With a slowdown in the U.S. economy, the Las Vegas economic expansion has come to a halt. With people unable to pay for a gallon of gas, it comes as no surprise that they are not in the mood to go gamble. The Independent of the UK had a fascinating article about how Las Vegas is suffering with the slow economy.
According to the report: "With Americans cutting back on luxuries, and the price of transport rocketing, the so-called 'Vegas vacation' is facing the axe. This week, as the nation celebrated Independence Day, major hotels were taking stock of a fall in all-important room occupancy rates from their usually impressive 95 per cent levels to nearer 80 per cent."
Gambling revenues have also slipped 3%. Attendance at conventions, a big contributor to the city's coffers has dropped by more than 7%.
All an investor has to do to see how bad the carnage has been is to check some stocks related to the Las Vegas gambling and tourist industry. Las Vegas Sands (NYSE: LVS) has gone in the last 52 weeks from more than $148/share down to around $39, a drop of more than 70%. Ouch. MGM Mirage (NYSE: MGM) has dropped from more than $100/share to under $30.
As the economy continues to sputter, look for more trouble ahead for Las Vegas. On the other hand, contrarian investors may look at an uptick in the U.S. economy, whenever it happens, as a signal to potentially look at stocks that are associated with Las Vegas.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 7/6/08.
There is something rotten in Denmark, to quote from Hamlet, Act I, as well as in Las Vegas, Louisiana, Mississippi, Colorado, Iowa, and Florida. Gambling havens, once thought recession proof, are in trouble. Customer numbers are down, as are gambling, gift shop, hotel, and restaurant revenues. Casinos in Las Vegas have been hard hit, according to a recent article in the Wall Street Journal, because of billions of dollars of debt to finance overambitious expansion plans. Tropicana Entertainment filed for Chapter 11 in May, defaulting on $2.67 billion in bank and bond debt. But smaller casinos are also feeling the pain.
Isle of Capri Casinos Inc. (NASDAQ: ISLE) recently reported 4Q and FY2008 results. Snake eyes. Investors know they are not in for good news when the CEO spends the first few paragraphs of an earnings release discussing what a "transformational period" the last year has been. That's corporate-speak for "money losing," beginning with a $78.7 million write down in the value of some of the company's international assets and ending with a $51.3 million loss from continuing operations in 4Q 2008. All told, Isle of Capri Casinos lost $96.9 million from continuing operations in FY2008.The company cited increased competition in riverboat gambling in Biloxi, a smoking ban in casinos in Colorado, and a flood in Natchez as reasons for the lackluster performance. The company admits it needs to renovate 1,200 of its hotel rooms in order to attract customers back to the slots and tables.
The stock is currently trading at $4.23, near its 52-week low of $3.97.
Leave it to private equity to try to bring back Michael Jackson.
The Wall Street Journal recently reported that "Colony Capital, which owns the Las Vegas Hilton and is a major shareholder in closely held Station Casinos, is in discussions with Mr. Jackson to get him back onstage and in the spotlight via a long-term stand in Las Vegas."
Colony Capital may just have the leverage to get something done with Mr. Jackson: he owes them $25 million after the firm acquired the debt from Fortress Investment Group.
The plan is to try to revive Jackson's career with a stint in Las Vegas and, eventually, build a Thriller-themed hotel-casino there. I'm not so sure. Las Vegas has resuscitated -- or at least prolonged -- the careers of a lot of entertainers, but it's hard to think of anyone who carries as much baggage as Michael Jackson.
Similarly, a private equity firm might be able to turn around a struggling brand but, to my knowledge, the industry has never attempted to work its magic on a brand that a large percentage of Americans believe has molested children (with the possible exception of Chrysler). And legal system be darned, that's what many people associate him with.
After hitting a one-year high of $100.50 in October, the stock hit a one-year low of $57.26 in March.. This morning, MGM opened at $60.58. So far today the stock has hit a low of $57.90 and a high of $60.58. As of 1:45, MGM is trading at $58.84, down $2.23 (-3.9%). The chart for MGM looks neutral but improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider a June bear-call credit spread above the $75 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in two and a half months as long as MGM is below $75 at June expiration. MGM would have to rise by more than 28% before we would start to lose money. Learn more about this type of trade here.
MGM hasn't been above $75 since early January and has shown resistance around $65 recently. This trade could be risky if the company's earnings (due out in late April or early May) are a positive surprise, but even if that happens, this position could be protected by resistance MGM might find around $73, where it topped out in January and February.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MGM.
As the financial crisis spreads quickly from Wall Street to other industries, two large home builder projects have received default notices. The problems involve developments in Las Vegas, where house prices have collapsed.
A project involving KB Homes (NYSE: KBH), Lennar (NYSE: LEN), and Toll Brothers (NYSE: TOL) has failed to make interest payments on $765 million in debt.
It is not clear how many other large real estate developments involving public home builders are facing near-term margin calls, but with the falling price of real estate, the problem in Las Vegas is unlikely to be that last one. That means that already weakened firms could face a credit crisis of their own as home prices continue to drop and the potential value of homes under construction face going on the market for a fraction of what they may have brought just a year ago.
