2016 Fearless Gold Sector Forecast : Stay The Hell Away

Build Your Gold Watch List – but keep your portfolio in other sectors :

This past year was one of the worst ever for large mining companies, which suffered because of falling commodity prices and high leverage. They needed cash badly, and the streaming companies were more than happy to provide it. Mining giants such as Barrick Gold Corp., Glencore Plc, Teck Resources Ltd. and Vale SA all sold streams in 2015.

For junior or producing gold companies and their investors, the range of forecasts and continued volatility suggest it’s wiser to ignore the crystal balls for now and instead focus on what companies can control, like ensuring a sound business plan, keeping their balance sheets strong, monitoring costs, and building value for their shareholders.

Trends are against gold:

1) no inflation can be detected

2) rising interest rates offer a money making alternative while we watch and wait

3) global unrest in the middle East, Africa and Ukraine continue unabated but don’t move the panic button to ” buy”

4) Peter Schiff continues to see gold at $5,000  ( our best contrarian indicator )

This is the time of year when analysts roll out their economic forecasts for the New Year. For those who keep a close eye on gold prices, this can be a painful process.

It’s been another tough 12 months for the yellow metal, with prices falling for the third consecutive year — down about 10 per cent in 2015 alone. Prices touched a high in the neighbourhood of $1,300 and, as the year drew to close, they neared six-year lows around $1050.

That’s a big dive from the heady days of 2011, when gold hit over $1,900 an ounce.

What made things even more difficult for the sector in 2015 was the price volatility. Just when it appeared prices might be on a firm trajectory upward, they would then fall, creating more uncertainty among everyone from investors to gold companies.

That volatility is making it harder for prognosticators to estimate 2016 prices with any certainty. It’s the proverbial attempt to nail Jell-O to a wall.

That doesn’t prevent them from trying. But the resounding lack of consensus suggests it is a fraught exercise. Some are breathlessly proclaiming we’re on the brink of a new gold bull market. On the flip side, Goldman Sachs and JP Morgan predict it will fall to the psychologically important $1,000 US-per-ounce level — or lower — in 2016. Bank of America Merrill Lynch believes it will average $950 an ounce in early 2016 before recovering. Slightly more optimistic forecasters, like HSBC, predict gold will average $1,205 next year.

Gold is different from other metals in that its prices are not driven largely by typical supply and demand. While the prices of other metals, like copper or silver, tend to rise and fall as economies grow and shrink, a lot of different forces affect gold’s price. It’s used as a store of wealth, unlike most other metals (you don’t store copper to get rich), and it’s considered a “safe haven” — used as a hedge against political and economic uncertainty.

Inflation and the U.S. dollar are two major forces behind gold’s prices. In 2015, they didn’t work in gold’s favour. The collapse of the price of oil has kept inflation in check, which is bad for gold because of its role as a hedge against rising prices. The U.S. dollar has been strong — another blow for gold, which performs contrary to the greenback. Some say one of the reasons for the strong dollar was ongoing speculation that the U.S. Federal Reserve would raise rates for the first time in almost a decade. The Fed did that on Dec. 16, but there was minimal impact on gold due to the central bank’s dovish approach of a gradual tightening of future rates.

 

The dark side of metal streaming deals: Strapped mining companies trade future value for cash ( Financial Post )

 

In September, Robert Quartermain did something highly unusual for a mining executive — he signed a streaming deal with an early exit strategy.

Precious metal streaming companies looking to team up to tackle bigger deals

Valerian Mazataud/Bloomberg

Overwhelmed by the sheer volume of opportunities available in volatile commodity markets, precious-metal “streaming” companies are looking to team up to take on large acquisitions that they might not be able to readily afford on their own.

Continue reading.
Quartermain, the CEO of Vancouver-based Pretium Resources Inc., was alarmed at how much value miners are giving away in gold and silver stream sales, in which future output is sold at below-market prices in exchange for an instant cash infusion.

So when he sold a US$150-million stream on Pretium’s Brucejack project in British Columbia, he insisted that the deal include buyback options for Pretium in 2018 and 2019, and that it cap the number of gold and silver ounces that can be sold.

“When you start putting in higher levels of streaming, and the stream lasts forever, then the potential upside starts going to streaming holders and (away from) your existing shareholders,” Quartermain said in an interview.

