Spent the week in Montreal, Toronto, the Great White North. And if there’s a theme that emerged, its that the massive mountains of money run by some of North America’s most sophisticated institutional investors are looking for ways to hold onto their equity longs while layering in downside protection. Makes sense. Particularly in a world with such fat left and right tails. And it was good to hear that despite all the trade tension, when it comes to critical minerals, vital to national defense, there’s still plenty of cooperation underway. Brothers in arms.

Overall: “When @NYGovCuomo refuses to tax the rich, he’s refusing to let workers enjoy the wealth they created,” wrote Zohran Mamdani in the lead up to his election. “When he says low taxes foster a ‘business-friendly environment,’ he means an environment where it’s easy for bosses to steal from workers,” continued the candidate. “Taxation isn’t theft. Capitalism is.” It’s a rather extraordinary statement. Particularly so for the Mayor of New York, which for a century has been capitalism’s capitol city. Mamdani’s quote falls comfortably within the Karl Marx genre, “From each according to his ability, to each according to his needs!” Or George Orwell’s, “Four legs good, two legs bad.” Mamdani won the youth vote by the kind of electoral margin that would’ve made Saddam Hussein blush. And when an ideologue says capitalism is theft, you should (1) believe that he means what he says, and (2) expect it to take years of economic hardship for his constituency to come to their senses. Argentina’s chronic decline started sometime after Peron came to power in the 1940s. Milei chain sawed his way to economic sanity 80 years later. Anyhow, 1500 miles southwest of New York City, in Austin Texas, 75% of Tesla shareholders voted to award Elon a $1 trillion incentive package. It is contingent on a variety of milestones being met, the most ambitious of which is a 6x rise in Tesla market capitalization to $8.5 trillion. It was an Ayn Randian sort of result, and sure to attract more NYC refugees to the Lone Star state. Progressives naturally erupted. Which kicked off a furious but healthy philosophical exchange on X about the makers in society versus the takers. And whether we should think of economic spoils as a fixed pool to be divided by politicians, or something to be inexorably expanded by free market capitalism. It is a debate Orwell hoped to settle in Animal Farm’s final chapter, when the pigs replaced their seven idealistic founding principles with one simple line, “All animals are equal, but some animals are more equal than others.”

For Week-in-Review and Weekly & Year-to-Date market data, scroll to the bottom.

Lone Star: “A year ago we thought there would be 100 bps of rate cuts, but it turned out to be just 50,” said Lone Star, way out West. “We have had two cuts this year. So, we got there. It took longer because of the tariffs. But we can be patient, we pretty much have permanent capital,” continued one of the best performing US university endowment CIOs. “I’m inclined to think its 50/50 for a December cut. We thought that a recession would be unlikely. And I don’t think we’re close to a point where they’ve exhausted their tools to boost the economy.”

Lone Star II: “They have not fully unleashed the banks to get this economy running hot, and I think they will,” said Lone Star. “They can reduce capital charges, and get banks to boost credit growth,” he explained. “Might be bad in the long-term, and may boost inflation back toward 4%, but it’s good for the short term. Good for GDP and good for the market.” Indeed. “And that is a big shoe that has yet to drop. So, I’m not in the camp of the market will turn lower and really go down. At least not yet. But it seems everyone’s scared that things are headed south.”

Lone Star III: “So we have the Republicans jawboning rates lower, and the Fed probably cutting, and if they unleash the banks, that’s a huge positive,” said Lone Star. “There’s no austerity coming. Trump loves debt, leverage. So, expect fiscal to be more of the same. Monetary easing, regulatory loosening, fast-tracking infrastructure development will be big,” he said. “If that’s underpinning the economy, we should see growth moving higher. That doesn’t seem to be the consensus. Most people seem to think the economy will get worse and slow.”

Lone Star IV: “The administration has been going for growth, and it has worked,” said LoneStar. “And once they use all their tools, by the middle of 2026, we could see the Atlanta Fed’s GDPNow at 5%.” They’ll need the banks to get there. And they seem to be doing that. Big banks are getting bigger, no one cares. “You could see CPI grinding down toward 3%, interest rates another 25bps lower, AI still screaming, and you won’t know what to do. So, it seems like we will see more of the same, with fits and starts and Trump being Trump and whatever.”

