Editorial: Fortunes Not Made
The thread of gambling may end with a slot machine, but it begins with investors - bulls and bears, longs and shorts, pass and don't bettors, who bet millions of dollars on the house, not in it. Long time VT reader and gaming industry watcher Motoman shared with us his thoughts about betting with the house and not betting at all. Enjoy!
As we approach the fifth anniversary of the stock market crash that precipitated economic meltdown, I happened to notice that the stock of Las Vegas Sands Corporation, owners of Venetian, Palazzo, Sands Convention Center, and a bona fide cash-generating empire in Macau and Singapore, closed the day north of $85.
Flash back to 2007. As storm clouds were beginning to gather just beyond the horizon, the Dow reached an all-time high of over 14,000 and shares of LVS peaked at around $145 -- also an all-time high. By mid-'08 the Dow was faltering and LVS had lost well over half its peak value and was sliding downhill -- horrors!
Then the bottom dropped out. Automated trading algorithms augmented investor panic (and vice-versa) and on that fateful day of March 9, 2009 the Dow plummeted below 6600, less than half its high of barely a year and a half prior. And LVS closed the day at $1.42. That closing price represented a loss of over 99% from peak value.
Pity the fool who sold on that day.
"Buy, buy!" I would yell to anyone willing to listen. Sands was still printing money in Macau! Singapore was in the works. Thanks to Admiral Hunter's Two Way Hard Three blog and regulars detroit1051 and Dr. Dave who had inspired an interest in the business side of the gaming industry, I felt better-informed than Average Joe on the Street. It's a fire sale! Buy!
So, did I take my own advice? What do you think? ;-)
Herd mentality is a funny thing. Panic is contagious. Somehow I convinced myself that any available "play money" was fully committed, tied up in "safer" equities like Apple and Nike. And there was no way in hell I would tap IRA or other retirement funds for such a speculative play. Besides, who could say if LVS had been fairly valued at its earlier price? We had already suffered the hot air of the dotcom bubble. Sure, AAPL and NKE had good runs during the current recovery. Just not, oh, 4710% ! Yes, that is the approximate gain enjoyed thus far by LVS. Four thousand, seven hundred, and ten percent.
Of course it's impossible to buy at an absolute low and sell at an absolute high. The market as a whole and Sands in particular began rebounding almost immediately. But just to rub salt in the wound let's have a little lesson in Opportunity Cost, shall we? A mere $1000 pulled from other investments and placed on LVS would today be worth over $47,000. Easy math, right? $5K would have yielded more than $235,000 and made for stress-free Vegas vacation planning.
$10K? While I wouldn't exactly be retired, Sky Suites and Wynncore's finer offerings would become a no-brainer. And I certainly would no longer be living the Ed Schultz "Shower AFTER Work" lifestyle and coming to Vegas just to escape all that. That much is certain.
Any Vegas Tripper out there brave enough, bold enough, or just plain crazy enough to have made that play? Feel free to brag here. And do send us pictures from inside the Sky Villas and Mansions. Those things look delicious.
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