“The FSD V14 release will be a dramatic gain with a 10X higher parameter count and many other improvements,” wrote Elon Musk on X. I started using Tesla’s full self-driving 5yrs ago. In the past 9mths the pace of performance improvements has gone vertical. A 10x parameter jump dramatically expands the model’s representational capacity - roughly akin to a 10x increase in mental resolution. It’s hard for human brains to visualize this sort of compounding. You simply experience it. FSD V14 is to be released this week. V14.1 is scheduled for 2wks later. Then V14.2. “By V14.3 your car will feel like it is sentient,” said Musk.

Overall: “We were very naive to leave our public space to social media networks controlled by US or Chinese companies that don’t share our interests and are not interested in the survival of our democracies,” said France’s embattled President, his 7th Prime Minister resigning after 27 days, his nation edging toward ungovernability. Macron noted that social media algorithms were mainly designed to drive polarization, with companies allowing anonymous accounts to spread hateful content because they were primarily focused on driving more traffic and earning advertising revenue. While 99.99% of the population throughout the West could not define an algorithm and can’t conceptualize the pace of computational compounding that has advanced social media’s manipulative power, we all experience it. Beijing understands it and acts accordingly. TikTok in China (Douyin) under government-mandated “Youth Mode” restricts under-14 youth to 40-minutes between 6am-10pm, and its algorithm promotes positive values, uplifting messages, science, history, national culture, patriotism. It imposes a 5-second pause to interrupt addictive behavior. It developed the US algorithm to be a freer, hyper-stimulating, entertainment-driven version, to maximize attention and time spent on the app, addiction, compulsion. Compounding the negative impacts of our growing inability to concentrate, contemplate, think critically. Anyhow, in a fracturing world, now grappling with the existential vulnerabilities that run through its critical infrastructure, it should become increasingly clear to Macron and others that relying on China for artificial intelligence is utterly unacceptable as a matter of national security. Most will choose to mitigate their dependency on the US if they can afford to. It is not hard to imagine that nations with financial resources will race to build their own AI in defense of national sovereignty. Not unlike what they have begun doing in the gold market, building strategic reserves to mitigate the uncertain risks of a fracturing global financial system. Such buying by sovereigns tends to be far less price sensitive than investments by corporations. And it therefore seems reasonable to expect that what has happened in gold markets will happen in AI infrastructure.

Week-in-Review: Mon: Eurozone ret sales 1.0% (1.3%e). Trump said medium and heavy duty trucks will face 25% tariff beginning Nov 1. France’s Prime Minister Sebastien Lecornu resigned following President Macron’s cabinet selections. S&P +0.4%. Tue: New Zealand cash rate 2.50% (2.75%e). Japan leading index CI 107.4 (107.1e). Kenya interest rate 9.25% as exp. Trump opens door to blocking back pay for certain federal workers when the government reopens. S&P -0.4%. Wed: Poland base rate 4.50% (4.75%e). Hungary CPI 4.3% (4.4%e). Spot gold tops $4,000 as continued US government shutdown fuels rally. Israel and Hamas have agreed to terms for the release of all hostages held by Hamas in Gaza, as part of a US and Qatari brokered deal. French President Macron will name a new prime minister by Friday evening. S&P +0.6%. Thu: Mexico CPI 3.76% (3.78%e), Core 4.28% as exp. Japan PPI 2.7% (2.5%e). Bessent announced finalized $20b currency swap framework with Argentina’s central bank to support political ally President Javier Milie in upcoming midterm elections. China unveiled broad new curbs on its exports of rare earths and other materials ahead of Xi-Trump meeting, with controls to be enforced from Nov 8. S&P -0.3%. Fri: UMich sent 55.0 (54.0e). Canada unemp rate 7.1% (7.2%e). French President Macron reappoints Sebastien Lecornu as Prime Minister. Trump threatened an increase of tariffs on goods from China and to cancel upcoming meeting with President Xi, following China’s export controls on rare-earth minerals. White House lays off thousands of federal workers amid government shutdown, with cuts across the departments of Health and Human Services, Homeland Security, and Commerce. S&P -2.7%.

Weekly Close: S&P 500 -2.4% and VIX +5.01 at +21.66. Nikkei +5.1%, Shanghai +0.4%, Euro Stoxx -1.1%, Bovespa -2.4%, MSCI World +0.01%, MSCI Emerging +0.1%, Bitcoin -4.9%, and Ethereum -11.2%. USD rose +3.4% vs Brazil, +2.5% vs Yen, +2.0% vs Australia, +1.6% vs South Africa, +1.5% vs Sweden, +1.1% vs Euro, +1.0% vs Mexico, +0.9% vs Sterling, +0.4% vs Turkey, +0.4% vs Canada, +0.2% vs China, and +0.1% vs Indonesia. USD fell -0.7% vs Russia, -0.5% vs Chile, and -0.1% vs India. Gold +2.3%, Silver -1.5%, Oil -3.3%, Copper -4.2%, Iron Ore +2.1%, Corn -1.4%. 10yr Breakevens (EU +1bps at 1.76%, US -2bps at 2.32%, JP +5bps at 1.66%, and UK flat at 3.09%). 2yr Notes -7bps at 3.50% and 10yr Notes -9bps at 4.03%.

