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Bill Robertson is the Chief Executive Officer of Big River Capital Corporation, and he is ultimately responsible for the performance of each the firm's business units. Robertson launched Big River Risk Managers Fund, LP, a fund of hedge funds on January 1, 2008; Big River Real-Estate Partners... More
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  • Last Post For BigRiverReport.com

    The Big River Report is winding down at the end of Q1 2014.

    However, the monthly performance report and commentary is still available for accredited investors who are interested in the money management services provided by Big River Capital Management.

    If you would like to receive the monthly letter, please email me directly at wtr3@bigriverfunds.com with Monthly Letter in the subject line.

    Thank you for your interest in Big River.

    Oct 28 9:54 AM | Link | Comment!
  • October River View

    The portfolio returned +2.8% during September. The portfolio is +25.8% YTD.

    As we approach a shutdown of the US Federal government at mid-night tonight October 1, 2013, Chairman Bernanke's mid-September decision to continue the asset purchase program unchanged at the current pace of $85 billion per month appears to have been a prudent course of action.

    In conjunction with the possible risks facing the US economy resulting from a Federal government shutdown, the relatively weak recent inflation data, continued low labor participation rate, fragile European and Asian recoveries and expected slowdown in 2014 US GDP growth gave the Fed ample reason to continue the asset purchase program at the current pace.

    Following the FOMC announcement, the ten year treasury yield slid to 2.65% as the bond market began to adjust to the prospects of a Federal government shutdown. The S&P 500 stock market index has sold off in order to discount for the prospects of a shutdown and the negative affects that the US not paying our debts could have on the economy.

    If the US congress is unable to work out an agreement to continue operating the Federal government and the US does not meetour financial obligations which are coming due around October 17, 2013, this would cause a calamity of significant magnitude which in turn could have devastating affects on the US economy.

    I do not believe the majority of market participants expect these events to transpire, however, the markets have begun discounting for the possibilities.

    So far, the blow to US equities has been cushioned by the FOMC's decision to fully continue the stimulus program.

    The biggest downside risk posed by continuing the stimulus program: given enough time, a substantial, negative event will occur in the world that will have a major negative impact on the world and US economies. That event could be years away, but it could just as easily be today, tomorrow, the next day, ect. These so-called "tail-risk" events seem to happen every few years (Asian contagion 1998, Internet bubble bursting 2000, 9/11 2001, Hurricane Katrina 2005, Bear/Lehman collapse 2008, and now we are in 2013).

    My concern with a delay in removing the stimulus program is that given enough time, something in the macro economy will eventually go wrong. (Such as the failure of the US government to meet our financial obligations, which is very unlikely, but such an event is just the type of catastrophe that I am talking about.)

    I have been working through potential scenarios surrounding the stimulus program and the government shutdown, examining how various scenarios could affect the value of our holdings. I began with the most likely outcomes, and I have worked through to worst-case under normal circumstances.

    At this point in time, valuations for high quality businesses are mildly stretched. According to the FOMC, the US is expected to experience moderate GDP growth in 2014. Unless the GDP estimates turn out to be too low, I don't see how earnings are going to grow beyond the present forecasts.

    However, if companies can meet 2014 forecasts that would allow the S&P 500 to fundamentally rise approximately 10% next year without multiple expansion. With a continuation of the asset purchase program, we are likely to see continued multiple expansion. We are also paying attention to the costs associated with an expected rise in interest rates and the downward trajectory that higher interest rates could have on the outlook for future earnings.

    Net, net, barring any genuinely negative economic consequences from the Congressional impasse, I remain constructive towards owning great US businesses selectively at the current prices.

    For risk management purposes, we have raised our cash position. We will be looking to add back the exposure as the Congressional cloud lifts. Alternatively, we are prepared to take further steps to manage risk if the outlook deteriorates.

    Oct 04 12:56 PM | Link | Comment!
  • Big River Report September

    The September Report is now available online. The portfolio was down (1.3%) during August through 8/29/13. YTD the portfolio has returned 22.3% through 8/29/13.

    It appears that the US stock markets are adjusting for higher interest rates. Recent economic data has been mixed, but I've seen nothing in the data to suggest that the odds of a September stimulus reduction has been reduced from the recent 50/50 chance. These odds were generated by the FOMC's polling of a leading group of national economists.

    I believe a strong August employment report will allow the Fed to begin the unwinding process in September. However, a lackluster or weak unemployment report could easily cause the process to be postponed until later this year.

    Minutes from the July 31 FOMC meeting suggests that the economy was weaker than the committee had anticipated during the first half of 2013, but that US GDP growth appears to be on track to pick up during the second half of the year.

    The August through October period has historically been a difficult stretch for US equities and the recent turmoil in Syria has increased investor anxiety. Stock prices relative to earnings are high when compared with most of the past decade.

    We believe that we own great businesses. We also believe that the transition to a more normal interest rate environment is ultimately healthy for the US and global economy. However, we expect annual returns comparable to what we've seen from the S&P 500 over the last several years could be more difficult to achieve in a rising interest rate environment. And generally, we believe the economy will have a difficult time gaining steam during the transition period towards higher interest rates.

    So far, I've seen nothing to indicate that business conditions will materially deteriorate, but we will continue to be vigilant in our risk management.

    Thank you for your interest in BigRiverReport.com. Subscribe today to receive the regular emails with trades and commentary.

    Bill Robertson

    Disclaimer. BigRiverReport.com is a financial newsletter publication relying on Federal exemption under Section 202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C. § 80b-2(a)(11)) and individual State exemptions under Section 401(f) of the Uniform Securities Act. We do not provide any investment advice, nor do we make any investment recommendations. You are able to view the BigRiverReport.com portfolio and all of the trades made for the portfolio in order to aid your research efforts, but ultimately the decisions you make for your portfolio are your responsibility. I believe the research and work that we are doing at BigRiverReport.com will improve your investment performance, but there is no guarantee that you will be able to utilize the information for financial gain. In fact, you could incur financial losses. The BigRiverReport.com portfolio is managed in a tax deferred account. Each individuals financial situation is different. Please consult your own financial advisors and tax professionals prior to investing.

    Aug 29 5:14 PM | Link | Comment!
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