The Dow Jones Industrial Average hit a new all-time high on Friday. Which is not exactly how you would have expected the week to end if you’d been watching, well, just about anything else. Crypto got smoked worst of all. The more esoteric the coin, the worse it fared. You could almost see the capital flowing from the world’s most ethereal assets to those that are most tangible. Like gold, which ended the week +5%, and the most industrial of the stock averages, the DJIA, which gained +2.6%. Wouldn’t it be ironic if in a world racing toward ubiquitous super intelligence, in hot pursuit of abundance, the next big investment opportunity is in overcoming the constraints of our physical world.

Overall: “We see telltale signs of a market distorted beyond recognition, one that punishes strategic investment, one that punishes diversification, and one that punishes long-term planning,” said JD Vance in an important speech [here] to representatives from 54 countries plus the European Commission. “This is crazy - we should have the kind of global markets, the kind of domestic markets that reward long-term planning, that reward strategic thinking, and that’s exactly what we’re trying to do,” continued America’s Vice President at the State Department’s inaugural Critical Minerals Ministerial. “We all face the same vulnerability, access to the things that protect our people and sustain our way of life. Everything from missile defense systems to energy infrastructure, to advanced manufacturing, to emerging technologies, the fundamental supply chains that support these industries sometimes can vanish in the blink of an eye without any control or influence from any of the countries in this room.” None of our adversaries were invited. Which meant that neither Russia nor China were present. The latter, of course, produces 70% of the world’s rare earths and processes 90%, which it has weaponized, just as the US has weaponized the dollar and the global payment system. “And we in the Trump administration believe it is the business of the government, of the people’s government elected just over a year ago to confront such problems and that we want to confront them together. And I think that you’re all here, at least I hope you’re all here because you all feel the exact same way,” said JD, extending a warm hand to leaders in the process of picking sides in the great power conflict now raging. “We’ve convened this ministerial in an effort to accelerate that shared work. So this morning, the Trump administration is proposing a concrete mechanism to return the global critical minerals market to a healthier, more competitive state. A preferential trade zone for critical minerals protected from external disruptions through enforceable price floors.”

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

Imagine: Economically speaking, our ascent is defined by rising productivity, the spoils of which determine prosperity. We have imagined various ways to distribute this wealth: socialism, communism, free-market capitalism. I can imagine other approaches – the Chinese have pursued one. But even within existing constructions, there are nuances. Today, capital owners collect a disproportionate share of profits relative to laborers. There is no intrinsic reason that this degree of inequality cannot persist. But in modern history it never has. The societal stresses such inequality have produced are quite obviously manifesting, metastasizing. And now comes AI.

Imagine II: The private sector overwhelmingly sees itself as a more capable steward of research and development capital than governments. However, an examination of innovations traceable to state-funded initiatives during the past century suggests otherwise. I suspect the failure of Soviet communism led western free-market capitalists to imagine every element of our system to be superior. I imagine someday we’ll regard that black and white conclusion as foolish. China’s unprecedented economic rise and technological advance should prompt Western self-reflection. So far it has not. I can imagine this being forced upon us. In fact, it is already underway.

Public/Private: Biden launched the Infrastructure Investment and Jobs Act in 2021. The Inflation Reduction Act and CHIPS Act in 2022. They together catalyzed $1trln in private investment. Under Trump, the US has taken equity stakes in Lithium Americas, MP Materials, Vulcan Elements, Intel, Westinghouse, US Steel, and entered profit sharing agreements with Nvidia and AMD. It has announced Project Vault, a strategic mineral stockpile, along with energy deregulation, manufacturing subsidies, tax breaks. And you can be sure that Fed/Treasury will be coordinating to unlock lower cost and more abundant capital. It’s only just starting.

Public/Private II: “You can mark my words. In 36mths, but probably closer to 30mths, the most economically compelling place to put AI will be space. It will then get ridiculously better to be in space,” said Elon Musk. Solar panels generate about 5x more power in space than on Earth (due to no atmospheric loss or night), making it “actually much cheaper to do in space” for massive AI workloads, despite current challenges like launch costs (he expects Starship to solve rapidly). SpaceX’s FCC filing for a million-satellite constellation of solar-powered orbital data centers and the merger of SpaceX/xAI, positioned it as a scaling solution beyond Earth’s grid constraints.

