The stock market’s movement in 2016 was most Unusual, Unpredictable, and downright Crazy compared to previous years. Between politics and economics, it was a classic case study of extremes...

1. Since the beginning of the new year the
overall stock market has developed an
almost dome-shaped price pattern. The
high to date occurred at the beginning
of March, then settled back to its current
level. Even so, the popular market
averages ended the first quarter of 2017
by recording good gains as shown in
Exhibit 1.
‘Fedtrarian’
Oxbow could appropriately be described with the term “Fedtrarian” due to the many times over the past
10 years our views have been contrary to consensus thinking on Federal Reserve monetary policy. The
present period is another time when we at Oxbow have different views. Exhibit 2 shows the 10-year U.S.
Treasury yield since the two Fed upticks occurred.
There was a huge buildup in the
news media leading into the December
2016 rate increase—and then again
into the mid-March increase of this
year. Each time the Fed announced
a rate increase, the yield on the
10-year and 30-year U.S. Treasury
bonds actually fell a short time after.
Why did this occur?
In our opinion… longer term bond
prices are the true barometer of
inflation. Numerous surveys show
why inflation is projected to be below
2% in the second half of 2017 and
perhaps even close to 1%. The percep-
tion is that the Federal Reserve is on
a tightening round of rate increases
and the inflation trade is on. In reality,
however, it is not likely to happen.
Perception vs. Reality
APRIL 2017
2017 RETURNS
YEAR-TO-DATE ENDING MARCH 31, 2017
Dow Jones Industrial Average........... 4.6
S&P 500 Composite............................ 5.5
NASDAQ Composite........................... 9.8
Wilshire 5000 Composite.................... 5.3
(total stock market)
Dow Jones Global............................... 7.4
(ex U.S.)
% PERCENT
Exhibit 1
10-YEAR U.S. TREASURY YIELD
SEPTEMBER 1, 2016 – MARCH 27, 2017
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17
2.7
2.5
2.3
2.1
1.9
1.7
1.5
Fed Meeting
12/14/2016
Fed Meeting
3/15/2017
Source: Bloomberg L.P. Exhibit 2
% P E R C E N T

2. Up Against the Wall of Debt
Another reason that makes it hard for interest rates
to skyrocket is the ongoing high federal debt level.
Later this year we expect to see the federal debt
ceiling come back into play. Notice Exhibit 3,
which shows the U.S. federal debt rise from roughly
$9 trillion in 2007 to its current level of approxi-
mately $20 trillion. This compounding will cause
any rise in interest rates to be felt with increasingly
painful impact.
The perception is that Congress
can tackle the current budget
head on, but in reality Congress
has very little room to maneuver
with a debt ceiling of $20 trillion.
Public and private debt is currently
250% of GDP, and U.S. corpora-
tions have added $2.3 trillion
of debt since 2008. Very little of
this liquidity was used to add
productive capacity to companies;
instead it was used for stock
buy-backs and refinancing. (That
is probably unsustainable and is
likely to crack the economy if
rates do begin to rise.)
What’s Going On Here?
With the polarization in politics and
lack of unity in this country, there
now appears to be a complete lack of
consensus. It seems to us that political
bantering has turned into more of a
fight to the death. Exhibit 4 shows the
major percentage increase of populist
thinking from 1900 to the present.
Populism is the political doctrine that
the common people are exploited by
a privileged elite.
We have said for a number of years
that the ever-widening chasm between
incomes of the top and bottom would
have negative effects. It usually comes into being
where government institutions have failed to
deliver. Much of the populist reality has stemmed
from the big-bank bailouts of 2008. This isn’t a
political statement, only acknowledging that this
dynamic will have some impact on the stock market.
Most individuals in the U.S. currently seem to be
more polarized along ideological lines than ever
before. There likely will be increasing fallout from
2
MARKET COMMENTS APRIL 2017
POLARIZATION AND POPULISM ARE NOW THE NORM
DEVELOPED WORLD POPULISM INDEX
Source: Bianco Research, LLC Exhibit 4
Vote Share of Populist/Anti-Establishment Parties
Timely Estimate from Polling
1990 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
45
40
35
30
25
20
15
10
5
0
Now at highest
level since 1930s
% P E R C E N T
WWII
A MASSIVE LIQUIDITY ILLUSION
GOVERNMENT BONDS – U.S. TOTAL FEDERAL DEBT
Source: Advisor Perspectives, Inc. Exhibit 3
20,000,000
18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
22,000,000
‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17
Federal Debt, Total Public Debt Outstanding, Mil. USD – U.S.Federal Debt, Total Public Debt Outstanding, Mil. USD – U.S
US TREASURY
Debt Limit $20.1 Trillion,
Reinstated March 16, 2017
19,937,261.31