This will go down as the biggest year ever for metal streaming deals, and it’s not even close. Miners have raised US$4.2 billion from 11 stream sales in 2015, according to Financial Post data. That is nearly double the US$2.2 billion raised in 2013, which is the second biggest year on record.

For the most part, mining analysts and investors have cheered these deals. But their sheer number has caused alarm for some observers, who worry that miners are giving away vast amounts of future upside once metal prices improve.

The metal streaming business was created back in 2004. In these transactions, a streaming company like Silver Wheaton Corp. gives a mining company an upfront cash payment. In return, it gets the right to buy a fixed amount of precious metals production from the miner at a fixed price that is far below the market price. The streamer can then sell the metal for a profit. The biggest players in this business are Silver Wheaton, Franco-Nevada Corp. and Royal Gold Inc.

This past year was one of the worst ever for large mining companies, which suffered because of falling commodity prices and high leverage. They needed cash badly, and the streaming companies were more than happy to provide it. Mining giants such as Barrick Gold Corp., Glencore Plc, Teck Resources Ltd. and Vale SA all sold streams in 2015.
On the surface, these deals made a lot of sense for mining companies. Their stock prices are so depressed that they do not want to even think about issuing equity. And the last thing this sector needs is to take on more debt. So they sold future metal production instead.

“When companies are between a rock and a hard place, they often sell what’s good because they can’t sell what’s bad,” said John Tumazos, an independent analyst.

The problem is that streams destroy much of the future “option value” for mining companies. Since the streaming metal is typically sold at fixed prices far below the market price, the streamers get all the benefit when market prices go up.

To take an extreme example, Silver Wheaton was buying silver from some mining companies at less than US$4 a pound in 2011, when silver prices rose to almost US$50. It was a massive transfer of wealth from mining companies to a streaming company.

Another concern is that streams can eliminate the exploration upside from a mine. If a miner has agreed to sell a fixed percentage of gold or silver production from a mine to a streamer, it will have to sell more metal if it makes a new discovery on the property and boosts production.

When companies are between a rock and a hard place, they often sell what’s good because they can’t sell what’s bad
John Ing, president and gold analyst at Maison Placements Canada, said streaming is reminiscent of hedging, in which metal is sold in fixed-price contracts. Hedging was all the rage in the gold industry in the 1990s, when prices were low. But it became a massive liability once prices rose far above the value in the contracts. Barrick had to spend more than $5 billion to unwind its hedge book in 2009.

Eventually, hedging became a toxic word in the industry. It is almost nonexistent today.

“It wasn’t until the price of gold went up that everybody realized what Barrick was leaving on the table,” Ing said.

“The same thing is going to happen (to streaming) when the price of gold goes up again. Not until then will people focus on the dark side of the streams.”

For investors that don’t like streaming, the good news is that miners are starting to preserve more upside for themselves in these transactions.

For example, Barrick struck a US$610-million stream sale with Royal Gold last August that guarantees higher sale prices down the road. For the first 550,000 gold ounces and 23.1 million silver ounces that Barrick delivers to Royal Gold, it receives 30 per cent of the prevailing spot prices. For every ounce after that, it receives 60 per cent of the spot prices. So if silver prices go up, Barrick stands to benefit.
Pretium Resources Inc.

Pretium’s Brucejack project in British Columbia.
Pretium went even further by negotiating optional buybacks of its stream and capping the total amount of gold and silver to be sold. If Pretium discovers more metal at the Brucejack project, it won’t go into the stream.

Traditional streaming companies like Silver Wheaton and Royal Gold are looking to buy streams that will last for decades, so Pretium’s deal is not for them. Instead, Pretium sold the stream to two private equity firms, Orion Resource Partners and Blackstone Group.

These companies are just looking for a good return and are not bothered by the idea of having their stream re-purchased in a few years. That is a relatively new concept in streaming, and it could be a game-changer if more private equity firms and other players decide to compete with traditional streamers.

Quartermain said his deal is proof that miners have alternatives to conventional streaming. He hopes other companies will follow Pretium’s lead and try to maintain some upside in these deals.

“We’ve shown you can, even in challenging markets, finance good projects and achieve that upside for shareholders,” he said.