Lone Star V: “And if the House and even the Senate turn blue this time next year, then everything Trump is doing will get investigated,” said Lone Star, sketching out scenarios. “Then it turns into a circus like the first time. We’ve seen that before and in the last couple of years of his first term and the economy did well,” he said. “But with the election this week, they just got told, don’t screw it up. So, they’ll spend the next year getting as much money into people’s hands as possible. Seems sensible, and completely obvious to me, but this is not the narrative I hear.”

Anecdote: “Where the stock market is now makes sense from the perspective of what investors are long versus what they’re short,” said Lone Star. “But the valuation gap is similar to what we saw in 1999, and even though we’re still in early innings of this AI theme, valuations are well ahead of reality,” continued one of the top performing US endowment CIOs. “The gap between growth and value assets is why people are calling for all things AI-related to be down 50% tomorrow. And when I hear that, I think, well yes, but who knows when,” he said. “You need a catalyst to get the momentum players to give up on this theme, to get the people who’ve made so much money betting on momentum to call it quits and go home. But that’s not what gamblers do,” said Lone Star, sizing up the boys in New York from the wide-open spaces out West. “If you’re on the growth momentum train, you’re winning. If you’re not, you’re sitting on a cactus. I don’t know how long this will go on. No one else does either. And there are geopolitical things that could factor in, but who knows how those things play out.” No doubt those sorts of things are tough to play. “Would you short Palantir here? Would you have shorted Cisco in 2000? Everyone wants to short these stocks right at the top. Who doesn’t?” he asked. “When investors run around whining and moaning, I don’t care, my teenagers did that. But when people that have followed a disciplined investment process for many years start closing shop, I get interested. And I’m seeing some value investors wind down,” said Lone Star. “So, I’m starting to get interested. But I’ve done this long enough to know that it can take a long time for markets that are ahead of reality to come back in line. And absent a catalyst, I think this market keeps on going higher.”

Good luck out there,

Eric Peters

Chief Investment Officer

One River Asset Management

Week-in-Review: Mon: US ISM mfg 48.7 (49.5e), prices paid 58.0 (62.5e). Eurozone PMI mfg 50.0 as exp. Turkey CPI 32.87% (33.20%e). South Korea CPI 2.4% (2.2%e). Australia cash rate target unch 3.6% as exp. Amazon inks $38b deal with OpenAI for Nvidia chips. Microsoft signs $9.7b deal to buy AI computing capacity from Australian’s IREN. Trump threatened to take military action in Nigeria and cut off US aid if the government doesn’t halt militants’ “killing of Christians”. S&P +0.2%. Tue: Brazil IP 2.0% (1.9%e). Election Day sees Mamdani become Mayor of NYC, Mikie Sherrill (D) secure NJ governorship, Abigail Spanberger (D) secure Virginia governorship, and Newsome-backed California redistricting measure Prop 50 pass. S&P -1.2%. Wed: US ADP emp change 42k (30k e), US ISM serv 52.4 (50.8e). Brazil Selic rate unch 15.0% as exp. Sweden Riksbank policy rate unch 1.75% as exp. Poland base rate 4.25% as exp. Key US Supreme Court justices expressed skepticism about the legality of Trump’s global tariffs. Nvidia’s Jensen Huang told the FT that China will beat the US in the AI race thanks to lower energy costs and looser regulations. S&P +0.4%. Thu: Mexico overnight rate 7.25% as exp. UK bank rate unch 4.0% as exp. China exports -1.1% (2.9%e), imports 1.0% (2.7%e), trade balance $90.07b ($96.85b e). Musk made lofty predictions about the future of Tesla after shareholders approved his $1T comp package. US airport flight cuts expected to kick in early Friday morning, as government shutdown continues to become the longest in history. S&P -1.1%. Fri: US UMich sent 50.3 (53.0e). Canada unemp 6.9% (7.1%e). Mexico CPI 3.57% (3.56%e). US government shutdown continues as Senate Republicans rejected Democrat’s offer to scale back their shutdown demands in regard to Affordable Care Act subsidies, prolonging disrupted air travel and delayed food aid. Trump grants Hungary exemption on Russian oil purchases. S&P +0.1%.

