July 2025

I guess you could say this about any year, but what an interesting and sometimes frazzled world and first half of the investment year.

While we did not specifically predict “DOGE” (Department of Government Efficiency), “Liberation Day” (tariff tantrums) or the “Big Beautiful Bill” (government budget) we have constructed your investment portfolio to endure volatile and uncertain times like these. We have been consistent in our view that inflation is the path forward and we continue to believe so.

We believe we have positioned our investment strategy to take advantage of the significant opportunities of a long-term inflationary cycle. Our investment strategy owning strategic commodities and businesses with exposure to unique, scarce and productive assets, sometimes with no debt, is an approach poised to deliver outsized returns for an extended time frame.

Preserving and growing wealth in an inflationary environment might be the most important objective of the investment business. Maintaining purchasing power can have a material impact on your day-to-day existence, your retirement plans and future generations of your family. Our observation is that the time period of approximately 1980-2020 will ultimately be viewed as an aberration in history. Perpetually declining interest rates, tax rates and increasing budget deficits led to the financialization of almost everything. Alternatively, throughout most of history, real wealth was invested in hard, tangible and productive assets.

Volatility is not Risk!

While we believe that the last 40 years have been unique in investment management history - almost every working professional who graduated from college and graduate schools during this period is schooled in modern portfolio theory positing that markets are efficient, and all knowable information is reflected in the price of investments. As a result, the main tool an investor has is to manage “risk” by managing volatility.

Contrary to this focus, we believe the greatest risk to portfolios is the loss of purchasing power from debasement due to inflation or currency devaluation. CNBC rarely discusses this because it is measured in years or decades, which does not lend itself well to “BREAKING NEWS”, “market soars” or “market crashes” headlines. True risk is not daily or even year-to-year price volatility. Volatility is simply short-term price fluctuations. If we overpaid attention to such volatility, we might have sold Texas Pacific Land or Bitcoin at least half-dozen times over the last decade and both would be long-forgotten points of discussion. We are glad we didn’t.

Finding Opportunity:

Let’s be blunt, for years the rise of indexation or passive investing in exchange traded funds (ETFs) that traded indexes like the S&P 500 was a serious headwind to our “active” fundamentals-based strategy. Initially the concept was sound, the majority of managers underperformed the market over time and identifying the ones that did is a daunting task. Even Warren Buffett, arguably the greatest investor in history, would regularly recommend that investors opt for an index for broad diversification.

Well like anything in life, if a little is good, a lot must be great goes the common thinking. Indexation became a big business and Wall Street funneled so much investor money into indexed strategies it now leaves tremendous opportunity outside the world of indexation.

Lately the river has started to flow back in our direction as the tech sector pivots to the next big thing, high performance computing and artificial intelligence (AI). These companies will consume massive amounts of steel, concrete, copper and other resources to develop infrastructure to support their growth initiatives. Ultimately, these companies will consume incomprehensible amounts of electricity and water. We aim to benefit handsomely from these trends.

If the market were truly efficient the opportunity we see in our investments due to these trends would not exist. The valuations versus the current fundamentals and long-term opportunity are quite compelling, especially versus the overall market. The pendulum swung so far in the direction of ETF’s and indexation we believe it sets up an extraordinary opportunity for our investing.

Why are we excited!

Two unprecedented trends - unmatched in our 30+ years of experience, drive our optimism:

First, our nation has accumulated $37 trillion of debt. Interest expense on that debt exceeds $1 trillion annually, which is frankly beyond comprehension. One trillion one-dollar bills laid out, would stretch for roughly 96,906,656 miles, which is further than the distance from the Earth to the Sun (thank you AI for this example).

One might think you would see a bipartisan effort to address this. But, alas, a key part of the recent budget signed by the president included a $5 trillion increase raising the debt ceiling to $41.1 trillion. Nothing stops this train! No wonder gold and Bitcoin price at or near all-time highs versus our constantly debased dollars. Our investments in Franco-Nevada, Wheaton Precious Metals and Bitcoin have and will likely continue to thrive in this environment.