Safety in Production: In 2015 - thirty-nine years after Mao’s death, and thirty-six years after Deng Xiaoping initiated major economic reforms - Li Keqiang announced the “Made in China 2025” program. It was part of a broad three-step strategy: making China a strong manufacturing country by 2025, competing with other manufacturing rivals by 2035, and transforming China into a manufacturing superpower by 2049 (the 100th anniversary of the People’s Republic). 86% of its 260 goals have reportedly been met, which is probably why Beijing no longer mentions the program, lest it further antagonizes those which it seeks to unseat, the US and Europe.

Safety in Production II: Beijing’s Made in China 2025 industrial strategy explicitly targets dominance in 10 key high‑tech industry clusters (information technology, robotics, green energy/EVs, aerospace, ocean engineering and high‑tech ships, advanced rail, power equipment, new materials, medicine/medical devices, and agricultural machinery). Bloomberg Economics concludes that among the 13 critical technologies tracked, China has achieved global leadership in five: high-speed rail, graphene, unmanned aerial vehicles, solar panels, and electric vehicles and lithium batteries, while swiftly closing the gap in seven others.

Anecdote: A massive photograph hangs in the entryway at our One River headquarters. It was taken 15 years ago inside a dilapidated factory in Beijing. Painted on the factory wall are five large characters, which translate roughly to “Safety in Production”. Mao plastered this slogan across industrial worksites back when China was poor as dirt. The artwork was a gift from a Swiss investor, a talented photographer who I met in my travels. Each time I see it, I’m reminded of the decades I’ve spent circling the globe, grinding, building our factory. But all great artwork contains many layers of meaning, and sometimes I consider the irony that so many of our firm’s brilliant quantitative analysts/investors can read the characters on the factory wall while I cannot. They are China’s loss, America’s gain. They each have stories, their reasons for leaving, for coming to America, in search of opportunity, to our factory floor. And at other times I reflect on how far China has come in the period from the opening of that simple factory till today. Sixty years after Mao’s Great Leap Forward and the mass starvation that his catastrophic autocratic policies produced, Xi Jinping landed a spaceship on the dark side of the moon. Then cracked quantum-entangled communication. China’s dominance across vast swathes of humanity’s most advanced technology is almost inconceivable. No nation has ever ascended at such a staggering pace, at this scale. It lifts the bar on what we should imagine humanity to be capable of if only, we work well together. So sometimes, when I look at the photograph, I think of how much we may learn from China’s magnificent economic ascent. And what the US might look like if we can combine the best of what China has shown to work, with our constitutional rule of law, checks and balances, and the rugged individualism that has made America what it is today.

Good luck out there,

Eric Peters

Chief Investment Officer

One River Asset Management

Week-in-Review: Mon: US ISM mfg 52.6 (48.5e). South Korea CPI 2.0% as exp. Australia cash rate target 3.85% as exp. US government partial shutdown to delay Friday’s BLS January jobs report. Musk’s SpaceX combines with xAI at $1.25T valuation. Trump to roll back punitive India tariffs from 25% to 18% following an agreement with Prime Minister Modi that India will stop buying Russian oil. S&P +0.5%. Tue: Turkey CPI 30.65% (29.96%e). New Zealand unemp rate 5.4% (5.3%e). Partial US government shutdown ends after Trump signs funding deal. Bitcoin drops to lowest price since Trump’s election victory, and Anthropic’s Cowork release sparks selloff from software to broader market. S&P -0.8%. Wed: US ADP emp change 22k (45k e), ISM serv 53.8 (53.5e). Eurozone CPI est 1.7% as exp, Core 2.2% (2.3%e). Poland base rate unch 4.00% as exp. Trump and Xi discuss Taiwan and trade ahead of meeting in China in April. Diplomatic talks between US and Iran set for Friday to discuss nuclear deal. Trump says he would have passed on Kevin Warsh as his nominee for the Fed if Warsh had expressed a desire to hike interest rates. S&P -0.5%. Thu: US init jobless claims 231k (212k e), cont claims 1844k (1850k e), JOLTS job openings 6542k (7250k e). Mexico overnight rate unch 7.00% as exp. ECB main refinancing rate unch 2.15% as exp, deposit facility rate unch 2.00% as exp. Bank of England bank rate unch 3.75% as exp. Taiwan CPI 0.69% (1.20%e). Bitcoin drops below $61,000, global tech stock selloff deepens, silver plunges. Anthropic to release an AI model designed for financial research. S&P -1.2%. Fri: US UMich sent 57.3 (55.0e). Canada unemp rate 6.5% (6.8%e). Iran and US meeting to de-escalate tensions saw both countries agreeing to continue indirect talks, with discussions limited to nuclear issues. Markets rallied following sell-off, with chip companies driving gains, as Bitcoin also saw a bounce to $71,000. S&P +2.0%.