 

 

Product DetailsWhere can you find a gold watch list ?

on Amazon.com ( Books)

Product Details

AMP Gold and Precious Metals Portfolio: The Gold Investor’s Handbook

by Jack A Bass

Paperback

$19.95Prime
Usually ships in 6 days

In search of tailor-made solutions

Our core business lies in the fields of formation/administration of global corporations , trusts,foundations , asset safeguarding and sucession arrangements

We compile legally protected and tax optimising concepts and find the optimal solution for you.

We offer extensive services and contacts in the following fields:

  • Company , trusts ,foundations – incorporation and jurisdiction selection
  • Asset safeguarding
  • Tax optimisation
  • Managment consulting
    Bank introductions

Email : info@jackbassteam.com   ( all emailed answered within 24 hours)

  OR

Call Jack direct at 604-858-3302  Pacific Time

10:00 – 4:00 Monday to friday

There is never a cost or obligation for this inquiry.

Video:

Video

JB offshore.mp4  The First Rule Is Safety

About Jack A. Bass Business Development Services

photo

Jack A. Bass and Associates

Advertisements

Kinder Morgan ( KMI) / Shipping Sector/ Natural Gas – Why Chase Stocks Down ? – plenty of reasons to watch and wait

There was a recent video / interview of Jim Cramer saying his industry sector guru called $ 20.00 as the bottom but Cramer saw the stock in free fall and just did not know.

 

Kinder Morgan, Inc. (KMI)

Analysts have been split on whether Kinder Morgan’s dividends are sustainable as the pipeline industry’s ability to tap equity and debt markets to finance growth dimmed. The company’s stock has slumped 27 percent this week to $17.47 as of 12:34 p.m. in New York. Moody’s Investors Service warned on Tuesday that Kinder Morgan’s bonds were on the verge of tipping into junk.

“Dividend growth is unrealistic,” Vivek Pal, a managing director at Jefferies LLC in New York, said in a note to clients before the announcement. The company needs a 50 percent dividend cut to avoid being downgraded to junk, he said.

Prior to today’s announcement, Kinder Morgan had been expected to lift its 2016 dividend to $2.14, according to Bloomberg Dividend Forecasts. Companies across the oil and gas industry have been slashing or freezing dividends to conserve cash as plunging energy prices choked off money needed to drill wells, pay debts and purchase drilling rights.

Transocean Ltd., Chesapeake Energy Corp. and Linn Energy LLC are among those whose investors have seen payouts halted amid the crunch that began 18 months ago. Kinder Morgan’s $40 billion-plus debt burden exceeds the economic output of entire nations, including Bolivia and Bahrain.

We have no oil / gas stocks in the managed accounts.Braggin ‘ Rights – out of Chesapeake at $22

Chesapeake Energy Corporation (CHK)

We have no shipping stocks – Summary from Seeking Alpha

Dry bulk shipping unlikely to recover before 2017, consultant says
Dec 3 2015, 19:15 ET | By: Carl Surran, SA News Editor Contact this editor with comments or a news tip
Dry bulk shipping faces at least another year of pain, according to a new report from Drewry Shipping Consultants, which says companies in the industry will not return to profitability until at least 2017.Drewry says its dry bulk freight rate index fell 14.5% in September from August, and rates have fallen another 13.8% between September and November, although numbers for the full Q4 will not be available until early next year.”Demand has almost dried up,” Drewry’s lead analyst says. “China’s iron ore imports have stagnated, China’s coal imports have come down massively and India’s coal import growth has also slowed down.”Drewry forecasts demand for iron ore growing at 3%-4% over the next few years, but says demand for coal, especially in China, will not rebound any time soon.Related tickers: DRYS, SBLK, SALT, DSX, PRGN, EGLE, NM, NMM, SB, SINO, SHIP, FREE

Safe Bulkers Inc. (SB) – NYSE
$1.04-0.17(-13.64%)12:26 PM, 12/04 

Safe Bulkers Inc. stock chart
Today5d1m3m1y5y10y
52wk high:4.92
52wk low:1.03
EPS:-0.39
PE (ttm):N/A
Div Rate:0.04
Yield:3.31
Market Cap:$101.02m
Volume:450,843

Good Advice  DOES COST Money -and it does SAVE Your Portfolio

Tax Haven Wealth Management : GUARANTEE of 6 % OR YOU DON’T PAY

 

The key is to give yourself options. They may not love any of the scenarios, but providing choices usually leads clients to eventually embrace one.

