Big River Report
BIG RIVER CAPITAL MANAGEMENT

Phone: 601.259.3731

Email: wtr3@bigriverfunds.com


RiverView January Results Letter 2019


Dear Investor,

The Dow Jones Industrial Average as measured with the DIA and the S&P 500 with the SPY were +7.26% and +7.96% respectively during January.

Big River uses low cost index investing and a competitive fee structure to help you reach your financial goals.

You may be thinking: why would I pay an advisor to put me in the indices?

The answer is because Big River’s goal is to help you grow your money. Our interests are aligned, Big River is incentivized to grow your savings. I believe low cost index investing is the best way for you to reach your financial goals. 

It’s easy for you to determine value. You can start with a small amount of capital and measure the results. If your money with Big River is growing faster than your current savings program, Big River is delivering value. If not, stay with your current program.

Big River adds value in the following areas:

1) Diversification - Investor risk tolerance tends to fluctuate with market conditions. Big River can help you identify your risk comfort level, the objective being better risk adjusted results. Determining which securities to own and the weight of these securities in your portfolio is an important component in building a risk adjusted portfolio that best suits you. Being under invested or over invested in stocks can lead to poor results.

2) Risk Management - When an investment is losing money it tends to keep losing money. Big River will actively monitor and adjust your portfolio. 

3) Timing - Big River does not try to time the stock market or make directional predictions about the stock market. Big River can help you determine when to add to your stock or interest income holdings and when to sell or make allocation changes. 

4) Information - Most people do not have time to conduct adequate research. Big River’s research leads to more informed decision making.

5) Sounding Board - Decisions are discussed and determinations are made with input from the client and the advisor. 

6) Income Replacement - If you ever plan on not working or cutting back on work, you need a strong financial relationship in place to get you through the difficult periods. I don’t recommend annuities because you give up too much of your savings in exchange for future income. There are other ways to manage income. Also, as we saw in the aftermath of 2008, many annuities did not make the scheduled payments, either the companies took bankruptcy and the annuity investors got nothing or the companies were bailed out by the US government and the annuity payments to the investors had to be reduced. An annuity is only as good as the company selling it, and most companies selling annuities are highly leveraged financial institutions at significant risk during periods of market distress. It’s one thing to put all of your savings into the stock market during your peak earning years, it’s another matter when your ability to replace savings through income no longer exists. For example, at one point the S&P 500 was down nearly 20% during the fourth quarter of 2018. When you know that you can’t keep plugging away at work to replace the losses over time, riding it out is difficult. There have been several instances in America's history where riding it out has taken a decade or longer to reach full recovery. The 1930s, 1970s and 2000s over the 90 year period. To extrapolate, the odds of the next bear market taking a decade or more to recover is roughly 1 in 3 or a 33.3% chance. The Japanese stock market peaked in 1989 and it still has not recovered the high water mark. The world has a ton of debt (central banks, governments, corporations and households) and the nature of debt is that debt increases volatility. I don’t see periods of extreme volatility going away until the world can reduce its collective debts. The present trend is in the opposite direction, debt levels are rising. This increases the risk for severity during a future financial crisis.

7) Recession Plan - Big River can help you develop a plan to mitigate a difficult economy. 

Big River aims to deliver value to you. The fees are competitively priced. The goal is to improve your savings growth rate, i.e. to grow your savings, net of fees, more efficiently and effectively than your present rate of savings growth. 

The set-up is easy. Just a few documents that can be completed quickly. 

The first and most important step is to build a strong foundation.

Let’s meet at your convenience and have a conversation about Big River’s investment program and how the approach can benefit you. 

Reply or give me a call (601)259-3731 to get started.

Thank you,

Bill 

Also, if you would like to implement the program with your 401k or retirement plan, please have the appropriate person in your office call me. 


BIG RIVER CAPITAL MANAGEMENT, LLC
MONEY MANAGEMENT
CEO: Bill Robertson
Email: wtr3@bigriverfunds.com
Fax: 601.487.6365
Phone: 601.259.3731

Client performance for 2017, net of fees, ranged from +16.68% through +21.25%. This range represents clients who were invested throughout the full year.

During December, the Federal Reserve raised the benchmark Fed Funds rate to between 1.25-1.50%. The prime lending rate is now 4.5%. 

Forecast for 2018 call for three interest rate increases taking the Fed Funds rate to between 2.00-2.25% and the prime lending rate to 5.25%.

The most recent Federal Reserve forecast for 2018 is as follows:

GDP: +2.5%

PCE Inflation: +1.9%

Unemployment: 3.9%

Fed Funds Rate: 2.1%

The bull case for US stocks (stocks will advance without a 20% or greater decline) is that the market is on pace for the longest bull run in history, potentially reaching nine years old in 2018.

The recently passed US tax cuts are expected to add economic growth to a US economy that is already gaining momentum.

The bear case for US stocks (a bear market is defined by a 20% drop in price) is that valuations are historically high, and the good news is already priced in. 

During 2018 the US Treasury is expected to issue roughly $1 trillion in securities to fund the deficit, and the Federal Reserve will reduce it's securities holdings around $230 billion. The result will be a roughly $1.25 trillion increase in supply of treasury related securities.

These market dynamics: high stock market valuations, rising interest rates and an increasing supply of debt securities represent potential catalysts for an inevitable bear market in US stocks.

Alternatively, US stocks could tread water throughout 2018.

Our aim is to build wealth, not time the stock market.

At some point in time, the bull market will end and there will be a bear market. Whatever the new year brings, if we are adequately prepared, there will be opportunities to build wealth.