wknd notes: Guiding Principles

“I did a lot of math,” he said. “I made a lot of money,” continued the pioneer in quantitative investing. “And I gave almost all of it away,” said the founder of Renaissance Technologies. “That’s the story of my life,” said Jim Simons, 1938-2024, R.I.P.

Overall: “Be guided by beauty. Just as a great theorem can be very beautiful, a company that’s really working very well, very efficiently, that can be beautiful,” said Jim Simons, sharing one of his guiding principles. “Surround yourself with the smartest and best people you possibly can. Give them the freedom to do what they think is right. Don’t sit on top of them. And if they’re smarter than you, all the better,” he said. “Great people. Great infrastructure. Open environment. Get everyone compensated roughly based on the overall performance. That made a lot of money,” explained Jim, having generated 66% average annual returns for decades, producing $100bln+ in profits. “The best way to conduct research on a larger scale is to make sure everyone knows what everyone else is doing. The sooner the better. Start talking to other people about what you’re doing. Because that’s what will stimulate things the fastest,” he said. “Do something original. Don’t run with the pack. If everyone is trying to solve the same problem, don’t do that,” advised Simons, another principle. “Don’t give up easily. Stick with it. Stick with it not forever, but really give it a chance to get where you’re going. Persistence and discipline are key traits for long-term success in any field.” Another. “Giving back and making a positive impact on the world is a responsibility we all have,” he said, leading by extraordinary example. “Let’s suppose you have a coin that is 70/30 heads. Well, if you get to bet heads, you are going to win seven times out of ten. Three times out of ten you are going to lose, and that’s bad luck. You need a measure of good luck to avoid a long run of tails when you have a 70/30 coin that’s heads. So, the final principle is hope for good luck. That’s the most important.”

Week-in-Review: Mon: Fed’s Barkin says full impact of hikes ‘yet to come’ / Williams says there will be cuts eventually, Japan/UK holiday, Fed’s SLOOS finds C&I / consumer lending standards remain tight but below the 2023 peak, China Labor Day spending up 13% YoY but per capita still below 2019 levels, Yellen says she expects any FX intervention to be rare and consultation to take place, China Caixin serv PMI 52.5 as exp / composite 52.8 (52.7p), EU PPI -7.8% (-7.7%e), S&P +1.0%; Tue: RBA unch as exp / neutral - less hawkish than exp, MOF’s Kanda says no need to intervene if mkt is functioning properly and there is no excessive volatility, US revokes licenses for chip suppliers to sell to Huawei, 8 news organizations sign OpenAI/MSFT over copyright infringement, EU Ret sales 0.7% (-0.2%e), US Cons credit $6.274b ($15.0b e), S&P +0.1%; Wed: US pauses weapons shipments to Israel after Rafah escalations, Riksbank cuts 25bp (1st cut in 8 yrs!), Ueda hints that CB will react to weak JPY if it effects infl trend / MOF’s Suzuki says there is no ‘defending line in FX levels’, Trump’s classified documents case postponed indefinitely, Fed’s Collins says recent data suggests rates will stay here for longer, FTX will return capital in excess of what customers lost, Germany IP -3.3% (-3.6%e), Brazil Ret sales 5.7% (5.2%e), S&P flat; Thu: BOE unch as exp (2 of 7 voted for cut), Brazil CB cuts 25bp as exp but 4 of 9 members voted for 50bp cut – raises speculation that Lula is influencing central bank decisions, Poland CB unch as exp, Mexico CB unch as exp, Turkey CB gov Karahan repeats they will do “whatever it takes” to fight infl, MOF’s Kanda says ready for ccy intervention at any time, BOJ minutes marginally hawkish, Pentagon/SpaceX blunt unauthorized use of Starlink terminals by Russia, Fed’s Daly says need more time for disinflation, US house dems joined republicans to block attempt to oust Speaker Johnson, Putin revives his nuclear saber rattling amid annual military parade, Japan Cash earnings 0.6% (1.4%e) / Real -2.5% (-1.4%e), China Expts 1.5% (1.3%e) / impts 8.4% (4.7%e), S. Africa mfg production -6.4% (0.3%e), Mexico CPI 4.65% (4.63%e) / Core 4.37% (4.39%e), US Initial claims 231k (212k e), S&P +0.5%; Fri: Biden poised to unveil – mostly symbolic – tariffs on China EVs/strategic sectors, Japan household spending -1.2% (-2.3%e), UK GDP 0.2% (0.0%e) / IP 0.5% (0.3%e) / mfg prod 2.3% (1.7%e), India IP 4.9% (5.2%e), Brazil IPCA infl 3.69% (3.66%e), Mexico IP -3.0% (-2.9%e), Canada net emp chg 90.4k (20.0k e) / unemp rate 6.1% (6.2%e), US Mich Sentiment 67.4 (76.2e) / 1y infl exp 3.5% (3.2%e) / 5-10y infl exp 3.1% (3.0%e), S&P +0.1%; Sat: China PPI -2.5% (-2.3%e) / CPI 0.3% (0.2%e) / M2 7.2% (8.3%e).