Despite solid advice, some clients just spend too much. Others, like the married couple we’ll call Matthew and Elizabeth, diligently save but still run into retirement-planning problems.

Matthew and Elizabeth became clients of Jack A. Bass Managed Accounts a few years back, looking to manage their portfolio and put a retirement game plan in place. At 66, Matthew was considering retiring. Elizabeth could finally travel now that she was no longer the primary caregiver of her mother, who had passed the year prior. Together, we looked at their joint financial picture and analyzed the situation.

Then came some bad news: They wouldn’t be able to confidently cover living expenses if Matthew stopped working. They were shocked, because they’d done so much correctly—worked hard, lived within their means and consistently saved for retirement, putting away $2.3 million between retirement and non-qualified investments. Matthew even ran some preliminary retirement numbers online over the years to make sure they were on track.

Part of the problem was that Matthew’s planning assumptions were too rosy. He didn’t assume he’d have any variability on his portfolio returns, he didn’t assume he’d have health-care costs once Medicare kicked in, and he didn’t assume that retirement could last more than 20 years.

We projected that if Matthew retired at 66, the couple would only have about a 70 percent chance of being able to cover lifestyle expenses without having to make adjustments to spending over time; if either of them experienced a modest long-term care event that ate into their resources, they would achieve only a 65 percent success rate.

Their miscalculations aside, the other part of Matthew’s and Elizabeth’s retirement problem was that they, like many other people, put others’ needs before their own, in traditional “sandwich generation” style.

When their kids asked for help with down payments on houses, they obliged. When Elizabeth’s mom needed in-home help for a few years prior to her moving in with them, they covered it. Consequently, these unforeseen events ultimately put their retirement in jeopardy.

Working toward a solution

Matthew and Elizabeth weren’t happy to hear they weren’t on track to retire, but they appreciated having a framework from which to choose their solution.

Ultimately, Matthew chose to work 30 hours per week so that his company could continue to pick up their health-care costs (saving them about $1,000 a month in Medicare-related costs). The part-time work allowed him to take off every Friday, and that gave him the added benefit of “test driving” retirement.

He and Elizabeth also decided to downsize their home and buy long-term care coverage. The LTC insurance assured that their children wouldn’t be faced with the possibility of someday having to assist them financially.

As with all best-laid plans and good intentions, sometimes things go awry with retirement planning. However, by exploring alternative saving tactics, you can still achieve your goal.

Investment Management

Offered by Jack A. Bass Managed Accounts

We can administer your account via the internet so that you can track your returns and only you can transfer funds from that account.

Guaranteed Investment Performance

( minimum 6 % annual return)  Or You Don’t Pay

Our stock market letter :  www.amp2012.com

 

Information must proceed action and that is why we offer a no cost / no obligation inquiry service.

Email info@ jackbassteam.com or

Call Jack direct at 604-858-3202 – Pacific Time 10:00 – 4;00 Monday to Friday

( same time zone as Los Angeles)

The main intention of our website is to provide objective and independent information that will help the potential investor to make his own decisions in an informed manner. To this effect we try to explain in a simple language the different processes and the most important figures involved in offshore business and to show the different alternatives that exist, evaluating their pros and cons.

On the other hand we intend – in terms of  offshore finance, bringing these products to the average citizen.

Do something to help yourself – contact Jack A. Bass now !

A final word of advice – information without action will produce nothing in the way of improved investment returns.

China Calm Shattered: Probe Sparks Selloff in Stocks

  • Citic Securities leads losses after revealing investigation
  • Industrial profits drop 4.6% in October as slowdown deepens

 

  • China’s stocks tumbled the most since the depths of a $5 trillion plunge in August as some of the nation’s largest brokerages disclosed regulatory probes, industrial profits fell and two more companies said they’re struggling to repay bonds.

    The Shanghai Composite Index sank 5.5 percent, with a gauge of volatility surging from the lowest level since March. Citic Securities Co. and Guosen Securities Co. plunged by the daily limit in Shanghai after saying they were under investigation for alleged rule violations. Haitong Securities Co., whose shares were suspended from trading, is also being probed. Industrial profits slid 4.6 percent last month, data showed Friday, compared with a 0.1 percent drop in September.

