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Strategies & Market Trends : Dino's Bar & Grill -- Ignore unavailable to you. Want to Upgrade?

To: Goose94 who wrote (13257)	6/19/2015 11:22:40 AM
From: Goose94	Read Replies (1) \| Respond to of 202705

CASH is KING! Cautious Portfolio Managers Increasing Cash Positions Cash is king among cautious portfolio managers, according to the June Bank of American Merrill Lynch (BAML) Fund Manager Survey. The latest survey results, released Thursday, show portfolio managers are taking more defensive positions, holding higher cash positions to protect against rising global uncertainty and expectations the Fed will raise interest rates this year. 'Higher cash levels show how caution is in the air, with 65 trading days until we expect the Fed to tighten,' said Michael Hartnett, chief investment strategist at BAML Global Research, in the report. However, according to commodity analysts, despite the rising risk-off sentiment in the marketplace, gold has been unable to attract strong safe-haven flows. During the survey period, from June 5 to June 11, gold prices were relatively lackluster, trading around $1,180 an ounce. The survey results show cash levels rose to 4.9% of portfolios, up from 4.5% in May. At the same time, the portion of investors who are overweight equities fell to net 38%, from the previous level of 47%. Greece’s bailout negotiations is one of the major concerns among investors with the majority of survey respondents now expecting to see a negative conclusion. According to the results 15% of respondents forecast that Greece will be forced out of the Eurozone, while 42% predict a default without a Grexit. China is also a major concern as 70% percent of investors say the nation’s equity market is in a “bubble” with 50% expecting economic weakness. In currency markets, the U.S. dollar appears to be the biggest winner as 72% of the respondents say that the greenback will strengthen against the euro as the Fed moves to raise interest rates later this year. Witold Bahrke, senior asset allocator strategist at Nomura, said that he is not surprised more fund managers are increasing their cash positions as there aren’t very many safe-haven options left in the marketplace. He explained that bond yields are so low that they don’t offer the same type of protection as they did say 10 years ago. “For more conservative investors it takes time to adapt to this new environment… and to get at least a perceived safety as they have just simply increased their cash holds,” he said. “As least now they have some capital preservation.” Bahrke added that gold’s high negative correlation with the U.S. dollar doesn’t make the yellow metal an attractive safe-haven investment. In these current market conditions, which he described as a relatively goldilocks scenario, where the U.S. economy continues to show positive growth, the U.S. dollar will remain the safe-haven asset of choice, he said. “At the end of the day gold is a hedge against extreme scenarios,” he said. “It is a hedge against extreme inflation or an extremely bad economic outcome.” “I think the current level of the U.S. dollar makes it tricky to have too large of an allocation in gold,” he added. Although Greece does have the potential to create an extremely negative economic situation, Bahrke said that it is too soon to tell exactly what is going to happen. “We could see things spiral and conditions could get nasty and in this type of scenario I would definitely expect to see a safe-haven bid, but that will benefit the U.S. dollar,” he said. Adrian Day, president of Adrian Day Asset Management, said he is also not surprised that more fund managers are increasing their cash positions. He noted that most people believe that it doesn’t make sense to hold gold in an environment where interest rates are expected to go up. He added that there just isn’t any incentive for funds to increase their gold holdings. “It’s going to take a lot more downside in equity markets and a much weaker U.S. dollar before we see funds move into gold.” Day added that many funds are hesitant to jump back into gold as most of them have taken a hit trying to predict each new bottom. He explains that funds won’t feel comfortable increasing their gold positions until they know that prices in a consistent uptrend but until then here is no urgency to buy. “Some funds have been burned four, five and even six times with gold so now they are just sitting an waiting,” he said.