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.

 

 

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Hedge Funds Are Back to Bearish on Gold as Price Slump Deepens : Preparing For – $1000

 

 

  • Money managers hold first net-short position since August
  • Assets in global bullion ETPs drop to lowest since 2009

Prices are trapped in their worst rout since July as Federal Reserve officials talk up improvements for the U.S. economy and reinforce signs that they’re ready to raise borrowing costs for the first time since 2006. That prospect has sent investors fleeing. Assets in exchange-traded products backed by gold have fallen to the lowest since 2009. Money managers are holding a net-short position in the metal for first time since August as their long wagers shrunk to the smallest in seven years.

The bears are being rewarded after futures last week dropped to a five-year low. The outlook for increasing borrowing costs poses a few hurdles for gold. Because the metal doesn’t pay interest, it loses out to competing assets, such as bonds. At the same time, higher rates usually favor a stronger dollar and cut demand for alternatives, while a strengthening economy means investors are less interested in bullion as a haven. More than $6.5 billion was wiped from the value of gold ETPs since mid-October.

“Gold is dead in the water and is an asset class that should be avoided,” said Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel, Nicolaus & Co., which oversees about $170 billion. “We continue to believe that dollar strength will be an anchor on metals, and in particular on gold.”

Fund Wagers

Futures have dropped 9.1 percent in 2015 to $1,076.30 an ounce on the Comex in New York. Prices fell for five straight weeks, the longest slide since July 24. The net-short position in gold futures and options was 8,989 contracts in the week ended Nov. 17, U.S. Commodity Futures Trading Commission data released three days later show. That compares with a net-bullish position of 21,530 contracts a week earlier. Investors trimmed their long holdings to 92,318, the smallest since December 2008.

Bullion, long considered a haven during times of geopolitical turmoil, failed to sustain brief gains last week following the Nov. 13 terrorist attacks in Paris that left 129 people dead and injured another 352. In addition to being ignored by investors, the metal is suffering from weak physical demand, particularly in India, which vies with China as the world’s top bullion buyer. Valcambi, one of Switzerland’s largest gold refiners, projects annual Indian imports of 850 metric tons. That’s down from the average 875 tons in the past five years.

“Investors have become somewhat inured with terrorism,” Jack Ablin, chief investment officer in Chicago for BMO Private Bank, which oversees $68 billion, said by telephone. “They just see it as an ongoing risk, but a single event is not enough to derail an economy or a market, so investors have chosen to ignore it.”

Gold is heading for a third straight annual loss amid speculation that the Fed will soon start tightening monetary policy.Minutes from the Fed’s October meeting released last week showed officials stressed that “it may well become appropriate” to raise the benchmark lending rate in December. Goldman Sachs Group Inc. analysts led by Jeffrey Currie said they expect bullion to extend losses over the next 12 months, according to a report on Nov. 18.

Paulson Stake

The slump hasn’t deterred billionaire hedge fund manager John Paulson. His firm, Paulson & Co., left its holding in the SPDR Gold Trust, the world’s biggest bullion ETP, unchanged in the third quarter, a government filing showed Nov. 16.

While traders are pricing in a more than two-thirds chance of a rate increase in December, the Fed minutes showed policy makers largely agree that the pace of increases will be gradual. The rate outlook may already be “absorbed by the market for now,” Karvy Commodities Broking said in a report Friday.

“The Fed has made it clear they are likely to hike in December — they’ve also telegraphed that they are going to move very slowly from thereafter, so there’s a little less enthusiasm for the dollar,” said Dan Heckman, national investment consultant in Kansas City, Missouri, at U.S. Bank Wealth Management, which oversees about $126 billion. Still, “we have a very low inflation and a very low-growth environment, and it’s hard to make a case for gold.”

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Gold Plunges : Peter Schiff “It’s going to be a ‘horrible Christmas’ “

Well , a horrible Christmas for the folks who followed Peter Shiff’s constant refrain to buy gold.

( as opposed to AMP advice to sell at $1800 .