Manufacturing PMI (high-to-low): India 58.8 (previous month 59.1), Brazil 55.9 (prev month 53.6), Greece 55.2 (prev 56.9), Russia 54.3/55.7, Indonesia 52.9/54.2, Norway 52.44/50.68, Spain 52.2/51.4, Hungary 51.8/52.2, Sweden 51.4/50.4, China 51.4/51.1, Netherlands 51.3/49.7, Mexico 51/52.2, Hong Kong 50.6/50.9, Singapore 50.5/50.7, Vietnam 50.3/49.9, South Africa 50.3/48.4, Taiwan 50.2/49.3, Japan 49.6/48.2, Canada 49.4/49.8, South Korea 49.4/49.8, Turkey 49.3/50, US 49.2/50.3, UK 49.1/50.3, Italy 47.3/50.4, Poland 45.9/48, France 45.3/46.2, Czech Republic 44.7/46.2, Austria 43.5/42.2, Germany 42.5/41.9, Switzerland 41.4/45.2. Services PMI: India 60.8/61.2, Spain 56.2/56.1, UK 55/53.1, Italy 54.3/54.6, Japan 54.3/54.1, Brazil 53.7/54.8, Australia 53.6/54.4, Ireland 53.3/56.6, Germany 53.2/50.1, China 52.5/52.7, US 51.3/51.7, France 51.3/48.3, Russia 50.5/51.4, Sweden 48.1/54.1.

Weekly Close: S&P 500 +1.9% and VIX -0.94 at +12.55. Nikkei flat, Shanghai +1.6%, Euro Stoxx +3.0%, Bovespa -0.7%, MSCI World +1.5%, and MSCI Emerging +0.2%. USD rose +2.5% vs Ethereum, +1.8% vs Yen, +1.7% vs Brazil, +0.2% vs Sweden, +0.2% vs Sterling, +0.1% vs Russia, +0.1% vs Australia, and +0.1% vs India. USD fell -1.5% vs Chile, -1.2% vs Mexico, -0.6% vs Bitcoin, -0.3% vs South Africa, -0.2% vs Indonesia, -0.2% vs China, -0.1% vs Canada, -0.1% vs Turkey, and -0.1% vs Euro. Gold +2.9%, Silver +6.8%, Oil +0.2%, Copper +2.3%, Iron Ore +0.3%, Corn +2.1%. 10yr Inflation Breakevens (EU -1bp at 2.10%, US flat at 2.36%, JP -1bp at 1.44%, and UK -1bp at 3.71%). 2yr Notes +5bps at 4.87% and 10yr Notes -1bp at 4.50%.

2024 Year-to-Date Close: Argentina +38.7% priced in US dollars (+51.4% priced in pesos), Turkey +25.4% priced in US dollars (+36.8% priced in lira), Colombia +15.3% in dollars (+16.3% in pesos), Denmark +13.2% (+16.6%), Netherlands +12.7% (+15.7%), Greece +11.8% (+14.8%), Italy +11.2% (+14.2%), HK +11.2% (+11.2%), Ireland +11.2% (+14.2%), Hungary +9.7% (+14.2%), Euro Stoxx 50 +9.5% (+12.5%), S&P 500 +9.5% in dollars, Germany +9.1% (+12.1%), Taiwan +8.9% (+15.5%), NASDAQ +8.9% in dollars, Poland +8.5% (+10.3%), MSCI World +7.6% in dollars, Russia +7.5% (+11.3%), Venezuela +7.2% (+9.4%), UK +7.1% (+9.1%), Spain +7.1% (+9.9%), Malaysia +6.6% (+10%), France +6.1% (+9%), Czech Republic +5.8% (+9.6%), Belgium +5.4% (+8.2%), Austria +4.5% (+7.3%), China +4.2% (+6%), Norway +3.6% (+11.1%), Japan +3.2% (+14.2%), Israel +3.2% (+7.2%), Canada +2.8% (+6.4%), Saudi Arabia +2.6% (+2.6%), Chile +2.4% (+7.1%), Sweden +1.6% (+9.7%), Russell +1.6% in dollars, Mexico +1.5% (+0.6%), South Africa +1.5% (+2.4%), India +1.1% (+1.5%), Finland -0.9% (+1.7%), Singapore -1.1% (+1.6%), Australia -1.3% (+2.1%), Switzerland -2.3% (+5.5%), Portugal -2.7% (-0.1%), Philippines -2.9% (+1%), Korea -3.5% (+2.7%), UAE -5.1% (-5.1%), New Zealand -5.2% (-0.1%), Indonesia -6.7% (-2.5%), Thailand -9.8% (-3.1%), and Brazil -10.4% (-4.9%).