2025 Year-to-Date Equity Index Returns: Greece +61% priced in US dollars (+43.6% priced in euros), Korea +55.4% priced in US dollars (+50.5% priced in won), Czech Republic +55% in dollars (+34.4% in koruna), Israel +54.5% (+38.4%), Poland +51.9% (+35.7%), Colombia +51.8% (+35.5%), Hungary +50.7% (+28.6%), Spain +49.7% (+33.5%), South Africa +47.3% (+36.2%), Portugal +46.1% (+30.3%), Austria +42.3% (+27.4%), Mexico +37.4% (+22.3%), Italy +37.3% (+23%), Germany +36% (+21.8%), Chile +33.8% (+29.3%), Vietnam +33.5% (+38%), Ireland +33.2% (+18.8%), Norway +32.9% (+18.3%), Brazil +31.6% (+17%), HK +30.8% (+31.1%), Finland +30.8% (+17.1%), Belgium +29.4% (+15.4%), Taiwan +27.3% (+18.5%), Euro Stoxx 50 +26.7% (+13%), Sweden +26.2% (+9%), Japan +24.7% (+20.5%), Canada +24% (+20.7%), Singapore +23.1% (+16.9%), UK +23% (+15.3%), Switzerland +21.5% (+7.6%), France +20.3% (+7.3%), Netherlands +20% (+7%), China +18.9% (+16.3%), MSCI World +17% in dollars, Australia +15.1% (+9.8%), NASDAQ +15%, Indonesia +13.6% (+16.6%), S&P 500 +11.4%, UAE +7.4% (+7.4%), Russell +7.4%, New Zealand +5.1% (+2.7%), Malaysia +4.6% (-1.2%), India +3.1% (+6.9%), Saudi Arabia -3.6% (-3.8%), Thailand -3.8% (-8.1%), Turkey -7.8% (+9.1%), Philippines -8.2% (-7.5%), Denmark -14.1% (-23%), Argentina -46.2% (-24%).

Number Go Up: In the early 1960s our scientists and engineers managed to fit 100 transistors onto a silicon chip. In 1990 the Intel 80486 squeezed 1.2mm onto a chip. By Y2K, Intel’s Pentium 4 chip boasted 42mm transistors. Facebook launched in 2004, igniting the modern social media era. As the S&P 500 bottomed in 2009, Intel fit 731mm onto the Core i7, Facebook had 200mm active users. In 2013 when we started One River, the fastest chip had 4.31bln transistors. 12yrs later Nvidia released one with 208bln. Facebook now has 3.04bln active users.

Number Go Up II: The human brain has about 86 billion neurons and 600 trillion synapses. But still, we do all sorts of stupid things. In finance, the dumbest thing we do is apply leverage to illiquid investments with mismatched duration. You see it all the time, in every cycle, and it always ends with those who have produced the most extraordinary returns suffering catastrophic losses. That just happened in crypto markets on Friday afternoon, after President Trump announced 100% tariffs on China. It sparked the most severe liquidation I’ve ever seen in a day.

Number Go Up III: In AI computing, a node is the rough equivalent of a neuron in the human brain. A parameter is equivalent to a synapse. The most advanced LLMs contain on the order of tens of millions of nodes connected by up to 1.8trln parameters. So, there’s a long way to go before they hit the human brain equivalent. But you can be in this cycle, our LLMs will be scaled such that they far surpass the human brain across every dimension, in search of sentience. And we can be sure that no matter how intelligent they become, they will not prevent us from repeating our mistakes.

Number Go Up IV: Crypto markets are magnificent in their raw ferocity. From the time we started One River, Bitcoin has gone up 8,420x, which is more than double the pace of increase in transistors our engineers fit onto a silicon chip. And even so, in that time, there have been numerous breathtaking liquidations. It reminds us that new technologies can produce remarkable returns, even as they periodically suffer profoundly. And it is thus our job as investors to identify these mega macro trends, concentrate risk in them, and manage positions so that we can hold on.

Number Go Up V: For a few years, crypto market movements have led traditional market cycles. Bitcoin peaked in late 2021, sniffing out the rate hikes, before the S&P 500 topped. So, it is worth paying attention when digital assets move in material ways. Friday’s crypto liquidation had a whiff of 1987 to it. It was technical in nature. It cleaned out every stop loss order, and destroyed anyone who was overleveraged, illiquid. That’s what ferociously free markets do. So crypto markets are once again clean. It should be an interesting week in traditional markets.

Anecdote: When we started One River in early 2013, I had been a global macro investor for 24years. The number of transistors you could fit on a silicon chip had grown from 1.2mm to 4.32bln in that time (a 3,600x increase). You want to embed that kind of mega macro trend into your business. So, I figured we should build a quantitative capability, and felt if we didn’t, we probably wouldn’t have a firm in 10yrs. Aligning with prevailing mega macro trends is how the world’s greatest fortunes have been built. All the lesser fortunes too. People in our industry talk a lot about alpha, which typically means relatively short-to-medium term active trading/investing. The greatest form of alpha generation is embedding the right beta into your portfolio/business. It’s a framework that I find helpful in thinking about investing/business. Thankfully we embedded technology into our business, and our quant team now dominates our activities. We took too long to embed equity beta into our portfolios/business but finally figured out how to combine our defensive quant strategies with long equity beta in ways I expect to power One River’s future. We missed building a private equity business. Private credit too. They’ve been remarkably powerful mega macro trends. But we embedded crypto beta into our business, blockchain infrastructure too - powerful tailwinds and those betas should have years to run. Inflation is one of those mega macro trends that persistently work in your favor, like Moore’s Law, so it’s important to embed both into your business/portfolio. But while these trends move reliably from the lower left to upper right, asset markets periodically suffer major setbacks. Which is why introducing hedges into your business/portfolio is vital. It sounds obvious, easy, but hedges (long volatility) may be the hardest things to hold onto as investors. And long volatility is particularly important when positioning a portfolio/business for a world that is simultaneously in the process of fracturing and racing toward AGI. Both of which are mega macro trends with much further to run.

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.