Quite a few interesting things happened over the week in fairly quick succession, Tuesday through Thursday, so I offer them as morsels for your digestion of what the fundamental picture looks like:
Well… went Platinum I guess, and firmly put the Pt/Au ounce price ratio at above 1, somewhere in the region of 1.02 at the moment. This is partially on the back of higher expected growth leading to more industrial platinum use, but the major question is if this isn’t largely a momentum rally, given how extremely well platinum has ran over the year, and how it hardly posts down-days at all. Still interesting to see and a worthwhile question posed for the precious metal bugs: got platinum?
2: Soveriegn Bond Fall and Rerack.
You can’t have missed the massive plunge in treasuries, with yields on the 10Y jumping nearly 30 basis points! Someone’s screaming exits while the waters are still calm, and although we’re not at particularly alarming levels yet (2.3%) the force was pretty impressive nonetheless.
However, more interesting things have (not) happened in Europe: the most solid names remain pretty firmly attached to their sub-2% yield in the 10Y contract space. Moreover, Sweden again took the EU leadership flag in terms of highest-priced bonds. A sign that investors are piling in again and that the liquidity offsets the tail risk, allowing cash inflows and highlighting the significantly stronger fundamentals and lack of these particular sovereigns?
3: S&P500 above 1400!
Lets bring out the champagne and other bubble-inducing idiotic spending! 2012 bonuses guaranteed for all except the few morons that decided that the European crisis could possibly spill over to the US, or ever thought that the momentum in Apple was unnatural. No such thing now as the hedge funds compete with each other on who can be longest and hardest levered a company that uses the very inspiration of proper gravitational theory as its logo… But do expect this exuberance to work a while yet, consumer leveraging is still highly active in the economy, while companies are not paying a high percentage of dividends although it’s the highest ever in nominal terms. Inflation adjusted, I don’t know, but headlines are headlines, right? Something must drive the momentum algorithms…
And, just to add a small sweet S3 dessert: Galaxy Macau posted a tripling of its profit, hitting HK$3 bn, slightly below estimates of HK$3.1 bn. The disappointment was very obviously Galaxy Macau, with its not-quite-open state, and this being offset by massive growth in the VIP area from Star World Casino. But I heard someone whisper VIP is dead? Mass market gaming growth is all the rage, as it comprises a whopping 25-ish percent of the entire revenue of Macau… (which is on its own still 50% above Las Vegas revenue though!)
Still, game rates and oncoming expansion still favors a pickup in Galaxy Macau, thus indicating very likely that the fair value estimation I made for 2012 has to be revised higher. Another given is that oncoming expansion plans are very likely to litter the news and keep the stock in the average investor’s mind for a while to come, even after it stops topping the daily turnover charts of the HSI (as sad as it is to keep making this sort of analysis, it’s still important). Beyond this, we had a 12% swing in the stock price on the high-to-lows within the last two days, so remember that Galaxy Entertainment’s volatility is the main benefactor of this flurry of conflicting news. Impressive what a trend line can do!