The probe into the finance industry comes as the government widens an anti-corruption campaign and seeks to assign blame for the selloff earlier this year. Authorities are testing the strength of a nascent bull market by lifting a freeze on initial public offerings and scrapping a rule requiring brokerages to hold net-long positions, just as the earliest indicators for November signal a deterioration in economic growth. A Chinese fertilizer maker and a pig iron producer became the latest companies to flag debt troubles after at least six defaults this year.

Brokerages Plunge

“The sharp decline will raise questions whether the authorities’ confidence that we are seeing stability in the Chinese markets may be a tad premature,” said Bernard Aw, a strategist at IG Asia Pte. in Singapore. “The rally since the August collapse was not fundamentally supported. The removal of restrictions for large brokers to sell and the IPO resumptions may not have been announced at an opportune time.”

Friday’s losses pared the Shanghai Composite’s gain since its Aug. 26 low to 17 percent. The Hang Seng China Enterprises Index slid 2.5 percent in Hong Kong. The Hang Seng Index retreated 1.9 percent.

A gauge of financial shares on the CSI 300 slumped 5 percent. Citic Securities and Guosen Securities both dropped 10 percent. Haitong International Securities Group Ltd. slid 7.5 percent for the biggest decline since Aug. 24 in Hong Kong.

The finance crackdown has intensified in recent weeks and ensnared a prominent hedge-fund manager and a CSRC vice chairman. Citic Securities President Cheng Boming is among seven of the company’s executives named by Xinhua News Agency as being under investigation. Brokerage Guotai Junan International Holdings Ltd. said Monday it had lost contact with its chairman, spurring a 12 percent slump in the firm’s shares.

An industrial explosives maker will become the first IPO to be priced since the regulator lifted a five-month freeze on new share sales imposed during the height of the rout. Ten companies will market new shares next week. The final 28 IPOs under the existing online lottery system will probably tie up 3.4 trillion yuan ($532 billion), according to the median of six analyst estimates compiled by Bloomberg.

VIDEO

Video

JB offshore.mp4  The First Rule Is Safety

GOLDMAN: These Stocks Equal Great Buys

Wynn Resorts

Wynn Resorts

Thomson Reuters

Ticker: WYNN

Sector: Consumer Discretionary

Dispersion Score: 5.6

Upside to Price Target: 89%

Executive Comment: “We enjoy a segment of the market that we wanted to continue to enjoy, the upper premium, the VIP business and the top end of the mass marketing. We enjoy that advantage today and we intended to increase that advantage by the opening of Wynn Palace, such worthy assumptions of its creation, and I’m happy to say that that was the result of the construction and the development,” said CEO Steve Wynn.

UPDATE : Sept 23

Wynn Resorts (WYNN) Stock Falls on Fitch Ratings’ Lower Macau Gaming Revenue Forecast

NEW YORK (TheStreet) — Shares of Wynn Resorts were falling by 3% to $62.01 on Wednesday morning, after Fitch Ratings revised its Macau gaming growth forecast for 2015.

The statistical ratings firm said it now expects Macau gaming revenue to decline between 33% and 34% in 2015, down from its previous forecast of a 29% decline.

Fitch Ratings said that gaming revenues in Macau are down 36.5% year to date through August, which reflects on the difficult first-half 2014 comparison, and pressures such as a corruption crackdown in China that took a toll on gaming.

The ratings firm said that Macau’s decision to loosen its visa restrictions “should produce some positive benefit, underscoring that Macau is willing to use certain levers to prop up its gaming-centric economy.”

Fitch Ratings said it expects Macau gaming growth in 2016 to be “relatively flat,” citing the positive impact of new properties opening in the region next year.

The lower 2015 Macau gaming revenue forecast helped bring down shares of casino operators with properties in the region, including Wynn Resorts.

Separately, TheStreet Ratings team rates WYNN RESORTS LTD as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

“We rate WYNN RESORTS LTD (WYNN) a HOLD. The primary factors that have impacted our rating are mixed — some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and weak operating cash flow.”

