Dusted off an anecdote from 2017 about financial market crises, which in my thirty-five years of doing this, seem to bubble up more often than most care to recall (see below). Enjoy Labor Day break. Back next Sunday with full wknd notes. All the very best, E
Week-in-Review: Mon: Canada to impose up to 100% tariff on Chinese EVs / 25% on steel & aluminum, Trump vows to make Bitcoin ‘made in the USA’, PBOC keeps 1y MLF rate unch as exp, US Durable goods orders 9.9% (5.0%e), S&P -0.3%; Tue: Hungary CB unch as exp, Jack Smith refiles Jan 6th Trump indictment to align with SCOTUS Presidential immunity ruling over the summer, US Cons conf 103.3 (100.8e), Australia CPI 3.5% (3.4%e), S&P +0.2%; Wed: Berkshire Hathaway tops $1T value for first time, Lula appts Galipolo as next CB chief, NVDA beats earnings / Blackwell chip delays causes some concerns, US mortgage rates fall to lowest levels since Apr 2023, Eurozone M3 2.3% (2.7%e), Russia Ret sales real 6.1% (5.4%e), Russia Unemp rate 2.4% as exp, Russia IP 3.3% (2.8%e), S&P -0.5%; Thu: President Xi and Nat’l Security Advisor Sullivan meet in Beijing, Apple & NVDA in talks to participate in next OpenAI funding round, Harris sits for first interview since becoming Democratic candidate, Germany CPI 1.9% (2.1%e), US GDP 3.0% (2.8%e), US Initial jobless claims 231k (232k e) / Cont claims 1868k (1870k e), S&P flat; Fri: US PCE 2.5% as exp / Core 2.6% (2.7%e), China said to be mulling refinancing on $5.4T in mortgages, Intel rumored to be exploring spinning off foundry business, Trump announces a plan to pay (or force insurance companies to pay) for IVF for all Americans, S. Korea IP 5.5% (7.5%e), Japan jobless rate 2.7% (2.5%e), Japan Tokyo CPI 2.6% (2.3%e) / Core 1.6% (1.4%e), Japan IP 2.7% as exp / ret sales 2.6% (2.8%e), UK house prices 2.4% (2.9%e), Germany unemp 6% as exp, Italy unemp 6.5% (7%e), EU unemp 6.4% (6.5%e), India 2Q GDP 6.7% (6.8%e), Brazil unemp 6.8% as exp, Canada 2Q GDP 2.1% (1.8%e), US Chicago PMI 46.1 (44.8e), US personal inc 0.3% (0.2%e) / spending 0.5% as exp, US UofM 67.9 (68.1e) / 1y infl exp 2.8% (2.9%e) / 5-10y infl exp 3% as exp, S&P +1.0%.
Weekly Close: S&P 500 +0.2% and VIX -0.86 at +15.00. Nikkei +0.7%, Shanghai -0.4%, Euro Stoxx +1.3%, Bovespa +0.3%, MSCI World +0.3%, and MSCI Emerging -0.1%. USD rose +6.8% vs Ethereum, +4.0% vs Bitcoin, +3.2% vs Mexico, +2.2% vs Brazil, +1.3% vs Euro, +1.2% vs Yen, +0.9% vs Sweden, +0.7% vs Sterling, +0.6% vs South Africa, +0.4% vs Australia, +0.3% vs Turkey, and +0.3% vs Chile. USD fell -1.1% vs Russia, -0.4% vs China, -0.2% vs Indonesia, -0.1% vs Canada, and flat vs India. Gold -0.7%, Silver -3.7%, Oil -1.7%, Copper -0.8%, Iron Ore +4.5%, Corn +2.6%. 10yr Inflation Breakevens (EU -2bps at 1.77%, US +3bps at 2.15%, JP -5bps at 1.32%, and UK -5bps at 3.41%). 2yr Notes +0bps at 3.92% and 10yr Notes +10bps at 3.90%.
