wknd notes: Defending our Safe Haven

Dusted off an anecdote from 2011 in honor of the brave men and women who have made the ultimate sacrifice to defend our nation, history’s greatest safe haven. In this cynical moment of political dysfunction, social division, and carnage in our schools, I reflected on this anecdote on American greatness, in the sincerest hope that we each strive our utmost to secure its future. See below.

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Week-in-Review (expressed in YoY terms): Mon: Biden signals reconsideration of tariffs on China, Lagarde says negative rates exit by end of third quarter, Powell sworn in for second term as Fed Chair / Brainard sworn in as Vice Chair, Labor Party wins Australian elections (TBD if they can achieve lower house majority), RBI gov Das says will not allow for “runaway” FX depreciation, SNB’s Maechler says won’t hesitate to rase rates if inflation remains outside target, Russia loosens capital controls amid surging RUB, White House walks back Biden’s statement saying US will defend Taiwan against China militarily if necessary, UK house prices 10.2% (9.9%p), Singapore CPI 5.4% (5.6%e), Turkey tourist arrivals 225.6% (129.7%p), US Chicago Fed 0.47 (0.5e), S&P +1.9%; Tue: China outlined 33 pt plan to target support to businesses struggling to cope with lockdowns, US trade rep Tai back peddles on tariff removal rumors, Snapchat cut forecasts and dragged social media mega caps down, Turkish Lira continues to fall sharply as rumors of inflation linked bonds didn’t materialize, ECB’s Villeroy says 50bp hikes aren’t consensus, UK considers sending navy to protect ships carrying Ukrainian grain, India set to restrict shipments of sugar, Lagarde says doesn’t see a recession in the euro area, deadly shooting at Texas elementary school reignites gun control debates, Finland PPI 29.2% (26.6%p) / unemp 6.9% (7%p), EU PMIs mfg 54.4 (54.7e) / serv 56.3 (57.4e) / comp 54.9 (55.1e), Brazil IPCA infl 12.2% (12.04%e), US PMIs mfg 57.5 (57.7e) / serv 53.5 (55.2e) / comp 53.8 (55.7e), US Richmond Fed -9 (10e), US new home sales -16.6% MoM (-2%e), S&P -0.8%; Wed: ECB’s Panetta and Rehn suggest policy normalization should be gradual, RBNZ hiked 50bp as exp / revised terminal rate higher (hawkish), FOMC mins confirm most participants expect 50bp hike at next couple meetings, Chinese Premier Li urged implementing fiscal measure to ensure reasonable growth in Q2, N. Korea launched its 17th missile test this year, China conducts military exercises near Taiwan, Trump backed candidates lose GOP primaries in Georgia, Germany cons conf -26 (-25.5e), Sweden PPI 23.8% (24.5%e), Norway unemp 2.9% (3.1%p), Sweden unemp 7.7% (7.5%e), US durable goods 0.4% MoM (0.6%e), Russia PPI 31.5% (26.9%e), S&P +1.0%; Thur: Kuroda says BoJ could exit from monetary policy and US rate hikes won’t necessarily weaken the JPY, Chinese Premier says economy could miss growth target by wide margin, BoK hiked 25bp as exp, Russia CB cut 300bps in emergency meeting considering more cuts at next meeting. Turkey CB kep rates unch, UK announces 15B GBP fiscal package aimed to calm the surge in energy prices, US sec of state Blinken makes hawkish comments with regard to China, Brainard calls for robust crypto regulations, Japan PPI serv 1.7% (1.5%e), US 1Q GDP -1.5% (-1.3%e) / core PCE 5.1% (5.2%e), US init claims 210k (215k exp), US pending home sales -11.5% (-7.6%e), US KC fed 23 (15e), S&P +2.0%; Fri: bipartisan group of Senators wrote to Biden asking him to NOT remove Chinese tariffs, record amount of Russia oil on tankers heading for India / China, Russia says it already paid $100m interest payment on its foreign debt but investors are wary, EU M3 6% (6.3%e), US retail inventories 0.7% MoM (2%e) / wholesale inv 2.1% MoM (2%e), US personal inc 0.4% (0.5%e) / spending 0.9% (0.8%e), US PCE Deflator 6.3% (6.2%e) / Core 4.9% as exp, UofM sent 58.4 (59.1e) / 1y infl exp 5.3% (5.4%e) / 5-10y exp unch at 3%, S&P+2.5%.