Manufacturing PMI (high-to-low): India 59.2/57.7, Sweden 55.1/55.6, Vietnam 54.5/50.4, Greece 53.5/52, Spain 52.1/51.5, Netherlands 51.8/53.7, Indonesia 51.2/50.4, Hong Kong 51.2/50.4, Hungary 51/51.6, China 50.6/51.2, Singapore 50/50.1, Italy 49.9/49, UK 49.7/46.2, Canada 49.6/47.7, Germany 49.6/49.5, Mexico 49.5/49.6, South Korea 49.4/50.7, Austria 48.8/47.6, Poland 48.8/48, France 48.8/48.2, South Africa 48.8/50.2, United States 48.7/49.1, Brazil 48.2/46.5, Switzerland 48.2/46.3, Japan 48.2/48.5, Russia 48/48.2, Norway 47.74/49.65, Taiwan 47.7/46.8, Czech Republic 47.2/49.2, Turkey 46.5/46.7. Services PMI (high-to-low): India 58.9/60.9, Ireland 56.7/53.5, Spain 56.6/54.3, Sweden 55.4/57.9, US 54.8/54.2, Germany 54.6/51.5, Italy 54/52.5, Japan 53.1/53.3, China 52.6/52.9, Australia 52.5/52.4, UK 52.3/50.8, Russia 51.7/47, France 48/48.5, Brazil 47.7/46.3.

Weekly Close: S&P 500 -1.6% and VIX +1.64 at +19.08. Nikkei -4.1%, Shanghai +1.1%, Euro Stoxx -1.2%, Bovespa +3.0%, MSCI World -1.5%, MSCI Emerging -0.6%, Bitcoin     -5.7%, and Ethereum -10.9%. USD rose +0.8% vs Australia, +0.4% vs Sweden, +0.4% vs Turkey, +0.4% vs Chile, +0.3% vs Indonesia, +0.2% vs Canada, +0.1% vs Russia, and flat vs China. USD fell -0.8% vs Brazil, -0.6% vs Mexico, -0.4% vs Yen, -0.3% vs Euro, -0.2% vs South Africa, -0.1% vs India, and -0.1% vs Sterling. Gold +0.3%, Silver (flat), Oil -2.0%, Copper -2.6%, Iron Ore -2.4%, Corn -1.0%. 10yr Inflation  (EU +1bps at 1.77%, US -2bps at 2.29%, JP -3bps at 1.56%, and UK -3bps at 2.90%). 2yr Notes -1bp at 3.56% and 10yr Notes +2bps at 4.10%.

2025 Year-to-Date Equity Index Returns: Colombia +75.7% priced in US dollars (+50.9% priced in pesos), Korea +66.3% priced in US dollars (+64.8% in won), Hungary +61.3% in dollars (+35.3% in forint), Czech Republic +59.1% (+37.9%), Poland +56.7% (+39.5%), Israel +55.7% (+39.7%), Spain +53.5% (+37.1%), Greece +51.3% (+35.2%), Chile +50.4% (+43.1%), Brazil +48.2% (+28.1%), South Africa +47% (+34.6%), Portugal +45.1% (+29.7%), Austria +44.6% (+29.8%), Mexico +44.5% (+28%), Italy +39.9% (+25.5%), Ireland +37.8% (+23.1%), Finland +37.7% (+23.6%), Germany +31.9% (+18.4%), HK +30.7% (+30.8%), Japan +29.4% (+26%), Belgium +28.9% (+15.2%), Norway +27.8% (+14%), Sweden +27.5% (+10.1%), Euro Stoxx 50 +27.2% (+13.7%), Taiwan +27% (+20%), UK +24.6% (+18.5%), Singapore +24.6% (+18.6%), Canada +23.8% (+21%), Vietnam +22.3% (+26.2%), China +22.2% (+19.3%), Netherlands +21.1% (+8.2%), France +20.5% (+7.7%), Switzerland +19.4% (+6%), NASDAQ +19.1%, MSCI World +16.6% priced in dollars, Indonesia +15% (+18.6%), S&P 500 +14.4%, Australia +12.7% (+7.5%), Russell +9.1%, UAE +7% (+7%), Malaysia +5.6% (-1.4%), New Zealand +4.3% (+3.7%), India +4% (+7.8%), Thailand -1.7% (-6.9%), Saudi Arabia -5.9% (-6.1%), Turkey -6.9% (+11.1%), Philippines -13.5% (-11.8%), Argentina -17.9% (+13.1%), Denmark -22.2% (-30.1%).

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.