Three Casino Stocks Rolling Over

Gas is down 40 cents, the US consumer is back! Pile in! Pile in!

Not so much.... as I keep saying each time these consumer discretionary stocks [Stuff I've Been Negative on Since Last Fall] jump on Kool Aid recovery talk - they just create yet another opportunity to short - the danger is timing. Three casino stocks rolling right back over. Again we cannot short individual stocks in the current situation but this is simply the easiest way to make money the past year - let the "junk" go to their oversold rallies and then get short. We're losing a lot of return by not being able to do this.

I don't see gas prices jumping up the past few sessions, so I wonder why this is when the theory was how great everything would be as gas prices fell? Ah yes - reality. Just 8 days ago these stocks were ramping up 12-14% [Aug 11: The "Turn" Appears to be Here]

Some amazing action out of the retailers - see Coach (COH) - and what we considered last week continues to fly. Lots of tried and true shorts over the past year such as Polo Ralph Lauren (RL)Harley Davidson (HOG) are simply unstoppable right now as oil heading to $24 brings the US economy back ;) I'd be unsurprised to see restaurants also fly. Once again, this is simply the opposite trade of everything that has worked the past year to short - casinos should also ramp. It is quite a simplistic thinking but it is what it is - look at up 10%, Wynn Resorts (WYNN) MGM Mirage (MGM) up 14%. It is truly amazing how the entire world has changed by a 40 cent drop in gasoline prices - headed to 65 cents.

A month ago, I wrote:

Did I mention avoid anything to do with the U.S. consumer? Yesterday...

1. Wynn Resorts (WYNN) down 10%
2. Las Vegas Sands (LVS) down 11%
3. (grand prize to) MGM Mirage (MGM) down 21%

Have I mentioned this is not a buy and hold market. Nothing but traders moving stocks up and down to create some return for their funds. This is all the market has become. Did anything change fundamentally from 3 months ago? 2 months ago? 1 month ago? I know - I know - gasoline is down 40 cents so everything is fine in the United States of Subprime! But it didn't pop back up today - did everything revert away from "fine" the past 3 trading sessions?

I only type this so for all of you who sit there and wonder "why is my stock doing this or that" and try to attach logic or fundamental reasons to it - to urge you to stop doing that. Save yourself the grief. Your stocks are in the hands of others and it's like balls of yarns for big cats - very big cats - with a lot of money and leverage. Fundamentals are not changing - just shorting, short covering, naked shorting, leveraged long positions, etc etc etc.

Fundamentals? So old school. Check back in about 6-8 weeks when these stocks go back on another 40% run upward. And then fall back down in 11-13 weeks. Rinse. Wash. Repeat. Since this is the only way to make money anymore and buying companies on their actual business is useless, I expect myself to be the proud owner of one of these gaming stocks in a few weeks so that I too, can yell about the upcoming economic recovery (even though the moves have nothing to do with fundamentals) and cheer these on as their fundamentals degrade. MGM is so bad you cannot even see the 200 day moving average on the chart anymore.

Disclosure: No positions but yearning to be long a casino stock in about 3 weeks - or maybe an airline or automaker

Comments

[John C. Lee:]

breakaway gaps - they're going downnnnnn. Why not short now AND go long 3 weeks from now? Hit both sides.

2008 Aug 19 12:31 PM

[PanamaJim:]

GOV’T RESTRICTIONS COULD CURB CASINOS MACAU OPS
Shares of casino operators have tumbled sharply in Tuesday’s trading amid concerns that the surging revenues gleaned from operations in Macau could be imperiled by efforts on the part of the Chinese government to curb visits to the gaming destination. Shares of Las Vegas Sands (LVS) dropped 11% Tuesday, MGM Mirage (MGM) fell a comparable 11%, and Wynn Resorts (WYNN) slid 7%. A Morgan Stanley research note quoted news accounts in Asia indicating the Mainland Chinese government has considered additional restrictions on visas to Macau as part of its effort to slow gaming activities on the part of its citizens. One limit being floated: restricting visas so gamblers could visit every six months instead of the current allowance of every two months. Morgan Stanley said the Chinese government has made it clear it wanted to further restrict visits, and that such visas restrictions are one way of accomplishing its aims. However, the firm described the every-six-month limit as ”extreme,” and suggested that the worst-case scenario under discussion isn’t definite. Nevertheless, revenue generated at the gaming operations in Macau, which outstrip the take from the Vegas Strip and Atlantic City combined, is expected to decline this year. Morgan Stanley forecast growth would flow from the 50% pace of the first half of this year to about 25% in the second half and 16% in 2009.

Doesn't look like a smart bet these days.......

2008 Aug 19 01:24 PM

[Shaggieman:]

U.S. could also restrict the number of Chinese tankers admitted to U.S. ports and greatly increase there docking fees to pay for the added security. Point is we can find things here in the U.S. to restrict that will cost Chinese companies $$$$.

2008 Aug 20 10:21 AM

[wpdragon:]

ahh, denial, ain't it just grand?

2008 Aug 20 03:02 PM

[John C. Lee:]

You should be concerned about the 200-day MA...that's the long-term indicator, which I presume you to be: long-term. The chart shows overall investor sentiment toward the company and they don't lie either.

2008 Aug 20 08:41 PM

[Gob:]

"Since this is the only way to make money anymore and buying companies on their actual business is useless"

What a stupid thing to say.

2008 Aug 21 02:44 AM

[bearfund:]

Gob, sadly while it's certainly not completely true it's actually got a kernel of truth in it. The markets are being manipulated by people with lots of extremely cheap money (it's NOT a conspiracy; it's right there in plain view, and the people responsible have effectively admitted their actions). Going long for the long term based on fundamentals is tantamount to being short the manipulators. You may well win that way, but the truth is that if Hank and Ben want your investment to tank, it will tank. If you're unleveraged (as all true investors are) maybe you hang on. But why? They can kill the company itself just as effectively as they can kill its stock. This is a game for someone else. If only I could earn a positive - or even zero - yield in insured savings accounts. Since I can't, I keep shorting Treasuries and buying gold, always taking physical delivery. What else is there to do? Confidence is a fragile thing, and the powers that be have destroyed mine.

2008 Aug 22 11:28 PM

[SubRosa:]

I am buy boyd stock and when they buy out stations they will have the local gaming market monopolized in Las Vegasand when the economy goes back up so will this stock that I boought for under $4.00 last month. I delt dice for years and Boyd will always have the best odds and the best crap game in town from Hederson Jokers Wild the only real bird game in town anymore to main street station down town with 20 times odds and now that they bought out coast casinoes the next step take over staions and rule the local market belive what you want I bought the stock and I will hold it. I am a gambler at heart and I will bet on my stock a company that I love and a industry that will never die.

Apr 22 08:02 PM