Big River Report
BIG RIVER CAPITAL MANAGEMENT

Phone: 601.259.3731

Email: wtr3@bigriverfunds.com


RiverView Q3 2017



The Federal Reserve Open Market Committee is expected to raise interest rates at their December meeting. Another rate hike would lift the Fed Funds rate between 1.25% - 1.50% with the prime lending rate moving to 4.50%. 

The meeting minutes released from the Federal Reserve during September provided an update to the consensus interest rate forecast, two additional rate hikes are now projected for 2018. 

The Fed's September economic projections for 2017: GDP 2.4%, inflation Core PCE 1.5% and the unemployment rate ending the year at 4.3%. 

The Fed elected to begin unwinding it's roughly $4.5 trillion balance sheet starting in October with approximately $10 billion of securities rolling off monthly, increasing every three months until reaching $50 billion per month after twelve months.

As I consider this letter, the phrase "steady as she goes" comes to mind. According to a loose translation from  dictionary.com, this is a nautical phrase that came about as a ship captain called to the helmsman ordering him to stay the current course. As an adjective it means steady, careful, avoiding sudden change. 

I believe this is a good motto for the current market. However, we know from human nature and history that markets cycle from periods of "fear" to periods of "greed". We are now a long way (more than 9 years) from the fear filled days during the fall of 2008. The US stock market is presently as calm as bath water. 

History has shown that a calm market invites leverage. The calm market gives the appearance of "easy money". During these periods, the stock market just keeps going up and refuses to go down. I hear the phrase "no fear" when speaking with colleagues. During this phase, more and more investors become comfortable taking on additional risks.

While the current advance is notable for it's duration, human nature being what it is, this time is not likely to end differently. While investors continue to pile into the US stock market, the two primary disrupting forces that have historically ended bull markets are simultaneously underway. These forces are the Federal Reserve raising interest rates and the Federal Reserve draining liquidity from the financial system through the reduction of it's balance sheet.

The best time to prepare for a storm is when the skies are clear, prepare for adversity from a position of strength. Major selling in the S&P 500 index and related stocks is expected, the unknown is when the market top will be reached. According to Jim Rogers, an investor who produced an impressive track record while at Quantum Fund (an early and hugely successful hedge fund), the route in the S&P 500 will be worse this time because so many people now own the S&P 500 ETFs.   

If you invest with Big River, the aim is to prepare you for corrections, bear markets and panics so that your expectations are aligned with the challenges of investing. Historically, investors who were adequately prepared for these inevitable events generated healthy long term gains. This is the aim for your capital account.

Feel free to call me directly at your convenience (601)259-3731.

Or reply to this email to schedule a meeting.

For more information visit bigriverfunds.com

Thank you,

Bill Robertson

On January 1, 2012 Bill Robertson began tracking his personal account, and the results comprise the track 
record for Big River Multi-Strategy Equity. On February 1, 2016, Robertson broke out the following strategy:
Big River Long Only Equity in order to track it separately. The monthly 
results presented for this strategy is from his personal accounts. These results include the 
reinvestment of dividends. There are no management fees charged on these personal accounts, and the 
results have not been audited.
 
Big River manages assets for clients in separately managed accounts.  
The separately managed account results presented represent the range of actual client results from lowest to highest  
during the performance periods. The separately managed account results are presented net of a 1.5% annual management fee.
The performance of a client's separately managed account is expected to vary materially from the performance of 
Robertson's personal  accounts. The client results have not been audited. 

Due to the fact that the custodian is delayed in deducting fees, previously Big River estimated fee deductions. On September 30, 2017 
the calculation of results in the client accounts were revised to match the calculations of the custodian. The changes were not material.