Some of the large home building company stocks have lost over two-thirds of their value over the past year, and that may only be the beginning.
Douglas A. McIntyre is an editor at 247wallst.com.
Playboy Enterprises, Inc. (NYSE: PLA) may not be doing so well, but it's still one of my favorite companies -- I'm a guy, so this makes sense. The company reported Q4 and full-year earnings today -- losses have widened, and I'm sure not a few investors out there are questioning the value of the brand.
Total net revenues saw a slight decline for the quarter, coming in at roughly $86 million. The company lost 3 cents per share on these revenues; in the previous year's quarter, Playboy actually booked a much more pulchritudinous 11 cents per share of positive net income. For the year, total net revenues didn't jump like a bunny -- $340 million versus $331 million. Net income, however, was much better, doubling to 15 cents per share. The company's year-end results benefited from a decline in interest expense, income tax obligations, and other costs. Sales of artwork were also cited by CEO Christie Hefner in the release.
The licensing operations are performing, but domestic TV and publishing are very weak. In fact, it is the publishing segment that really needs attention. It's been needing attention for a long time now -- for the year, subscription sales were down, newsstand sales were down, and advertising revenues rose by the smallest bit.
Long-term, I still have hope for Hugh Hefner's Playboy. It is an American icon, and its logo continues to propel licensing; plus, the company does have a nice presence in Vegas at the Palms Casino Resort. As Jonathan Berr reported back in November, you may want to remember that sex does indeed sell, and one has to assume that Playboy will be supplying that demand for years to come.
The metro Detroit area had the highest foreclosure rate among the 100 largest U.S. metropolitan areas in 2007, RealtyTrac announced Wednesday, in a press release. Stockton, California and Las Vegas, Nevada ranked second and third.
RealtyTrac also released statistics indicating that U.S. foreclosures increased 79.2% in 2007 to 2,203,295, up from 1,774,778 in 2006. Detroit hard hit
Detroit registered the highest foreclosure rate among the nation's 100 largest metro areas, with close to 5% of its households entering some stage of foreclosure during the year -- 4.8 times the national average and up about 3% from 2006. A total of 72,616 foreclosure filings on 41,273 properties were reported in the Detroit metro area in 2007, up 68% from 2006. The other Michigan metro area with a foreclosure rate in the top 20 was Warren-Farmington Hills-Troy, at No. 17.
Following the announced purchase, Lawrence Klatzkin of Jefferies & Co. told his clients that MGM is one of his top three picks and maintains a "buy" rating. According to Klatzkin, investors can expect to see Dubai World continue to add to its MGM holdings. This will continue to help keep the stock strong and definitely minimize any sort of downside risk.
Dubai, which has been swimming in money since the oil boom brought billions into the economy, has been moving fast over the past decade to branch out in its revenue streams. Seeing the end of the country's oil reserves in the near future, the country has been working hard to become one of the world's top tourist destinations, and moving into Las Vegas gaming is just one more step in the country's strategy to remain a relevant world player once the oil runs dry.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
There's a lot of talk about a weak economy, the mortgage meltdown, and a credit crunch, but apparently that isn't stopping people from heading to Las Vegas. According to the New York Times, "some of the city's largest casinos are on pace for a record-setting year. In October alone, gambling revenues on the Las Vegas Strip were up 19.8 percent over the same month last year."
Casinos in other locales aren't doing so well, with some reporting declines in gaming revenues of 5% or more. Experts believe that pricey locales like Las Vegas are less vulnerable to consumer malaise precisely because they cost more -- the mortgage mess just isn't hurting people with a lot of disposable income, at least for now.
Day trip locations that target lower-income gamblers aren't faring nearly as well.
This may have broader implications for investors. If higher income consumers still have the money to drive Las Vegas gaming revenue growth, they also probably aren't going to be cutting back on luxury products like bags from Coach, Inc. (NYSE: COH), which has seen its stock beaten down by worries about consumer spending. The international tourists that are giving Vegas revenue a boost could also help luxury goods companies.
If Coach won't see its sales and margins hurt by an economic slowdown, the stock is cheap.
This post was part of the AOL Money & Finance Best & Worst of 2007 feature. The voting has now closed and readers have chosen the Dubaias the breakout city of the year. Be sure to let us know in the comments if you are pleased with this result.
What are breakout cities? Cities that seemed to pop up in news stories with uncommon frequency, that have developed a cachet, that appear on the itinerary of early adopters. For your consideration here are four outstanding, very different candidates for this honor. Which whets your travel appetite?
Dubai City, U.A.E. Nothing helps build a city quicker than petrodollars and a monarchy devoted to world-class projects. Dubai has all of that and more. The city that calls itself the "City Built For Tourism" is known as the home of the world's largest free-standing hotel, the Burj Al Arab. This ultra-ultra-luxury, 1,000-ft. tall hotel with a profile evoking billowing sails has quickly become the symbol of Dubai.
Under the vision of the ruler Mohammed bin Rashid Al Maktoum, Dubai has used its free-trade zone status to also develop into a world center for business. Having the world's largest manmade harbor and an airline that serves as a hub for the Persian Gulf region (with a new one under construction) helps, too. Dubai's acceptance of other culture's mores has helped turn it into a popular tourism destination, as well.