August Mthly Close: S&P 500 +2.3% and VIX -1.36 at +15.00. Nikkei -1.2%, Shanghai -3.3%, Euro Stoxx +1.3%, Bovespa +6.5%, MSCI World +2.5%, and MSCI Emerging +1.4%. USD rose +32.9% vs Ethereum, +12.2% vs Bitcoin, +6.0% vs Mexico, +5.3% vs Russia, +2.8% vs Turkey, and +0.2% vs India. USD fell -5.0% vs Indonesia, -3.9% vs Sweden, -3.3% vs Australia, -3.3% vs Chile, -2.5% vs Yen, -2.3% vs Canada, -2.1% vs South Africa, -2.1% vs Sterling, -2.0% vs Euro, -1.9% vs China, and -0.8% vs Brazil. Gold +2.2%, Silver -0.8%, Oil -4.3%, Copper -0.1%, Iron Ore +1.6%, Corn +0.3%. 10yr Inflation Breakevens (EU -13bps at 1.77%, US -8bps at 2.15%, JP -17bps at 1.32%, and UK -11bps at 3.41%). 2yr Notes -34bps at 3.92% and 10yr Notes -13bps at 3.90%.
2024 Year-to-Date Equity Index Close: Argentina +57.1% priced in US dollars (+84.7% priced in pesos), Venezuela +54.9% priced in US dollars (+58.3% priced in bolivars), Malaysia +22.6% priced in dollars (+15.4% priced in ringgit), Denmark +21.7% in dollars (+21.9% in krone), Taiwan +18.8% (+24.2%), S&P 500 +18.4% in dollars, NASDAQ +18% in dollars, Hungary +16.9% (+20.2%), Netherlands +16.6% (+16.8%), MSCI World +15.5% in dollars, India +15.2% (+16.1%), Turkey +14.1% (+31.6%), Italy +13.1% (+13.2%), Spain +12.7% (+12.9%), Germany +12.7% (+12.9%), Belgium +12.7% (+12.9%), Ireland +11.5% (+11.6%), UK +11.3% (+8.3%), Japan +11.2% (+15.5%), Czech Republic +11.1% (+12.8%), South Africa +10.9% (+8.2%), Greece +10.5% (+10.7%), Switzerland +10.1% (+11.7%), Poland +9.6% (+8.2%), Euro Stoxx 50 +9.5% (+9.7%), Russell +9.4% in dollars, Canada +9% (+11.4%), Austria +8.5% (+8.6%), Israel +8.4% (+10.3%), Norway +7.4% (+12.8%), Singapore +7.4% (+6.3%), Sweden +5.8% (+8.3%), HK +5.7% (+5.5%), Australia +5.4% (+6.6%), Philippines +5.3% (+6.9%), Colombia +5.2% (+14%), Indonesia +4.5% (+5.5%), New Zealand +4% (+5.8%), Saudi Arabia +1.4% (+1.5%), Finland +1.4% (+1.5%), France +1% (+1.2%), Chile +0.3% (+4.2%), Portugal -2.4% (-2.3%), Korea -3% (+0.7%), UAE -3.1% (-3.1%), Thailand -3.7% (-4%), China -4.3% (-4.5%), Brazil -12.9% (+1.4%), Mexico -21.9% (-9.4%).
Anecdote (Sept 2017): I love movies. Scary ones especially. Keep your happy endings, give me chainsaws. Meat hooks. I’ll never forget ERM in 1992. That was my first real snuff flick as a Lehman prop trader. The Italians never stood a chance in the film, they never do. Show me an Italian who can resist a dark woodshed and I’ll show you a hero in a hockey mask. At least the Swedes put up a fight in that flick. Their central bankers raised overnight rates to 500% in 1992. Want to make a grown nerd cry? Run that interest rate through his risk model. But of course, not a single propeller-head imagined such a monster. Anyhow, my next scary movie was Orange County, 1994. The great bond massacre brought terrified traders to tears. Mexico devalued too; Tequila Slammer. So many strings inextricably woven into that tangled tale. These intricate plots build over years, unravel in months. Asian Flu was released in 1997, classic zombie apocalypse genre. Just when the virus seemed contained, along came a sequel; Russian Flu in 1998. A month later they released LTCM, a documentary about the dangers of mixing academics and money. Wall Street is remaking that classic as we speak; a big budget Black Monday II. Revenge of the Sock Puppet was released in 2001, followed quickly by 9-11. Then things went quiet for what seemed like forever. But seven-years later Haunted House came out – scared the crap out of everyone, even hardened criminals flipping cribs from cellblocks. European Debt Crisis was released three years later in 2011, a real nail biter, until some Italian central banker saved mankind with a printing press. It’s been happy endings ever since. Chick flicks, corsets, period pieces. Utterly boring. But in my three decades of watching scary movies, on average there’s been a blockbuster surprise every three to four years. And it’s been six since 2011.
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.