Manufacturing PMI (high-to-low): Sweden 56 (previous month 55.4), India 55.4 (previous mth 55), Greece 54.2 (previous 52.9), US 52.6/47.9, Indonesia 52.6/51.2, Vietnam 52.5/53, Hong Kong 52.3/51.9, UK 51.8/50.6, Taiwan 51.7/50.9, Japan 51.5/50, South Korea 51.2/50.1, France 51.2/50.7, Singapore 50.5/50.3, Canada 50.4/48.6, China 50.3/50.1, Netherlands 50.1/51.1, South Africa 50/47.7, Czech Republic 49.8/50.4, Russia 49.4/48.1, Hungary 49.3/54, Spain 49.2/49.6, Germany 49.1/47, Poland 48.8/48.5, Switzerland 48.8/46.4, Italy 48.1/47.9, Turkey 48.1/48.9, Austria 47.2/49.3, Brazil 47/47.6, Mexico 46.3/46.1. Services PMI: India 58.5/58, Australia 56.3/51.1, Ireland 54.5/54.8, Sweden 54.3/56.3, UK 54/51.4, Japan 53.7/51.6, Spain 53.5/57.1, Russia 53.1/52.3, Italy 52.9/51.5, US 52.7/52.5, Germany 52.4/52.7, China 52.3/52, Brazil 51.3/53.7, France 48.4/50.1.

Weekly Close: S&P 500 -0.1% and VIX +0.32 at +17.76. Nikkei +1.7%, Shanghai -1.3%, Euro Stoxx +1.0%, Bovespa +0.9%, MSCI World flat, MSCI Emerging -1.4%, Bitcoin -15.9%, and Ethereum -23.5%. USD rose +1.6% vs Yen, +1.4% vs Russia, +1.2% vs Sweden, +0.6% vs Sterling, +0.5% vs Indonesia, +0.5% vs Canada, +0.3% vs Euro, and +0.3% vs Turkey. USD fell -2.0% vs Chile, -1.4% vs India, -1.1% vs Mexico, -0.8% vs Brazil, -0.7% vs South Africa, -0.7% vs Australia, and -0.3% vs China. Gold +4.9%, Silver -2.1%, Oil -2.5%, Copper -0.7%, Iron Ore -3.0%, Corn +0.5%. 10yr Inflation Breakevens (EU -4bps at 1.85%, US -1bp at 2.33%, JP -11bps at 1.81%, and UK -5bps at 3.11%). 2yr Notes -2bps at 3.50% and 10yr Notes -3bps at 4.21%.

YTD Equity Index Returns: Hungary +20.3% priced in US dollars (+17.1% priced in forint), Brazil +19.5% priced in US dollars (+13.5% in reais), Korea +19% in dollars (+20.8% in won), Turkey +18.3% (+20.1%), Colombia +17.5% (+14.6%), Mexico +15% (+10.1%), Norway +14.2% (+9.4%), Israel +13.1% (+10%), Chile +12.8% (+7%), Greece +12.2% (+11.4%), Sweden +10.5% (+8.2%), Belgium +9.4% (+8.6%), Taiwan +8.8% (+9.7%), Portugal +8.4% (+7.7%), Russell 2000 +7.6%, Poland +7.6% (+6.9%), Singapore +7.5% (+6.2%), Japan +7.3% (+7.8%), South Africa +7.3% (+3.8%), Thailand +7.1% (+7.5%), Austria +6.9% (+6.4%), Saudi Arabia +6.7% (+6.7%), Philippines +6.2% (+5.6%), Malaysia +6% (+3.1%), UAE +5.7% (+5.7%), UK +5.7% (+4.4%), Netherlands +5.4% (+4.6%), Australia +5.2% (-0.1%), Spain +4.4% (+3.7%), Euro Stoxx 50 +4.3% (+3.6%), Finland +4% (+3.5%), Switzerland +3.8% (+1.8%), Czech Republic +3.3% (+2.7%), HK +3.2% (+3.6%), China +3.2% (+2.4%), New Zealand +3.2% (-0.8%), Canada +3% (+2.4%), Italy +2.6% (+2.1%), France +2.2% (+1.5%), MSCI World +2.2% in dollars, Ireland +2.2% (+1.5%), Germany +1.5% (+0.9%), S&P 500 +1.3%, Vietnam -0.4% (-1.6%), NASDAQ -0.9%, Argentina -1% (-2.4%), Denmark -1% (-1.5%), India -2.4% (-1.7%), Indonesia -8.9% (-8.2%).

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.