Weekly Close: S&P 500 +6.6% and VIX -3.71 at +25.72. Nikkei +0.2%, Shanghai -0.5%, Euro Stoxx +3.0%, Bovespa +3.2%, MSCI World +3.3%, and MSCI Emerging -1.2%. USD rose +12.4% vs Ethereum, +6.7% vs Russia, +2.9% vs Bitcoin, +2.0% vs Turkey, +0.1% vs China, and flat vs India. USD fell -3.1% vs Brazil, -1.7% vs Australia, -1.6% vs Euro, -1.6% vs South Africa, -1.4% vs Mexico, -1.3% vs Sweden, -1.3% vs Chile, -1.2% vs Sterling, -0.9% vs Canada, -0.6% vs Yen, and -0.5% vs Indonesia. Gold +0.5%, Silver +1.9%, Oil +4.3%, Copper +0.7%, Iron Ore +2.2%, Corn -0.2%. 5y5y inflation swaps (EU -13bps at 2.10%, US +2bps at 2.64%, JP -10bps at 0.75%, and UK +7bps at 3.93%). 2yr Notes -11bps at 2.48% and 10yr Notes -4bps at 2.74%.

YTD Equity Indexes (high-to-low): Chile +29.4% priced in US dollars (+25% priced in pesos), Brazil +25.3% priced in US dollars (+6.8% in reais, UAE +14.1% in dollars (+14.1% in dirham), Colombia +12.7% (+8.6%), Saudi Arabia +11.2% (+11.1%), Turkey +7.1% (+31.3%), Indonesia +4.8% (+6.8%), Portugal +3.4% (+9.9%), Mexico +2.7% (-1.5%), Singapore +1.8% (+3.4%), Norway +1.4% (+9.3%), Venezuela -0.9% (+3.9%), South Africa -2.9% (-4.7%), Spain -3% (+2.5%), Canada -3% (-2.2%), Thailand -3.4% (-1.1%), Argentina -3.6% (+12.2%), UK -4.3% (+2.7%), Australia -5.3% (-3.5%), Greece -6.1% (-0.2%), Malaysia -6.3% (-1.3%), Philippines -7.7% (-5.6%), India -9.6% (-5.8%), HK -12.1% (-11.5%), Israel -12.4% (-5.7%), Czech Republic -12.5% (-8.1%), S&P 500 -12.8%, Switzerland -13.6% (-9.5%), Germany -13.8% (-9%), Belgium -13.9% (-8.5%), France -14.3% (-8.9%), Italy -14.7% (-9.9%), MSCI World -15.1% (-15.1%), Korea -15.6% (-11.4%), Taiwan -15.7% (-10.7%), Japan -15.7% (-7%), Russell -15.9%, Euro Stoxx 50 -16.7% (-11.4%), Denmark -17.2% (-12%), Netherlands -17.2% (-12%), Finland -17.4% (-12.7%), Austria -18% (-13.4%), Ireland -18.2% (-13%), China -18.4% (-14%), New Zealand -19.1% (-15.1%), Sweden -21.7% (-14.9%), Poland -22.3% (-18.3%), NASDAQ -22.5%, Russia -28.6% (-36.4%), Hungary -32.5% (-23.8%).

Anecdote (Dec 2011): “My grandparents were given the name on Ellis Island,” he explained over lunch at Lavo – NY’s hottest spot. Filled with people from all over the world. Building. Hustling. Making something from nothing. And conversation wandered. His plans. Our plans. Opportunities. Risks. Markets. Trades. 2012. I explained investors have yet to fully appreciate what a true safe haven is: A place where you’re prepared to permanently move your assets, your family, your future. So you see, for me, Japan is a currency trade, not a safe haven. You want to be gaijin? No domo arigato. Think China is an emerging safe‐haven? Want to be gweilo? No way, better dead than Red. Brazil? Sure, just bring bodyguards for your kids. Norway? Sweden? Three generations later and your heirs will remain standing in the cold, facing closed doors. How about France, Germany, Italy? Same thing, no chance. I was just getting going. But he interrupted, with a story. “They were poor, and escaped from Poland, saw what was coming, and snuck out, leaving behind what little they had,” was how he started. “Made it to England first, but the plan was to get to America, which led them to that interview on Ellis,” he said, closing the circle. “A true safe haven is a country where your rights and dignity are protected, where you can live safely, provide for your family, build wealth, keep it,” he continued. And the grandson of two poor, brave Polish Jews, considered it for a moment, from his perch high in the strata of NY finance, surrounded by open doors, and finished with this thought, “There were just four countries we wanted to emigrate to. Each welcomed us ‐ Britain, Canada, Australia, of course, the US. And they remain the only true safe havens.”

Good luck out there,

Eric Peters

Chief Investment Officer

One River Asset Management?

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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, drink 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.