The second trend presenting potential opportunity beyond a scale we have seen is our country’s push towards the electrification of just about everything. The continued adoption of electric vehicles, the reshoring of manufacturing or the development of artificial intelligence and high-performance computing, all require outrageous amounts of power generation. After decades of flat or declining electricity demand, growth projections over the next decade present compelling investment opportunities. Through investments in Texas Pacific Land, LandBridge, Aris Water Solutions and others, we believe we have unique exposure to critical resources, namely: land, energy resources, water and strategic minerals.

We believe the next 1 to 2 years are likely to be action-packed in this area. We encourage you to call us to discuss this opportunity further.

We and our families are the largest investor group at Mad River. We are ecstatic about the potential of our current investments and the opportunity set for our strategy.

Thank you for partnering with us.

Best regards,

Rick Silver & Josh Stewart

Mad River Investors

Important Disclosure on Model Performance: For the purpose of presenting historical performance information, we reference and present the performance of our Model. While limitations exist with models, we believe our Model offers a reasonable assessment of the typical performance of our historical investment selections for clients. Our Model is based on a taxable portfolio investing since the inception of the investment strategy in March 1999. The Model is presented net of all fees (adjusted to the highest annual fee charged to clients), brokerage expenses, and includes the reinvestment of dividends and interest. The Model generally reflects the performance of portfolios under management since the strategy’s inception in 1999. Client performance will deviate from the Model due to, among other reasons, the starting point of a client relationship; client guidelines, circumstances, and directives; the size of a portfolio and its relative costs; additions and withdrawals of funds; the timing and historical position sizing and concentration of investments; and the account type and its ability to participate in certain investments. During this period there were no strategies employed to obtain the results portrayed other than those implemented for clients pursuant to the Model and disclosed in our Form ADV. Please carefully review our Form ADV for further information. We encourage and strongly recommend that you discuss with us the application, correlation, and significance of the Model’s performance to our client’s historical returns.

Important Disclosure on Benchmark Comparison: The S&P Composite is regarded as a gauge of the US equity market. This index includes a representative sample of 500 leading companies in leading industries of the US economy. Although the S&P 500 focuses on the large-cap segment of the market, we believe it serves as a reasonable proxy for the US market. Nonetheless, the use of the S&P Composite as a comparison may not be appropriate for a variety of reasons including, but not limited to, Model and client account(s) being more concentrated; volatile; holding cash, fixed income investments, and/or option contracts; being short securities; or the average capitalization of companies comprising the Index not correlating with the capitalization of the companies comprising the Model.

Important General Investing Disclosure: Inherent in any investment is the potential for loss of capital, past performance is not indicative of future results, and the value of investments and the income derived from investments may increase or decrease. It is not our intention to state, indicate or imply that future investment results will be profitable or equal past results. The information presented is meant to form the basis of a discussion with us and is subject to further clarification and explanation during discussions with us. This information may not be duplicated, redistributed, or communicated to others without our consent. This is not an offer or solicitation to any person in any jurisdiction in which such an action is not authorized or to any person to whom it would be unlawful to make such an offer or solicitation. We do not provide tax or legal advice to our clients, and you are strongly urged to consult a tax or legal advisor regarding any potential investment strategy.

This communication may include opinions and forward-looking statements. All statements other than statements of historical fact are opinions and/or forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the beliefs and expectations discussed are reasonable, we can give no assurance that such beliefs and expectations will prove to be correct. All expressions of opinion are subject to change. You are cautioned not to place undue reliance on these forward-looking statements. Any dated information is published as of its date only. Dated and forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update publicly or revise any dated or forward-looking statements. Investment process, strategies, philosophies, portfolio composition and allocations, security selection criteria and other parameters are current as of the date indicated and are subject to change without prior notice. 7/2025