3%), South Africa +13.5% (+10.5%), Italy +13.4% (+17.2%), UK +12.3% (+10.5%), Switzerland +11.5% (+15.4%), Germany +11.3% (+15%), Australia +10.6% (+14.2%), Greece +10% (+13.1%), Singapore +6.8% (+8.4%), Spain +6.8% (+9.8%), Portugal +6.1% (+9.1%), Thailand +5.1% (+13.9%), Korea +5% (+11.4%), China +4.3% (+3.1%), New Zealand +1.1% (+1.5%), Indonesia +0.9% (+2.5%), Japan 0% (+6.1%), Chile -0.9% (+6.9%), Brazil -1.9% (-1.8%), HK -5.1% (-4.9%), Malaysia -5.3% (-2.3%), Philippines -7.1% (-3.4%), Turkey -11.1% (-0.5%), and Colombia -16.9% (-7.7%).

Anecdote (July 2014): Charlie didn’t say a word. Nor did I. We just walked across the field. Together. He on my shoulders, riding high. And I imagined his beatific expression. I couldn’t see it, I felt it. I felt so many things. There are moments without which life would seem somehow unlived. Like when your child first opens his eyes and meets yours, for an infinite moment. Or when someone reaches for your hand, closes her eyes, and squeezes with the last atom of her fading strength. To say goodbye, forever. Now, Charlie is our youngest of four, and thus our weakest link. A wobbly little wildebeest. A straggler. On a busy street, or rushing through an airport, he learned to really slow his pace. Forcing me to swing him onto my shoulders. Which is pretty scary for a little fella. Exciting too. He’d grab my thinning mane in tight fists. Building confidence and trust; in himself, in me. Without which he couldn’t ever live a full life. Nor as his father, would I have truly lived mine. Charlie rode me like a polo pony. Turning my head left and right, kicking my ribs with sharp little heels. “Giddy Up!” We cut a historic deal a few years back: he’d lighten his grip on my hair if I’d tighten my grip on his ankles. Sounds like a bad deal, and no doubt it was far from my finest, but given our starting point, it was the best I could negotiate. And so it went. Anyhow, we walked across the field. “Shoulders please Daddy,” said Charlie. I swung him up. He grabbed my hair, I held his ankles. And it just felt time. So I lightened my grip, his hands slowly loosened theirs. I let go altogether. He did too. And on we walked. Without a word.

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, drink 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.

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