Gold

INDEX UNITS PRICE CHANGE %CHANGE CONTRACT TIME ET 2 DAY
USD/t oz. 1,086.30 -17.90 -1.62% DEC 15 11:24:10
JPY/g 4,286.00 -38.00 -0.88% OCT 16 11:23:43
USD/t oz. 1,089.56 -14.36 -1.30% NA 11:49:12
EUR/t oz. 1,014.24 -0.04 0.00% NA 11:49:50
GBP/t oz. 730.31 +4.41 +0.61% NA 08:28:35
JPY/t oz. 134,191.44 -210.72 -0.16% NA 11:48:54
INR/t oz. 72,028.75 -709.10 -0.97% NA 11:49:20

 

The Grinch has nothing on Peter Shciff .

On CNBC’s “ Futures Now ” Thursday, thecontrarian investor said that while Americans are wrapping presents this holiday season, they should instead brace themselves for “a horrible Christmas” and possible recession.

“I expect [job] layoffs to start picking up by the end of the year,” Schiff said, pointing to retailers as the first victim. “Retailers have overestimated the ability of their customers to buy their products. Americans are broke. They are loaded up with debt,” he said. “We’re teetering on the edge of an official recession,” and “the labor market is softening.”

For Schiff, there is no one else to blame but theFederal Reserve . As he sees it, the central bank’s easy money policies have created a bubble so big that any prick could send the U.S. economy spiraling out of control. And that makes the possibility of hiking interest rates slim to none.

Read More Oil driving markets, not Fed: Cashin

“The Fed has to talk about raising rates to pretend the whole recovery is real, but they can’t actually raise them,” said the CEO of Euro Pacific Capital. “[Fed Chair Janet Yellen ] can’t admit that she can’t raise them because then she’s admitting the whole recovery is a sham and that the policy was a failure.”

Related Quotes

According to Schiff, the recent rally in the dollar (Intercontinental Exchange US: .DXY) is “the biggest bubble that the Fed has ever inflated” and “it’s the only thing keeping the economy afloat.” The greenback hit a three-month high this week after Yellen said a December rate hike was a “live” possibility.

Read More Sorting out the influence of the strong dollar on revenues

“[The inflated dollar] is keeping the cost of living from rising rapidly and it’s keeping interest rates artificially low. It’s allowing the Fed to pretend everything is great,” Schiff said. “Eventually the bottom is going to drop out of the dollar and we are going to have to deal with reality,” he added. “That reality is we are staring at a financial crisis much worse than the one we saw in 2008.”

Schiff, a longtime Fed foe, has been doubting a rate hike for some time. And while his predictions for a stock market and dollar crash have yet to pan out, he has maintained his stance that the Fed’s hands are tied.

Correction: This article has been revised to reflect Schiff said the bottom will drop out of the dollar.

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Gold miners on ‘knife edge’ : “Gold is on the ropes”

Gold miners on ‘knife edge’ as slump wipes out $19-billion

Gold’s slump to a five-year low this month is squeezing the world’s biggest producers of the precious metal, already struggling to rein in costs and pay down debt.

A rout in bullion has sapped investor confidence in gold miners, sending the benchmark 30-member Philadelphia Stock Exchange Gold and Silver Index of the largest producers to its lowest since 2001. A five-day losing streak through Monday wiped $19-billion off the index, which includes Barrick Gold Corp. and Newmont Mining Corp.

Reuters Jul. 22 2015, 6:27 AM EDT

 India goes cold on gold

The metal’s plunge is eroding profits at mines across the globe and stressing balance sheets in an industry where the biggest producers are weighed down by a record debt load of $31.5-billion. Gold futures in New York are heading for their longest losing streak since 1996 amid increasing speculation U.S. interest rates will climb this year, weakening the appeal of bullion.

“The whole industry is on a bit of a knife-edge,” said James Sutton, a portfolio manager at JPMorgan Chase & Co.’s $2-billion Natural Resources Fund who is underweight gold stocks. “They are making very, very small margins. Really everybody in the industry needs higher prices. You’re going to see some companies run into trouble.”

The industry, on average, needs about $1,200 an ounce to break even when all costs are considered, according to Sutton. Bullion for immediate delivery declined to $1,086.18 an ounce on Monday, the lowest since March 2010. It fell 0.9 per cent to $1,091.20 an ounce at 2:56 p.m. in London.

Wood Mackenzie Ltd. said Wednesday that about 10 per cent of gold miners would be loss-making with bullion at $1,100 an ounce.

Investors Souring

Investors have soured on gold miners as they battled to contain ballooning costs and the outlook for prices dimmed. Some producers have been obliged to enact bailout plans. Petropavlovsk Plc, a Russian miner once valued at more than $3-billion, was forced to tap shareholders for emergency funds earlier this year after its stock slid 99 per cent in five years.

