Friday, February 13, 2009

Leaving Las Vegas.... Literally

With apologies to Sheryl Crow one of the areas we've been targeting since 2007 [Oct 3, 2007: A Top in Casino Names? Wynn and Las Vegas Sands] [Nov 1, 2007: China Can't Save Las Vegas Sands - It's Getting Crox'd], before it was fashionable to pick on the Strip is showing some breakneck degradation. Just as I said back then people were in denial of what is coming down the road, I continue to believe the same denial is there today; it has just shifted to different sectors. I do love watching some of the most famous commentators now claiming they warned you all along during their TV rants (laughable) Many of the "I told you so" folks were denying we were in a recession in early 2008 because "the data did not say so". Or saying once gas prices fell the consumer would be back last summer. Now they clearly predicted this plight? Revisionism at its best.

The cult of American consumerism continues to be "right sized" [Apr 14, 2008: Things I've Been Negative on Since Fall 2007]

I cannot continue to stress enough how wrong analysts are on 2008 estimates and any company with focus on the US consumer is simply going to be blown apart in due time - if not this earnings season - then in the future. We are told daily how "cheap" these stocks are; this is based on the fictional body of work called "analysts 2008 estimates". Don't believe the hype. The subprime nation (us) is in trouble. Consumers make 70% of GDP. Its a consumption culture where the consumer is being drowned in negative wealth effect from housing, inflation from the Federal Reserve/global forces, and underemployment if not outright unemployment.
Apr 2: The Underemployment Rate is Rising] It is bad out there in the bottom 60% and it's creeping up to the formerly immune 20-40 percentile as well. It is the perfect storm and I will utter the most dangerous words a financial commentator can ever utter - it *IS* different this time.

People were asking me for individual names for shorts - I continue to
stress the same themes I've stated since last summer - anything consumer related or based on
American conspicuous consumption - it will all go. These stocks bounce every time the bulls pass their... well bull... that the consumer will be back any moment now and just "trust us" because in 6 months they'll be back in the malls spending like mad. Just. Plain. Wrong. These are going to be shorts for a long time. It won't be so easy as when I first called it out in early fall because we were still in the "no recession at all" camp, and the stocks had just began to weaken from much much higher levels.

Next to go on the food chain will be entertainment - think casinos - Wynn (WYNN), Las Vegas Sands (LVS), MGM (MGM) - it is all going to suffer [
Nov 1: A Top in Casino Names? Wynn and Las Vegas Sands] - that's an "extra" you don't "need".

Bloomberg reports:
  • Las Vegas Strip casino gambling revenue tumbled 23 percent in December, capping the worst annual decline on record, as the city enters the second year of the U.S. recession with thousands more hotel rooms and fewer visitors to fill them. Last year was bleaker than 2001, when the Sept. 11 terrorist attacks frightened travelers. December’s gambling proceeds of $474.2 million represent the Strip’s 12th straight monthly decline.
  • Passenger flight capacity remains almost 15 percent less than a year ago, he said, as developers prepare to open more than 13,000 new hotel rooms in 2009. (oops) Las Vegas added about 8,000 hotel rooms last year, bringing its total to 140,000. “Prices are declining faster now than they were after 2001,” Bason said. “You have this collapse in demand just as they were going into this period of massive overbuilding. We have 5-star Vegas hotels for under $100 a night through much of the spring.” [Dec 23: Wynn Encore Casino Struggling to Fill Rooms During Launch]
  • “Over the last 30 years, we’ve seen one or two of these challenges happening, but we’ve never collectively had this many parts of our economy and our lifestyle being impacted all at the same time.”
  • In the 53 years we’ve been recording gaming wins, there have only been three declines — in 2001 and a 0.3 percent in 2002,” Streshley said. “You can see the severity of where we’ve gone since then.”

[Feb 5, 2009: Jaw Dropping Action in Casinos]

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