PART2IfPTM stays the course what is the future for FUM inflows...

PART2

IfPTM stays the course what is the future for FUM inflows given the 2022 USArising interest rate cycle and inflationary environment?

PROS

Rotationto Value

https://www.canberratimes.com.au/story/7574113/wall-street-nasdaq-start-2022-with-falls/?cs=14264

(8-9Jan22) “Investors have been rotating out of technology-heavygrowth shares and into more value-oriented shares, which they think may dobetter in a high interest-rate environment.

The S&P 500 value index added 1 per cent this week,outperforming the S&P 500 growth index which fell 4.5 per cent - itsbiggest weekly percentage drop since October 2020.”

https://www.msn.com/en-us/money/markets/s-p-500-and-nasdaq-fall-for-a-fourth-day-on-spiking-rates-to-cap-the-first-trading-week-of-2022/ar-AASvRNj?ocid=uxbndlbing

(8-9Jan22)“The 10-year Treasury yield topped 1.8% on Friday, continuing its 2022 run froma 2021 year-end level of just 1.51%. The release of the Federal Reserve'sDecember meeting minutes on Wednesday were the major catalyst for the ratemove. The meeting notes showed the central bank is ready to dial back its economichelp more rapidly than some hadanticipated, including taking steps to shrink its balance sheet while raisingrates.

"A shiftin Fed policy often injects volatility into markets," said Keith Lerner,chief market strategist at Truist.

Tech stockslost ground further on Friday as yields jumped. With rates rising rapidly,investors are dumping riskier stocks trading on high valuations based onestimates of profit growth far off in the future.”

https://www.barrons.com/articles/stock-market-tech-stocks-federal-reserve-51641603791

(8-9Jan22) “For a market that is both expensiveand crowded, that wasn’t good news, asthe priciest, most speculative stocks—which hadalready been beaten up, mind you—were hit hardagain. As of Thursday, 38% of Nasdaqstocks had fallen 50% or more from their 52-week highs. That the benchmark isdown only 5.7% from its all-time high is thanks to Big Tech stalwartslike Apple (AAPL) and Microsoft (MSFT), which have become so large that they maskthe weakness underneath.”

So, is this what is happening (rotation to value)? PIXX ETF unitprices have increased from $5.14 (31Dec21) to $5.41(19Jan22) 5.0%increase. PIF unit pricing $2.1479 (31Dec21) to $2.2515 (19Jan22) a 4.8% increase. If these increases were applied to Dec FUM of $22,006mn would point to projected Jan FUM of $23,000mn. If all the trust funds are included we are currently looking at FUM increase of about $400mn ($22,460mn). IF THE TREND to value continues then FUM report in first week of Feb should be an uptick in FUM, possibly even a significant uptick.

Dividend

Some are saying the dividend will be reduced to reflect thecurrent low SP to equate to the normal 5% div yield. I think that is puttingthe cart before the horse. The div is linked to EPS and not the SP. Averagingout the last six months FUM (23,020, 23,244, 22,826, 21,579, 22,050, and22,006) gives aveFUM $22,454mn and is on par with previous years’ performance,so I am expecting double digit interim div, indicating a possible div yld of upto 9.6% at current SPs. With the HlfYr results ann at end Feb the SP should seean uptick as fundies chase after the expected high div yld.

Interest Rates

US Feds have indicated three projected interest rate increasesfor 2022, while some market commentators have penciled in up to 7 increases.Our Res Bank has indicated that Oz rates may start to increase in 2023. Thedisparity in interest rates would devalue the Oz dollar compared to foreignexchanges and this would enhance all the trust foreign earnings when converedto Oz dollars. PTM Annual reports often comment on the positive effect adepreciating OZ dollar has on earnings and dividends.

Out Look

Clifford’s announced view of the world where US economic recoveryis real, inflation is a given due to expanding money supply and the tendencyfor US Fed Res to act too little too late, would indicate that PTM is wellpositioned to ride out the expectedturmoil in 2022. The stability/rising FUM in this environment should influenceFUM inflows. Neilson has mentioned in one of old PTM Annual reports that arising FUM is a lead indicator for FUM funds inflow. So FUM inflows in 2023?

CONS

FUM and SP

As expected there was a correlation between FUM and PTM SP. AsFUM goes up so does the SP and vis versa. Then something happened in 2018 andthis correlation no longer exists. This disconnect and the very economic factorsthat PTM have accounted for will cause a correction in world stock markets. Asthe “tide goes out” all stocks will decrease during this time of turmoil. Atsome point logic will overcome sentiment but when that will occur I don’t know.

FUM Outflow

There is a slide on the PTM website which I cannot locate,concerning an investor who places $1m in Platinum Trusts and reinvests all divbut draws out $100k pa. After going through GFC and pandemic etc the investor has $6m in trust. If the investor had placed the $1m in MSCI AC World Net Index fund he/she would have $0 after 20years. The point I am making is that the $100k withdrawal has to come from somewhere. Over the last four years of data the average outflows is -$151mn p mth and varies by +/- $88mn and I think this just reflects the annuity the trusts pays out. While I think this is normal the market sees it otherwise and the perception is the FUM will dwindle to zero.

Thus we come full circle and ask what PTM can do to change theFUM outflows to inflows. “Stay the course” would imply a positive change circa2023.

The only trust fund that has positive inflow month after monthis PIHF (Platinum International Health Fund) and I surmise it is because ofCovid-19 pandemic with all Governments giving “free” vaccinations, PCR and RATestthe perception is health funds are raking in the money. I would like PTM to createa new Trust Fund that has that kind of appeal, like maybe AI.

Anyway, fingers crossed, steady as she goes!

Fine print. Anything I have stated is not investment advice. Itis only my opinion of a possible scenario, one of many other possiblescenarios. Note I am usually wrong and when I am right, it is for the wrongreason.

IMO DYOR