“I am confident that the Fed chair will optimize the path for both inflation and economic growth,” said America’s Treasury Secretary to The Economic Club of New York, a packed room of us in attendance. “The president said at Chair Warsh’s swearing in that he would be independent and that he should do what he wants,” continued Bessent. “The president understands; he and I have talked about it quite a bit. The bond market has taken out more governments than howitzers,” said Scott. And that last bit was particularly interesting, remarkable in fact, coming from someone who has made a fortune bringing Prime Ministers who underestimated the fearsome power of markets to their knees. “So, I believe that the President has complete confidence in the Fed chair to do the right thing.”
For the past three years I’ve led both One River Asset Management - the firm I founded in 2013 - and Coinbase Asset Management, which was born from Coinbase’s acquisition of One River Digital in early 2023. Running both simultaneously, across digital assets and traditional finance, has been the opportunity of a lifetime. On Friday, I stepped down as CEO of Coinbase Asset Management, turning over the reins to a phenomenal team. Going forward, I’m refocusing 100% of my time and energy with my partners and teammates at One River [here].
Overall: Kevin Warsh’s nomination for the position of Fed Chairman, on January 30th, marked the high in gold, the low in the dollar. “Press conferences are useful. But when you have one, you want to make sure you have something important to say,” said Fed Chairman Warsh on June 17th, his first press conference, the weight of the America’s economic stability on his shoulders, President Trump in one ear, Stan Druckenmiller in the other. “Today I think we had something important to say about our commitment to deliver on price stability, our commitment to rethink practices with an eye of moving the Fed forward, and to give you and the American people a sense that these aren’t idle thoughts.” Here are five statements he made with respect to achieving the Fed’s inflation target: “We recognize that inflation has been running well ahead of the Fed’s long-stated inflation goal of 2% that’s been going on for more than five years. Persistently high prices are a burden for the American people.” – “But the recent past need not be prologue. I am pleased to report that members of the FOMC are unambiguous and unanimous: This Committee will deliver price stability.” – “On the 2% inflation objective, that is the Federal Reserve’s long-held objective of 2%. You’ve heard me say before, I tend to focus on the left of the decimal point. Well, the two is the left of the decimal point. For now, zero is to the right. I see no reason until we have reestablished our commitment and ability to deliver on the 2% inflation objective to revisit that.” – “First, we have the capability and commitment to deliver on our price-stability objective of 2%. That’s what we’re going to do.” – “The Fed statement says that inflation is primarily determined by monetary policy. You bet it is. I’ve said for years inflation is a choice. You bet it is. And today I'm announcing that this Committee, unambiguously and unanimously, have decided we are going to deliver on that.” There was no need for Warsh to nail himself to the cross of restoring 2% price stability during his first press conference. But he deliberately did exactly that. And there may be historical examples of highly intelligent, extremely wealthy, market savvy, self-made, principled men, who cannot be fired by an American President, publicly committing to things that they have no intention of doing. But Kevin Warsh is not one of them.
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Statecraft: “I would like to describe our strategy for economic statecraft by which I mean the disciplined use of America's economic power in the service of our sovereignty,” said Secretary Bessent. “For the better part of a century, the United States was the principal architect and guarantor of an open global economic system that delivered enormous benefits. It raised our allies from the ruins of war, widened channels for global trade, lifted standards of living, and attained a position of influence that remains unmatched in modern history. But the success of the system does not absolve us from revisiting its assumptions.”
Statecraft II: “In a world in which our overriding task was to help our allies rebuild their economies and defend against the specter of communism, we accepted asymmetries because they served a larger strategic purpose,” continued the Treasury Secretary. “We opened our market because it helped create a more prosperous world, and we tolerated imbalances because American economic strength appeared unassailable. Over time, however, these choices hardened into habits. Habits into assumptions, and assumptions left unexamined into vulnerabilities.”
Statecraft III: “We came to believe that access to the American market could be extended without condition and therefore, without consequence,” said Bessent. “We assumed that closer economic integration would always result in a greater conversion of interest. That supply chains would function in every crisis; low prices would compensate for lost capacity. And above all, that other countries would treat our firms as fairly as we had treated theirs. Of course, those assumptions failed to materialize fully. Some failed slowly, others all at once.”