“There’s a lot of pain to be taken in this sector,” Clive Burstow, who helps manage $44-billion at Baring Asset Management in London, said by phone. “Everyone has had to rationalize balance sheets, you’ve seen management turnover, you’ve seen dividends being either pared back or cut.”

Companies like Randgold Resources Ltd., a producer in West Africa, and Vancouver-based Goldcorp Inc. are best-positioned to weather the price slump, Burstow said.

Randgold, which built its business making its own discoveries in Mali, Senegal and Ivory Coast, has a war chest of at least $500-million to buy assets from distressed rivals.

“Another $50 off the gold price and this industry is toast,” Randgold Chief Executive Officer Mark Bristow said July 15, when bullion traded at about $1,150 an ounce.

1986 Low

The Philadelphia Stock Exchange Gold and Silver Index posted its biggest one-day fall in seven years on Monday, with Toronto-based Barrick declining to the lowest since 1986. The benchmark has tumbled 29 per cent in 2015, led by North American miners, with IAMGold Corp. down 51 per cent, Yamana Gold Inc. 48 per cent and Kinross Gold Corp. 41 per cent.

“This is a correction that has to take its course,” Markus Bachmann, CEO of resources-focused investor Craton Capital, said in a phone interview from Johannesburg. “Corrections do not stop halfway. Fundamentals do not matter. A lot of it is sentiment driven.”

Prices could fall below $1,000 an ounce for the first time since 2009, Jeffrey Currie, Goldman Sachs Group Inc.’s New York– based head of commodities research, told Bloomberg in an interview Tuesday.

“Gold is on the ropes,” Ross Norman, CEO of dealer Sharps Pixley, said in an interview with Bloomberg Television. “I suspect we’ll have another bear raid before long. I don’t think the bears have finished their game, they’ll keep punching it until it stops moving.

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Why Peter Schiff is still wrong about gold

While Peter Schiff, and others of his ilk, have remained staunchly bullish on gold since the all-time highs in 2011, I feel they have done a terrible disservice to those who have followed them for the last three-plus years of (relative) pain.

Schiff is an uber-bull, or gold bug, as some may call him, who continually calls for $5000 gold. Since markets move in two directions and not just up, I believe that anyone who is uber-anything should be dismissed, as there is no appropriate substance being proffered by simply saying the word up every day. Ultimately, they will be right, but, in this case, you have to deal with a multi-year 40%-60% drawdown before eventually being correct.

Myra Saefong had a piece earlier this week reiterating Peter Schiff’s perspective about gold going to $5000. So, let’s look at Mr. Schiff’s underlying perspective a little more closely, and see if he is finally going to be right. Or should people consider our perspective that Mr. Schiff’s followers have more pain to experience in the near term, as metals have a lower low to be seen before the next bull phase takes hold.

First, last year, Mr. Schiff was of the exact same perspective regarding gold, and, he has been of the same perspective on gold since it topped in 2011. However, we called the top to gold within six dollars of the actual top in 2011, while most were still looking for gold to exceed the $2000 mark along with Mr. Schiff. In fact, we even called the downside targets correctly even before gold topped. Since that time, gold has lost 41% of its value from its high to low during this correction. Yet, Mr. Schiff has stayed staunchly bullish during this 40% draw down.

Second, last year, Mr. Schiff maintained the perspective that “renewed weakness in the dollar and strength in oil and other commodities will add to gold’s appeal during 2014.” Despite its drop, Mr. Schiff simply dismisses it as being “completely out of touch with reality.

I want to digress for a moment and point out something to those that feel that the dollar must drop in order for metals to rise. There is nothing written in stone that states that the dollar must fall for the metals to rise. In fact, if one closely observed the market action since November of 2014 until the end of January of 2015, gold rallied almost 15% while the dollar rallied over 9%. And, yes, we expected both markets to rally together at that time, too.

Third, Schiff seems to claim that only further quantitative easing will cause the metals to rise. But, this was the same perspective he had with all the previous QE programs were instituted by the Fed. We had QE1, QE2, Operation Twist, and then QE3, and metals are still near their lowest levels in four years. Yet, we are to believe that QE4 will be the one that supposedly causes the metals to rise to $5,000? Does anyone else see the inconsistency in this argument?