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 37.14% is the gross profit margin for WYNN RESORTS LTD which we consider to be strong. Regardless of WYNN’s high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.42% trails the industry average.
  • WYNN, with its decline in revenue, underperformed when compared the industry average of 4.0%. Since the same quarter one year prior, revenues fell by 26.3%. Weakness in the company’s revenue seems to have hurt the bottom line, decreasing earnings per share.
  • WYNN RESORTS LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable earnings per share over the past year indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than prior full year. During the past fiscal year, WYNN RESORTS LTD’s EPS of $7.17 remained unchanged from the prior years’ EPS of $7.17. For the next year, the market is expecting a contraction of 54.4% in earnings ($3.27 versus $7.17).
  • Despite any intermediate fluctuations, we have only bad news to report on this stock’s performance over the last year: it has tumbled by 60.15%, worse than the S&P 500’s performance. Consistent with the plunge in the stock price, the company’s earnings per share are down 72.00% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
  • Net operating cash flow has decreased to $201.34 million or 45.41% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm’s growth is significantly lower.
  • You can view the full analysis from the report here: WYNN

Viacom Inc.

Viacom Inc.

REUTERS/Lucas Jackson

Ticker: VIAB

Sector: Consumer Discretionary

Dispersion Score: 3.3

Upside to Price Target: 52%

Executive Comment: “Viacom is seizing every opportunity. Many of our brands speak to the younger audiences that are at the leading edge of the evolution of media. This has always proven to be an advantage over the years and will again as we accelerate our investment in initiatives, platforms and content. We continue to do the hard work to confidently move forward and lead our industry through the latest pivot,” said CEO Philippe Dauman

Dollar Tree Inc.

Dollar Tree Inc.

@BrianSozzi

Ticker: DLTR

Sector: Consumer Discretionary

Dispersion Score: 2.1

Upside to Price Target: 44%

Executive Comment: “Dollar Tree continues to be part of the solution for millions of consumers as they strive to balance their household budget. We serve a very loyal and growing customer base. Our commitment is to continue serving our existing customers better while taking every opportunity to gain new customers in every store every day,” said CEO Bob Sasser.

United Continental Holdings

United Continental Holdings

Getty Images/Scott Olson

Ticker: UAL

Sector: Industrials

Dispersion Score: 3.9

Upside to Price Target: 35%

Executive Comment: “The second quarter was a very good quarter for United and I am proud of the work our employees have done to deliver record earnings which benefit all our constituencies, including our employees themselves. We have a great deal of confidence in our future as we work to make United the carrier of choice,” said CEO Jeff Smisek.

Urban Outfitters

Urban Outfitters

Flickr/Mike Mozart

Ticker: URBN

Sector: Consumer Discretionary

Dispersion Score: 3.5

Upside to Price Target: 34%

Executive Comment: “All brands have carefully, but steadily, offered larger, non-redundant product assortments across a number of categories and, in several cases, have added entirely new categories. At the same time we are launching initiatives to make very important operational improvements, like better category distortion in stores, faster reaction to customer demand, more efficient use of store space, and better integration of technology,” said CEO Richard Hayne.

Portfolio savings : for information on saving taxes by going offshore read http://www.youroffshoremoney.com

Mining Shares Lead Stock Losses

  • Cartoon of the Day: Falling Stocks - falling bull cartoon 10.13.2014
  • Copper, zinc, coal all tumble on deepening China concern
  • Credit Suisse lowers target prices for diversified miners

Mining shares including Glencore Plc led a slump in European equities as metals prices tumbled on fears that an economic slowdown in China, the world’s biggest consumer of raw materials, is deepening.

Glencore fell as much as 10 percent to a record 107 pence in London trading. Anglo American Plc, Antofagasta Plc and ArcelorMittal dropped more than 6 percent, dragging the regional benchmark Stoxx Europe 600 Index lower. KAZ Minerals Plc plunged almost 18 percent, the most since January, to a record low.

“Until China demand and emerging-market currencies find a floor, it will remain challenging to put an absolute floor on commodity prices,” Credit Suisse Group AG analysts led by Liam Fitzpatrick wrote in a note Tuesday.

The bank cut its price estimates for large diversified miners including Glencore and BHP Billiton Ltd., which said on Tuesday it’s planning to sell hybrid securities to help refinance near-term liabilities. Stainless steel producer Outokumpu Oyj sank as much as 16 percent after saying third-quarter delivery volumes may be 10 percent lower than the previous quarter.

Growth Cut

The Asian Development Bank reduced its growth forecasts for China and said the country’s declining appetite for energy, metals and other raw materials would hurt commodity-focused export economies like Mongolia and Indonesia. China is set to grow at its slowest pace in a quarter century this year even after five central bank interest-rate cuts and fiscal stimulus.

