Bear Mountain Bull

It’s time again for a little BMB R&R, especially with the market behaving as bizarrely as it’s been. Maybe if we stop watching it start to behave a little better…

Posting will be very light and variable over the course of this week, but we’ll put up an open thread each market day for our readers to comment on the day’s market activity or to post any interesting links they might run across.

Check the space below for whatever the latest might be during this ‘off’ time, and please visit the various sites in the ‘Links’ and ‘Regular Stops’ for up-to-date market news and analysis.

BMB will be back in full swing by next weekend.

…that more than one-quarter of daily Gulf oil production - and nearly one-fifth of natural gas - is still offline? From the latest shut-in statistics release from January 11th (GOM = Gulf of Mexico):

Today’s shut-in oil production is 396,786 BOPD. This shut-in oil production is equivalent to 26.45 % of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.

Today’s shut-in gas production is 1.805 BCFPD. This shut-in gas production is equivalent to 18.05% of the daily gas production in the GOM, which is currently approximately 10 BCFPD.

The cumulative shut-in oil production for the period 8/26/05-1/11/06 is 114,042,425 bbls, which is equivalent to 20.83% of the yearly production of oil in the GOM (approximately 547.5 million barrels).

The cumulative shut-in gas production 8/26/05-1/11/06 is 585.308 BCF, which is equivalent to 16.036 % of the yearly production of gas in the GOM (approximately 3.65 TCF).

Another interesting note from the MMS release is that the numbers haven’t been changing much, so they’ll be cutting back the release of data to every two weeks:

Given the relatively small variations in the shut-in statistics, beginning Wednesday, January 11, 2006, MMS will issue Hurricane Katrina/Hurricane Rita Evacuation and Production Shut-in Statistics every 2 weeks…In the last few days there has been minimal improvement in the production numbers and this appears to be a trend that will continue with incremental movement over the next several months.

BMB added the emphasis on the last sentence. In other words, this situation isn’t going to get much better anytime soon. What’s still broken is going to remain broken for a while.

Everyone knows that the British turned over control of Hong Kong to China in 1997. Few know that another city neighboring Hong Kong was also turned back over to China—just two years after the British/Hong Kong turnover, Portugal turned over Macau to China.

Macau is about 37 miles from Hong Kong, approximately 10sq miles in size, and has a population of less than 500,000 people. Compared to Hong Kong, which is about 420sq miles with a population of almost 7 million, the city of Macau is insignificant. It has always been the stepchild to Hong Kong, but that is changing rapidly.

Macau is a hidden gem to many US corporations; specifically, the gambling industry. It is the only city with legalized gambling in the South China Sea region. The gambling industry is estimated to contribute more than 40% of Macau’s GDP and 70% of Macau government revenue. Seven million tourists visited Macau in 1999. The number grew to 17 million in 2004, and an estimated 20 million tourists in 2005. The increase is mostly due to mainland Chinese visitors.

Casino operations were monopolized by one person until 2002 when the Macau government decided to end the casino monopoly and allow foreign investors to bid for casino concessions. Since ending the monopoly, Sheldon Adelson, chairman of Las Vegas Sands and owner of the Venetian hotel-casino (Symbol: LVS), stepped in to build the first foreign owned casino in Macau. Sands Macau cost US$240 million to build. It opened in May 2004. The casino generated US$171 million in revenue in the first quarter of 2005 and US$201 million in the second quarter. Operating income was US$60.5 and US$74.8 million, respectively.

The Las Vegas Sands company is also building a US$1.8 billion resort named Venetian Macau scheduled to open in mid-2007.

Las Vegas Sands is not the only US company trying to benefit from opportunities in Macau. Steve Wynn of Wynn Resort (symbol: WYNN) is building a US$700 casino-resort and plans to open it in the fall of 2006. Other companies such as MGM Grand are also trying to snare a piece of this pie.

How does Macau’s gambling industry compares to Las Vegas? The Las Vegas Venetian generated around $450 million in revenue in the last year–only half of the revenue Sands Macau generated in 2005. As of 2005, Macau gambling revenue surpassed Las Vegas as the world’s biggest gambling market at over US$5.3 billion a year. Sands Macau is expected to recoup its construction cost within 2 years of opening. According to Matthew Miller’s article in Forbes, a table at Sands Macau brings in an average of US$6100 a day; 50% more than at the Venetian Las Vegas. The typical Chinese gambler bets $85 a hand, compared to $25 for a gambler in Las Vegas.

Macau is no longer a shadow underneath Hong Kong. The city has tremendous opportunity for many corporations in the gambling industry. As the only legal gambling city in China, it is drawing an increasing number of visitors from the mainland. Macau is not only the Sin City of the Orient, but will probably soon earn the title, Sin City of the World.

Contributed by intrepid reporter WK from Hong Kong.

We’ve talked before on BMB about where to look for high yield rates. Today, we got a question from a reader about where to buy bonds (not bond funds, which tend to lose money in a rising rate environment, but the actual bonds/treasuries.)

It’s an interesting question given that right now the curve is partially inverted. You would actually get a higher yield for a 6 month treasury than a two year treasury. You get more for a two year than a five year.
The ten and 5 are currently not inverted, but they are VERY close.

Still for those interested, you can buy treasuries direct from the source, including TIPS and other treasury products.

Look also at CD rates on a site such as bankrate.com You can sometimes get a slightly better rate on CDs than treasuries because financial institutions know yields are rising. They tend to offer a rate slightly higher than treasuries to lock you in–with the bet that rates will go higher. Of course if rates stay the same for while or go higher, you can do just fine in the CD.

As we said on BMB a few weeks ago if you want high yields without locking money in for a term there are some deals out there:

HSBC is offering a 4% yield 4.25%
Paypal is at 4.26% for their money market
ING has a savings at 3.8%
Capital One is around 4.0%

All of these link directly to your bank account so you can move money back and forth. Some are money market, some are savings account. Be aware of the difference if it matters to you (savings accts are FDIC insured.)

As always, it pays to shop around.

Gold’s headed higher, according to Bill Fleckenstein, and China’s move to solidify its currency reserves is part of the reason. But, Fleck warns, the market can be volatile:

Folks who attempt to aggressively trade these markets will likely either get left behind or get their lungs ripped out — depending on what they’re attempting. However, that doesn’t mean investors won’t be successful sitting with their positions, as I and others have done.

Overnight trading has gold pushing north of $560/ounce.