Fourth, in Schiff’s recent interview, he noted that “what is holding gold back . . . is the idea that the Fed is going to be raising interest rates.” Wait a second. For years, all people have been talking about is that a rise in interest rates evidences inflation, which is the real driver of gold. So, isn’t the common theme that gold will go up when rates go up, because that is supposedly a signal of inflation?

Yet, when looking a little deeper into what Schiff is now suggesting, it seems that low interest rates are needed to cause gold to rally? Is not a drop in rates commonly viewed as being associated with periods of deflation? So, is it deflation which will cause gold to rally or is it inflation?

The answer is that gold’s movement is not based upon either if you look honestly at the history of gold’s movements. Let’s take a look at the 2007-2009 time frame, which evidenced the most recent period of deflation in our markets, and see if we can glean anything from the metals action in relation to deflationary market pressures and dropping interest rates.

We all know that the S&P 500 topped in October of 2007 and began an estimated 300-point decline into March of 2008, and then we saw a corrective bounce in the equities for a couple of months. During that same period of time, the metals continued to rally. So, here we have “evidence” of the metals supposedly rising during a period of deflation.

But, when we then look toward the May 2008-March 2009 severe decline in the equity market, we witnessed the metals also experienced significant declines within that time period. In fact, gold lost a little more than 30% (yet, rallied again, thereafter). So, when one is presented with these facts, does it make sense that the metals are surely going to rise during periods of deflation and/or low interest rates?

One has to put aside their personal biases toward the metals and recognize that they are not necessarily going to rise during periods of deflation, or due to the drop in the dollar or interest rates. Oddly enough, metals can rally during periods of deflation or dollar appreciation, and they can fall during periods of deflation and dollar appreciation.

The same applies to periods of inflation as well. I know you are likely thinking to yourselves, “Avi has really lost it this time.” But in all honesty, how can you come to terms with the reality of how they reacted during the 2008 broad equity market carnage, which was clearly a deflationary event? Did they act as the supposed “safe haven” during the strongest period of deflationary pressures experienced since the Great Depression, especially while interest rates were dropping precipitously?

The one thing said by Mr. Schiff with which I agree is that “the moves in gold come in waves.” And, these wave movements are driven by waves of sentiment. That is exactly what we track. In fact, not only did the tracking of market sentiment allow us to make various calls, such as the drop into the November 2014 low, but at this time, unlike Mr. Schiff, we still believe that lower lows and more pain are still in store for those that have been continually bullish since 2011.

So, I would urge anyone reading prominent pundit “expectations” about metals to test them against the reality of the price action history. If someone suggests to you that it is a matter of interest rate sensitivity or an inflation/deflation argument or a factor of quantitative easing, you need to think long and hard about if the price history of metals supports their proposition. I suggest that it will not.

Rather, metals are purely a sentiment trade, and unless you understand how sentiment drives metals, you will more than likely be caught on the wrong side of a popular fundamental argument. Ultimately, he will be right. But, do we all have the deep pockets to be able to withstand yet another drop to lower lows before being proven right?

See chart on GLD 2007-2009.

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Everyone Hates U.S. Stocks ?

 

Not since the year of the credit crisis have the world’s biggest investors had a lower opinion of American equities.

With interest rates poised to rise and Europe ascending, the percentage of global money managers who are underweight American equities is the highest since 2008, a survey by Bank of America Corp. shows. At the same time, clients of exchange-traded funds have pulled about $14 billion from U.S. equities this quarter and added $29 billion to international stocks, data compiled by Bloomberg show.

Souring sentiment is a reversal from the last two years, when money flowing to the U.S. was double that going elsewhere. The Standard & Poor’s 500 Index trails virtually every developed market in 2015 as accommodative central-bank policy from Europe to Japan lifts valuations and the Fed winds down programs that helped share prices triple since 2009.

“The U.S. stock market was an island of opportunity for a number of years,” Stacey Nutt, chief investment officer who oversees about $4 billion at ClariVest Asset Management LLC in San Diego, California, said by phone. “It has lost that status, not because it’s negative, but because other places around the world have started becoming more attractive.”

The percentage of money managers holding fewer American stocks than the country’s weighting in benchmark indexes exceeds those overweight by 19 percentage points, according to a March 6-12 poll of 207 money managers in Bank of America’s survey released Tuesday. That compared with a net 6 percent overweight in February.