Copper declined 2.5 percent to $5,139 a metric ton. Zinc sank as much as 1.8 percent to $1,628 a ton, the lowest in five years. European coal for 2016 dropped below $50 a ton for the first time.

Glencore, which sells all three commodities, was down 8.7 percent at 108.60 pence by 11:02 a.m. in London trading, after earlier touching the lowest since it began trading in May 2011.

“Glencore is a bet on copper, and weakness in metal prices is sending tremors through Glencore’s shareholders,” said Richard Knights, a mining analyst at Liberum Capital in London.

Precious Metals Routed as Gold Extends Decline

Gold Extends Decline to Five-Year Low

Precious metals were routed as gold sank to the lowest in more than five years on prospects for higher U.S. rates and after China said it held less metal in reserves than some analysts expected. Platinum plunged to the lowest since 2009, while silver and palladium lost more than 2 percent.

Bullion for immediate delivery tumbled as much as 4.2 percent to $1,086.18 an ounce, the lowest price since March 2010, and traded at $1,106.90 at 10:54 a.m. in Singapore. Miners’ equities fell as prices extended a fourth weekly loss.

Gold has fallen out of favor with investors as Federal Reserve Chair Janet Yellen prepares to raise rates this year, boosting the dollar. While China updated its bullion reserves on Friday for the first time since 2009, the 57 percent increase to 1,658 metric tons was smaller than had been estimated. Gold’s plunge raises the prospect of third straight annual drop.

“The market is in one of its bear phases, where any news is bearish news,” said Jack A. Bass Vancouver-based managing partner at Jack A. Bass and Associates, predicting that gold may drop as low as $1,050 an ounce. “People had expected China’s holdings to be higher,” said Bass , author of The Gold Investors Handbook. His managed accounts hold no gold or gold miners.

Newcrest Mining Ltd., Australia’s largest producer, lost 7.1 percent to A$12.26 in Sydney, while Evolution Mining Ltd. slumped 13 percent and Saracen Mineral Holdings Ltd. tumbled 13 percent. In Hong Kong, Zijin Mining Group Co. lost 3.8 percent.

“Gold has generally been suppressed by the ongoing expectation that the dollar may get stronger should the U.S. Fed raise interest rates,” Wallace Ng, a trader at Gemsha Metals Co., said from Shanghai. “But this sudden drop during Asian trading seemed to have been triggered by some stop-loss selloffs that have nothing to do with fundamentals.”

Commodity Losses

Some investors are turning away from precious metals amid a wider retreat in raw materials. The Bloomberg Commodity Index dropped for a fifth day on Monday to as low as 96.6395, heading for the longest run of declines since March.

China bought about 604 tons of gold since 2009, second only to Russia, according to data from the central bank and International Monetary Fund. The total holdings make China, the world’s biggest producer, the world’s fifth-biggest gold owner.

Prospects for a U.S. rate increase strengthened the dollar, hurting the allure of gold, which generally offers returns only through price gains. The Bloomberg Dollar Spot Index rose as much as 0.1 percent to the highest level since April 13.

‘Still Bearish’

“I’m still bearish on gold,” said Barnabas Gan, an economist at Singapore-based Oversea-Chinese Banking Corp., the most accurate precious metals forecaster in the eight quarters to March, according to Bloomberg rankings. “For the year-end, I’m still looking at $1,050 an ounce. The bearish outlook is underpinned by the likelihood of the U.S. Fed rate hike.”

Holdings in gold-backed exchange-traded products have shrunk as U.S. equities rallied and the dollar climbed. Global holdings were at 1,585.96 tons on Thursday, down from a record 2,632.5 tons in December 2012.

Gold futures retreated as much as 4.6 percent to $1,080 an ounce and traded at $1,109.50 on the Comex in New York. Money managers are holding the smallest net-bullish bet on gold since the U.S. government data begins in 2006.

Platinum for immediate delivery dropped as much as 4.7 percent to $947.38 an ounce, the lowest since January 2009, and traded at $962.90. The metal is 20 percent lower this year.

Spot silver lost as much as 2.3 percent to $14.5449 an ounce, the lowest since December 2014, and was at $14.6678. Palladium fell as much as 3 percent to $596.75 an ounce, the lowest since October 2012.