Statecraft IV: “I organize our approach to economic statecraft under President Trump around five core principles,” said Bessent. “First is that economic security begins with national capacity. We have rediscovered a great call, what Alexander Hamilton called us around the time of our founding, that every nation ought to endeavor to possess within itself all the essentials of national supply. That our strength is derived from what we can build. The 2nd principle is that America’s openness must be matched by reciprocity, which is the basis of durable cooperation. No economic relationship can remain healthy if one side opens its market, while the other closes it.”
Statecraft V: “The third principle is that America will write the rules of the next economy,” said the Treasury Secretary. “Unlike much of the last century, the next era of domestic competition will not be confined to the movement of goods across oceans and ports. It will be shaped by platforms, systems, and protocols through which commerce flows in the twenty-first century. In each of these domains, standards become strategy. If America and our partners set open, secure, market-based standards, then the twenty-first century will tilt toward freedom and prosperity by rewarding innovation, protecting intellectual property, and ensuring that competition is not distorted by discrimination.”
Statecraft VI: “The fourth principle is that financial leadership is a central instrument of statecraft,” said Bessent. “There is nothing accidental about the dollar’s place in the world. Its broad usage reflects the depth of our markets, the strength of our rule of law, the credibility of our institutions, and the scale of our economy. Treasury’s job is to protect the integrity of the financial system by rooting out abuses and to deploy this power with discipline. Sanctions must be targeted, enforceable and connected to strategy. They must be paired with diplomacy, compliance, intelligence, and coordination with our partners.”
Statecraft VII: “The fifth and most important principle is that economic statecraft, first and foremost must serve the American people,” said Bessent. “The purpose of American economic statecraft is to connect national power with household prosperity. We need an economy in which working families are not merely consumers of what the world produces, but participants in what America builds. An economy in which no community is asked to accept permanent decline as the cost of global efficiency. An economy in which the gains of national strength are broadly shared beyond the boardrooms and trading floors to families and communities who sustain it.”
Anecdote: Secretary Bessent’s speech at The Economic Club of New York was one of those rather important ones. Coming so soon after Fed Chairman Warsh’s first press conference, it had that ring of coordination to it. I sat right up front at a table hosted by one of America’s great technology giants. They were telling me all about the accelerating speed of R&D progress in their quantum computing lab. Lost in the world’s excitement over the latest LLM release are the stunning developments in a whole new computing paradigm. And that of course, is the story of American innovation, which tends to come in bursts. Bessent and Warsh know this better than anyone. Their job is to buy time, so that our entrepreneurs can produce breakthroughs, boost productivity, lifting wages and tax receipts sufficient to keep the over-leveraged, over-entitled, over-indebted American flywheel spinning. In recent years, the consensus came to expect that the way to keep the wheel spinning would be through inflation, eroding away our debts through a decline in the value of the dollar. But it’s alternatively possible - and better for longer-term American power and global stability - to keep the flywheel spinning with a firm dollar combined with a high-productivity economic boom. “I remember when Germany wasn’t an industrial powerhouse. They did it with a strong currency, and the strong Deutsche mark constantly made them become more efficient, made them innovate, and made them up their production game,” explained Bessent. “When people talk about a strong dollar, I don’t think it is the Bloomberg dollar index. I think that it means that we are doing the things to give us the underpinnings that people want to come to this country, whether it’s tax certainty, regulatory certainty, energy certainty. And I don’t necessarily believe that there is a duality there in a strong dollar and a manufacturing economy.”
Good luck out there,
Eric Peters
Chief Investment Officer
One River Asset Management
Week-in-Review: Mon: Canada CPI 3.2% (3.0%e). Eurozone cons conf -17.7 (-18.0e). Fed’s Goolsbee said he remains concerned about inflation and questioned whether all the factors driving prices up are temporary. Yen intervention prospect rises after Katayama-Bessent talks, with the yen trading near its weakest level in four decades. S&P -0.4%. Tue: Mexico ret sales 4.4% (3.6%e). Hungary CB rate decision 6.00% as exp. Australia CPI 4.0% (4.3e%). MSCI postponed its review on Indonesian equities for more time to see if recently announced transparency reforms would be effective. US Republican-led Senate voted to end war with Iran. S&P -1.4%. Wed: US new home sales 580k (640k e). Mexico bi-weekly CPI -0.11% (0.05%e). Russia IP -0.7% (2.5%e). US and Iran reportedly making progress in peace negotiations but outstanding issues, including Israel’s conflict with Iran-backed Hezbollah in Lebanon, continue to stand in the way of a firm deal. Back-to-back earthquakes struck Venezuela. US memory chipmaker Micron surged after its quarterly sales forecast exceeded estimates. South Korean memory chipmaker SK Hynix surged after announcing $29B US listing plan. S&P -0.1%. Thu: US init jobless claims 215k (225k e), cont claims 1821k (1802k e), GDP ann QoQ 2.1% (1.6%e). Mexico overnight rate unch 6.50% as exp, unemp rate NSA 2.76% (2.60%e). South Africa PPI 7.8% (6.7%e). Korean stocks tumble 9% on chip selloff, triggers trading halt. Ship struck in Hormuz renewed concerns about safe passage. US Department of Transportation moves to drop brake pedal mandate for autonomous vehicles. S&P flat. Fri: US UMich sent 49.5 (50.0e). Singapore IP 13.0% (17.5%e). Anthropic’s Mythos 5 AI model cleared by US for wider use. OpenAI limits release of new GPT-5.6 model under pressure from US. Zuckerberg urged Meta to explore working with Polymarket and Kalshi. S&P -0.1%.