Better Returns

After beating global stocks every year since 2009, the S&P 500 is up 0.7 percent since January, compared with a 2.1 percent advance in the MSCI World ex-USA Index. The U.S. gauge is on pace for the worst quarterly performance compared with the world index since the third period of 2013.

Better returns elsewhere are luring investors away after American stock ETFs attracted nearly $350 billion in the past two years, compared with the $160 billion that flowed to international equities.

Europe, in particular, has gained favor, as the Stoxx Europe 600 Index has rallied 16 percent so far in 2015, with benchmark indexes in Germany, Portugal and Denmark rising more than 20 percent. The gains came as European Central Bank President Mario Draghi introduced a 1.1 trillion-euro ($1.2 trillion) quantitative-easing program aimed at spurring growth and thwarting deflation.

The WisdomTree Europe Hedged Equity Fund has absorbed $8.4 billion this quarter, the most among all equity funds. By contrast, the SPDR S&P 500 ETF Trust, the biggest ETF tracking the U.S. benchmark gauge, has seen the biggest outflows, with investors withdrawing $31.2 billion.

Mindset Change

A net 35 percent of respondents in Bank of America’s survey picked the U.S. as the worst place to invest in the next 12 months, the most in almost a decade, while the proportion of those favoring Europe jumped to a record 63 percent.

“There has been a mindset change,” Jeffrey Saut, chief investment strategist at Raymond James Financial Inc., in St. Petersburg, Florida, said by phone. “The crowd now thinks that the quantitative easing program that Draghi has put on is going to do the same as it did here.”

Negative sentiment by fund investors toward U.S. equity markets has been of little consequence for American stocks since the bull market began in 2009. The S&P 500 has risen in five of the last six calendar years, a stretch that encompasses $93 billion in outflows from funds in 2012, when the S&P 500 jumped 13 percent.

Favorably Inclined

Most of the bull-market gains came as individuals plowed money into the fixed-income market after living through the S&P 500’s 57 percent plunge from October 2007 to March 2009. To some investors, skepticism has been the fuel for advances, leaving pools of unconvinced speculators to change their minds and buy as gains snowballed, especially in 2013 and 2014.

Hedge funds have raised their bets against equities, sending a gauge of manager sentiment to the lowest level since October, a survey from Evercore ISI showed. The measure of hedge fund long versus short bets fell to 49.6 in the week ending March 11, from 50.3 the previous week. Its low point in 2014 was reached in October, when the S&P 500 suffered the year’s worst retreat of 7.4 percent from Sept. 18 to Oct. 15.

“I can understand the rationale of being discouraged, thinking the U.S. is not the place to be, but we are still favorably inclined toward the U.S,” Walter Todd, who oversees about $1 billion as chief investment officer for Greenwood, South Carolina-based Greenwood Capital, said by phone.

Relatively higher valuations and a dimmer profit outlook are taking a toll on American stocks. After surging 207 percent during a six-year bull run on the back of Fed stimulus and a doubling in corporate profits, the S&P 500 trades at 18.5 times earnings, near the highest level since 2010. That compares with a multiple of 17 for the MSCI world index.

The proportion of investors in Bank of America’s survey saying U.S. equities are overvalued has reached its highest since May 2000 at a net 23 percent.

‘Europe Better’

Earnings from American companies are forecast to post the first back-to-back profit contractions since 2009 as the dollar’s ascent to highs not seen since the invasion of Iraq hurt sales for firms like Procter & Gamble Co. to Pfizer Inc., analyst estimates compiled by Bloomberg show.

By contrast, a net 38 percent of respondents in Bank of America’s survey say that they expect double-digit earnings growth in Europe in the next 12 months.

“It’s U.S. good, Europe better,” John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York, said by telephone. “I wouldn’t say anything bad about the U.S. at this point. If I were pushed, I’d lean toward Europe in the next two years but it wouldn’t be any more than a shallow lean.”

NOTE: Our November New letter:

Out of oil

Out of Gold

Out of Shipping

 Jack A. Bass Managed Accounts

November 2014 – 40 % cash position

Year End Review and Forecast

 

Oil/ Energy

I am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.

Have you avoided these sectors – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.

No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds monthly if you require an income stream.

Contact information:

To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email info@jackbassteam.com or

Telephone :  Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).