Corporate stock buybacks put a floor under earnings ? Bloomberg

Wall Street analysts are gloomy about corporate performance in the second quarter, predicting that profits fell 6.5 percent. If companies weren’t buying so much of their own stock, the drop could be much worse: 9 percent. “It makes you rethink a lot of things,” says Kevin Mahn, president of Hennion & Walsh Asset Management. “We question how much earnings growth has taken place because of actual sales growth and consumer spending—and how much is attributable to buybacks.”

Corporations report profits as earnings per share (EPS). By reducing the number of shares outstanding, buybacks help increase a company’s EPS. The impact of buybacks was harder to see in the first three years of the bull market, when ballooning profit margins helped companies in the Standard & Poor’s 500-stock index almost double their earnings. Now that margin growth has flattened out, buybacks’ contribution is more significant. Companies in the S&P 500 bought more than $550 billion of their own stock last year, boosting EPS growth by 2.3 percentage points, according to data compiled by Bloomberg.

The last time buybacks contributed as much to profits was in 2007, when companies spent the most ever on their own stock and enhanced that year’s increase in EPS by 3.1 percentage points. “Today the argument is buybacks are distorting the market, but I’m less certain,” says Dan Greenhaus, chief global strategist at BTIG, which provides trading services to institutional investors. “To the extent companies have thought their shares are undervalued the past few years, buybacks have been a fair use.”

Buyback announcements so far in 2015 have already topped full-year totals for 2008, 2009, 2010, and 2012, and they’re on pace to reach an annual record of $993 billion, according to Birinyi Associates. AIG announced a $3.5 billion share repurchase plan in April, and in June, Wendy’s said it would buy $1.4 billion of its stock.

Some companies borrow money for share purchases. Over the three months through June 19, companies in the S&P 500 listed buybacks or dividends among the uses for $58 billion they raised in bond sales, according to data compiled by Bloomberg and Sundial Capital Research.

Since 2009 companies have spent $2.4 trillion on buybacks, drawing criticism from politicians who say the companies should use the money to hire workers, pay them more, build plants, and fund research. In her economic policy speech on July 13, Hillary Clinton vowed to “propose reforms to help CEOs and shareholders alike focus on the next decade rather than just the next day, making sure stock buybacks aren’t being used only for an immediate boost in share prices.” Senators Tammy Baldwin (D-Wis.) and Elizabeth Warren (D-Mass.) have asked the Securities and Exchange Commission to look into the practice, with Warren saying that buybacks “create a sugar high for the corporations.”

Wall Street has its own doubts about the tactic. Investing in people, facilities, and research arguably could have a much bigger long-term impact on a company’s bottom line—not to mention the entire economy—than a company taking advantage of low interest rates to borrow money to buy its own stock. That’s the reasoning behind a letter BlackRock Chief Executive Officer Laurence Fink sent in April to the CEOs of S&P 500 companies, arguing that their “duty of care and loyalty” should be to long-term owners instead of activists agitating for returning more cash to shareholders.

One reason buybacks are common is that U.S. companies have earned so much money in the past few years. Over the previous 12 months they’ve generated $1.1 trillion in profits—a sum that “cannot possibly be reinvested back” as capital spending or research and development, says Dubravko Lakos-Bujas, an equity strategist at JPMorgan Chase. “Cash flow generation for U.S. companies has been very robust, balance sheets have remained pretty healthy, and interest rates are still low,” he says. “With growth fairly anemic, it’s extra reason for buybacks.” Or as BTIG’s Greenhaus puts it, “Companies have to do something with their cash.”

When dividends are included, companies are returning about as much cash to shareholders as they have in the past. Added together and expressed as a proportion of stock prices, repurchases and other payouts total 4.3 percent—about the historical average, according to JPMorgan data.

Investors have shown that they approve of the tactic. Shares of the 100 companies that use the biggest portion of their cash on repurchases in 2014 have beaten those that spent more on plants and equipment, according to an April study by Barclays. Says Marshall Front, chief investment officer at Front Barnett Associates: “Corporations wouldn’t buy back as much of their stock if they could make a significant increase in earnings over the years through investment.”

The bottom line: Companies spent more than $550 billion on their own stock in 2014, boosting earnings by 2.3 percentage points.