It seems Chicago, home of Wrigley Field and the Sears Tower, has hired a marketing firm to explore the potential of offering naming rights to public property, programs, and other assets as a way of raising revenue. The city hopes to begin attracting corporate sponsors as soon as next spring. Any proposed sponsorship will have to be approved by an advisory committee made up of civic leaders, whose job it will be to ensure the integrity of the city's brand image.
Chicago isn't the only city to consider offering naming rights. New York has partnerships with Verizon Communications (NYSE: VZ), and Pepsico (NYSE: PEP), and the Las Vegas monorail is sponsored by Nextel (NYSE: S). Winnipeg, Calgary, and Toronto also have similar programs.
Chicago is no stranger to naming rights issues. The city has already attempted to sell naming rights to the Chicago Skyway, which links the city to the Indiana Tollway. Many White Sox fans decried the name change of New Comiskey Park to U.S. Cellular Field, and an attempt to sell the name of Solider Field ultimately went nowhere. Many Windy City shoppers still haven't forgiven Macy's Inc. (NYSE: M) for changing the name of State Street institution, Marshall Fields.
But Chicago hasn't yet found itself in the embarrassing situation that Houston did after the naming of Enron Field. I wonder if there was an advisory committee to protect the integrity of Houston's brand image?
According to The Wall Street Journal, "Major properties on the Las Vegas Strip are now offering lavish commitment ceremonies to same-sex couples (though same-sex marriage is illegal in Nevada), as well as special hotel and entertainment packages geared specifically toward gay and lesbian travelers. Some resorts have mandated sensitivity programs to teach employees how to make gay and lesbian travelers feel welcome."
It's hard to imagine what took them so long. By ignoring the gay market, Las Vegas casino operators were failing to capitalize on their perfect market: Single people who like to have fun and, because they tend not to have families to support, have more disposable income. Research also shows that gay men spend 30% more than straight men. If Las Vegas wants to remake itself into a world of pricey cuisine and luxury shopping, this is the market to target -- not coupon-clipping senior citizens.
But why is this just starting to happen now, as most experts say it is? Fear that Bible-trumping prudes would be offended if gay couples were part target market of Las Vegas promoters? If so, that could be the reason for the city's decline in glamor, and utter loss of cultural relevance.
Perhaps targeting the gay community is the beginning of Las Vegas' rebirth.
Las Vegas Sands (NYSE: LVS), a leading international developer of multi-use integrated resorts operated by Sheldon Adelson, is recently down $10.62 to $133.97.
Morgan Stanley said that preliminary Macau gaming revenues are up 55% YoY versus its estimate for 70% and below the Street's estimates.
LVS October option implied volatility of 57 is above its 26-week average of 41 according to Track Data, suggesting larger price fluctuations.
Las Vegas Sands (NYSE: LVS), a leading international developer of multi-use integrated resorts operated by Sheldon Adelson, is recently up $4.42 to $142.73. LVS October option implied volatility of 56 is above its 26-week average of 41 according to Track Data, suggesting larger price fluctuations.
Belden (NYSE: BDC) designs, manufactures and markets signal transmission solutions for data networking and specialty electronic markets. BDC is recently up $3.74 to $52.03 on overseas takeover chatter. BDC has a market cap of $2.1 billion with June quarterly total revenue of $549 million. BDC call option volume of 1,240 contracts compares to put volume of 193 contracts. BDC October option implied volatility of 47 is above its 26-week average of 37 according to Track Data, suggesting larger risk.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
Last Friday we learned that O.J. Simpson had been questioned over a break-in at a Las Vegas casino, and today the ex-NFL star had his arraignment hearing today, and was granted bail of $125,000. When we looked at this Friday the details were still fuzzy, but the events of the break-in now point to much more than just a break-in snatch and grab.
In court today O.J. had the following charges handed down to him:
Kidnapping
Robbery with use of a deadly weapon
Burglary while in possession of a deadly weapon
Coercion with use of a deadly weapon
Assault with a deadly weapon
Conspiracy to commit kidnapping
Conspiracy to commit robbery
Conspiracy to commit a crime
If you ask me, "The Juice" got off pretty easy with only $125,000 in bail considering the amount and severity of the charges. The crime occurred last Thursday and O.J. has been in custody since Sunday. Reports indicate that O.J. was subdued during the hearing, and did not enter a plea on the charges.
With a slowdown in the U.S. economy, the Las Vegas economic expansion has come to a halt. With people unable to pay for a gallon of gas, it comes as no surprise that they are not in the mood to go gamble. The Independent of the UK had a fascinating article about how Las Vegas is suffering with the slow economy. 
Leave it to private equity to try to bring back Michael Jackson.
What are breakout cities? Cities that seemed to pop up in news stories with uncommon frequency, that have developed a cachet, that appear on the itinerary of early adopters. For your consideration here are four outstanding, very different candidates for this honor. Which whets your travel appetite?
It seems Chicago, home of Wrigley Field and the Sears Tower, has hired a marketing firm to 
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