Weekly Close: S&P 500 -2.0% and VIX +1.63 at +18.41. Nikkei -2.7%, Shanghai -1.5%, Euro Stoxx +0.0%, Bovespa +2.9%, MSCI World -1.7%, MSCI Emerging -4.5%, Bitcoin -5.0%, and Ethereum -7.3%. USD rose +7.2% vs Russia, +2.0% vs Chile, +1.7% vs Australia, +1.6% vs Sweden, +0.9% vs Mexico, +0.8% vs Euro, +0.7% vs Indonesia, +0.5% vs China, +0.4% vs Brazil, +0.4% vs Turkey, +0.3% vs Canada, +0.3% vs Yen, +0.2% vs Sterling, +0.1% vs South Africa, and +0.1% vs India. Gold -3.5%, Silver -10.7%, Oil (WTI) -8.7%, Oil (Brent) -9.2%, NatGas (US) +0.1%, NatGas (EU) -3.1%, Power (EU) +3.9%, Copper -3.8%, Iron Ore -1.7%, Corn -0.6%. 10yr Inflation Breakevens (EU -10bps at 1.83%, US -6bps at 2.20%, JP -10bps at 2.03%, and UK -8bps at 3.10%). 2yr Notes -9bps at 4.09% and 10yr Notes -8bps at 4.37%.
YTD Equity Index Returns: Korea +87.4% priced in US dollars (+99.6% priced in won), Taiwan +51.7% priced in US dollars (+53.9% priced in Taiwan dollars), Japan +33.2% priced in dollars (+37.8% priced in yen), Hungary +33% in dollars (+25.9% in forint), Russell 2000 +21.3%, Colombia +20.9% (+10.6%), Turkey +16.8% (+26.8%), Norway +16.7% (+14.9%), Austria +16.5% (+20.3%), Israel +15.3% (+8.3%), Thailand +15.2% (+22.4%), Brazil +14.2% (+7.6%), Greece +12.1% (+15.5%), Singapore +11.1% (+11.7%), Italy +10.5% (+14.1%), Poland +10% (+15.3%), Portugal +10% (+13.3%), Belgium +9.7% (+13%), Spain +8.9% (+12.2%), NASDAQ +8.8%, Netherlands +8.2% (+11.5%), Mexico +7.7% (+4.5%), S&P 500 +7.4%, MSCI World +7.1% priced in US dollars, Canada +6.6% (+10.3%), Finland +5.6% (+9%), Vietnam +4.9% (+4.9%), Switzerland +4.4% (+6.8%), China +4.3% (+1.5%), Euro Stoxx 50 +4.3% (+7.4%), Saudi Arabia +4.1% (+4.2%), Australia +4% (+0.6%), UK +3.9% (+5.8%), Sweden +3.3% (+9.4%), Ireland +3.3% (+6.4%), Argentina +0.9% (+2.4%), Chile +0.3% (+2.7%), France -0.1% (+2.9%), UAE -1.1% (-1.1%), Malaysia -1.5% (-0.7%), New Zealand -2.4% (-0.4%), Germany -2.4% (+0.7%), Philippines -3.7% (+0.3%), Denmark -4.1% (-1%), South Africa -5% (-5.6%), Czech Republic -7.8% (-4.6%), HK -12.2% (-11.5%), India -12.3% (-7.9%), and Indonesia -36.1% (-31.8%).
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.