3. this trend, as it has a way of frustrating everyone. It
can result in not trusting anything or anyone, which
also will make a difference in the business world.
You might ask…“Why does this matter?” It matters
because populism is now the norm. For example,
look at the outcome of the 2016 U.S. elections,
Brexit and recent European election trends. These
unexpected results have led to change.
It comes from economic failure and
the idea that economic governance has
not worked. The perception prior to
voting was that none of this would ever
happen. The reality is that it did happen.
Stock Markets Affected
The latest available Conference Board
surveys show consumer confidence is
at 20-year highs on many topics, includ-
ing stocks and the economy. Confidence
levels have been higher on just one
occasion—late 1999 to early 2000. If
memory serves us right, that was the
top of the stock market. In the March
30, 2017, edition of The New York
Times, the lead business article states:
“Consumers are more confident. Stocks
are up. The only problem: The boom
is apparent everywhere except in the
economic data.” Notice the current
expectations as shown in Exhibit 5.
Expecting the market to rise farther
is certainly the perception now. The
reality is that stocks are very expensive,
and it’s getting progressively harder
and harder to find value. The S&P 500
Price-to-Sales Ratio measurement is
shown in Exhibit 6. The current high
level has been slightly surpassed only by
the 1999–2000 top.
Assessing the Current Market
Our investment approach at Oxbow has been to
own the very best value possible over time. Value
will tend to win out over growth when times are
tough. Assets are priced as a function of investor
expectations. The stock market may be rational,
but the people who comprise it aren’t. Currently
hopes are high. We at Oxbow know this, and that’s
why we’re invested—but cautious.
3
MARKET COMMENTS APRIL 2017
S&P 500 PRICE-TO-SALES RATIO
JANUARY 1990 THROUGH JANUARY 2017
Source: Bloomberg, DoubleLine Exhibit 6
2.3
2.3
1.9
1.7
1.5
1.3
1.1
0.9
0.7
0.5
1
90 1595 00 05 10 15
Price/Sales
Average
1 St. Dev.
2 St. Dev.
Price/Sales
Average
1 St. Dev.
2 St. Dev.
1999-2000
CONSUMERS EXPECTING STOCKS TO RISE
UNITED STATES: CONFERENCE BOARD CONSUMER CONFIDENCE
52.5
45.0
37.5
30.0
22.5
15.0
90 95 00 05 10 15
% PERCENT OF RESPONDENTS
201720041999
Source: Gluskin Sheff Exhibit 5
2009

4. This business tends to get real crazy at market
peaks and valleys, and even professionals are
known to do things they normally wouldn’t do.
We stay with our disciplines, and they have served
us well over time, even though on occasion we
are counter to the public. We assure you that our
analysts and portfolio managers are as sensitive
as ever to the latest trends.
All three Oxbow-managed disciplines—Multi-Cap,
Dividend Growth and Long-Term Growth—
achieved positive returns in the first quarter of
2017. For high income investors who think they
have been left out, we say… be patient. Our
High Income strategy, while maybe not as robust
as the stock market, also is doing well this year.
As we move into spring, we wish you the very
best—and continue to appreciate your trust in us.
Ted Oakley
Bob Walsh
1-877-604-5707
email: info@oxbowadv.com
website: www.oxbowadvisors.com
MARKET COMMENTS APRIL 2017
Watch for information regarding our upcoming
market outlook conference call.
A wise person knows what’s inside their circle of control and what is outside of it.
— RYAN HOLIDAY
Bear Stearns is not in trouble.
— JIM CRAMER, MARCH 11, 2008
(one week before it was sold to J.P. Morgan for next to nothing)