Gaming law expert I. Nelson Rose apparently got misquoted in the LV Sun yesterday, so he sent out an unmediated version of his comments on the Las Vegas economy, which I posted to the UNLV Gaming Reading Room:
Economic depressions have immediate impacts on gaming law. I have had more than one large U.S. investor hire me to advise them about bankruptcy procedures – in Macau. Gaming companies are so international that bond-holders of American casino companies want to know about loans secured by property in Asia.
A depression is marked by deflation. Sellers become desperate; prices drop below cost. Casino hotel rooms in Las Vegas are now going for $22.00 a day – free, for local residents.
In a depression, virtually all business dries up. Atlantic City casino revenue fell 18.7% in December 2008; Las Vegas Strip dropped 23%. In fact, by every measure, this is the worst downturn since gaming was made legal in Nevada in 1931: average room rates, visitor volume, convention attendance and total revenue have plummeted.
Whether or not gaming ever was recession proof is somewhat irrelevant. In a depression nearly everyone loses. Plus, a company that makes a majority of its revenue from non-gaming sources, such as expensive restaurants, designer shops and overpriced Cirque du Soliel shows, is more susceptible to cutbacks in disposable income.
Rose: Of Course Its a Depression – Center for Gaming Research.
It’s provocative stuff. Interesting that investors are afraid of casino assets in Macau declaring bankruptcy, though, isn’t it?
On a related note, it seems that bearishness is in vogue. A lot of people are now saying that they expected, and even predicted, a downturn years ago.
Since history isn’t a predictive science, I never try to predict the future. I’ve got real philosophical problems with predicting the future anyway. If we knew what was going to happen, there wouldn’t be much sense in anything, would there? We wouldn’t have free will. But I’ve been asked several times when or whether the economy will improve, and my answer’s always been that there are too many variables to give any kind of prediction. Does anyone really understand how the economy works? I don’t think so, because if they did, we wouldn’t be in this mess.
Gambling should condition people to accept that, while there are things that it’s possible to know, there are also many things that we can never know. Sure, the past can be a guide, but it’s never a predictor. Pull three aces out of a fresh deck of cards, then shuffle them. Will the next card you pick up off the top of the deck be an ace? Probably not–there’s only a 2% or so chance–but it’s impossible to say absolutely. Unless, of course, you remove all the aces from the deck. Even then, I wouldn’t be on it, though, because I take to heart the advice of Sky Masterson’s father:
When I was a young man about to go out into the world, my father says to me a very valuable thing. He says to me like this… “Son,” the old guy says, “I am sorry that I am not able to bank roll you to a very large start, but not having any potatoes which to give you, I am now going to stake you to some very valuable advice. One of these days in your travels, a guy is going to come to you and show you a nice, brand new deck of cards on which the seal has not yet been broken. This man is going to offer to bet you that he can make the jack of spades jump out of the deck and squirt cider in your ear. Now son, do not bet this man, for as sure as you stand there, you are going to wind up with an earful of cider.”
In other words, never bet on a sure thing, because if it was a sure thing, no one would give you action on it.
That was quite a digression, but actually probably decent investing advice.
I couldn’t find where the misquoting was…but, I was glad I was led to this article. It had lots of good facts that I haven’t seen anywhere else.
Like the fact that England dropped interest rates lower than they’ve done in over 300 years.
That’s a eye-opening fact, just by itself.
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As far as people predicting that a crash was likely to come…I never caught wind, or even the slightest sniff of any such spoken indications. And my antenna is usually always searching for “look how foolish man is” data.
When I saw the boom of casino building in Las Vegas…my only ominous prediction was that the Strip and its surrounding streets would never be able to handle all the extra traffic of condo owners, casino employees and the additional guests.
It’s easy to make a logical conclusion based on the laws of physics.
But, economics is such an illogical system with so may human variables that it defies predictions.
I don’t think anyone could have forecasted this sucker-punch.
Free rooms for local residents, huh? Does Reno count as local?
Nicholas Nassim Taleb didn’t predict the crash, exactly, but wrote several recent books about how we have difficultly assessing risk accurately, and more importantly for the present situation, adequately preparing for low probability but high impact events (he calls them “black swans”). That most economic modelling is based on past performance, which can no more accurately predict future outcomes than knowing whether the last 10 (or 40) roulette spins were red or black.
History may not be a predictive discipline but, as a great man once observed, we are all interested in the future because that is where you and I are going to spend the rest of our lives.
(Sorry. I couldn’t resist the “Plan 9″ plug.)