Compounding: “I met Jim only once, on a video call,” said one of my three brothers, a Silicon Valley entrepreneur. “The Simons family funded my first business, and had it not been for them, we would have never gotten started.” Jim’s son assembled a team of talented venture capitalists to invest in green tech, along with a wide range of other noble initiatives. And then there is the Simons Foundation [here] and The Flatiron Institute [here]. “Jim was this larger-than-life character, asking insightful questions, commanding the meeting.”

Compounding II: “They bridged a market inefficiency, which was that few investors were willing to take on challenges in the hard sciences that require many years and significant capital to solve,” said my brother. “No one knew if our idea would work, but the efficiencies we could deliver to solar panels if it did, made it worth the effort.” He and his team of Stanford Material Science PhD’s solved the problem over 7yrs, sold the business to a giant, which could scale it. “Back then, few investors had the risk appetite, capital, and patience to bet on teams like ours.”

Compounding III: “They funded our second business too,” continued my brother. Having delivered that first win in green energy despite an industry downturn, Simons participated in the next venture. A far more ambitious challenge in display technologies, which if achieved would change the nature of virtual reality, augmented reality, our relationship with reality. “I believed what we were attempting to do was technically possible, but there really was no way to know.” A few remarkable breakthroughs later and they were acquired by a titan. It will change the world.

Compounding IV: Somewhere along that path, Jim Simons lost two of his five children. Tragic accidents. He carried on, found peace in his mathematical problems, equations. Led by example, as his impact compounded, at Renaissance and beyond, through people like my brother, so many others. “Don’t be afraid to take risks and embrace failure. That’s where the best opportunities often lie,” said Simons. “You have to be willing to question conventional wisdom and think for yourself.” Indeed. “The most important thing in life is to have a sense of purpose and meaning.”

Anecdote: “The world needs more men who do not have a price at which they can be bought,” read the perfect passage to close his memorial service. “Who do not borrow from integrity to pay for expediency.” Mara and I sat in the pew, honoring the memory of a mentor, advisor, friend, my uncle. “Whose handshake is an ironclad contract.” It was late in life that I came to realize the importance of mentors, guides, counsellors. “Who are not afraid of risk.” I thought I could do it all by myself, everything, anything. “Who are honest in small matters as they are in large ones.” But life has a wonderful way of beating the stubbornness out of us. “Whose ambitions are big enough to include others.” Humbling us to the point of submission. “Who know how to win with grace and lose with dignity.” I first opened to my great aunt, spiritual guide. Then a high-altitude mountain guide, a master in risk/reward, fear, courage, endurance. Great authors too, Conrad, Dostoyevsky, Melville. “Who do not believe that shrewdness and cunning and ruthlessness are the three keys to success.” I sought those with older children who I admired, as Mara and I grew our family, feeling our way across that slippery riverbed. “Who still have friends they made twenty years ago.” There’s rarely a big decision I make now that has not involved at least a few trusted advisors, and it’s not so much that they provide the right answers, but rather that they ask the hard questions. “Who are not afraid to go against the grain of popular opinion and do not believe in consensus.” Mara learned the importance of mentors earlier than I, and we now teach our four children to develop deep relationships with adults who can help them along life’s path. “Who are occasionally wrong and always willing to admit it.” I knew my uncle for 51 years, but only turned to him a decade ago, at a critical period, when I was starting One River. Time flew too fast. “In short, the world needs leaders.” Forever grateful to Gregory B. Peters, 1945-2024, R.I.P.

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, 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.

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