Dateline: Macau Casino magnate Steve Wynn promised investors it won’t happen again. Specifically, his Las Vegas casinos having much of any impact at all on his stock’s performance. In fact, on his recent conference call, Wynn was practically forced to apologize for “slow” growth of nearly 50% on his Macau properties, all while investors appeared giddy over a rare 12% uptick in Las Vegas casino revenues. I guess people in a country whose average liquid net worth is near zero spending any more money in an elongated period of economic turmoil is reason to celebrate. Or reason to just move any money YOU have somewhere else. The reason gaming stocks like Wynn’s have taken off in recent years is entirely focused on Macau. That’s where the gambling tycoons now spend most of their time, and is where all of the new development is. In fact, Steve Wynn famously told the bootlickers at CNBC that China was an easier government to do business with than the bipolar, “we’re free… but we’re really not” US government manned by Barack Obama. He and investors are putting their money where their mouth is. Here in Macau, casinos are booming. They now do seven times the volume of the Las Vegas Strip. Flying in to Macau on southern China’s tip, finding a decent hotel – even for one night – was quite a challenge. Wynn’s flagship hotel, and Encore, were sold out. So was the MGM Grand. The Hard Rock Hotel was going for nearly extortionate rates. All because five percent of China’s gamblers have set foot in this tiny gambling enclave once controlled by the Portuguese. And the other ninety-five percent want in. It’s just a matter of time. I was reminded to fly over here by a few emails I got in my inbox last week. As I explained last week when telling you I decided to set up a perpetual traveler’s base in Kuala Lumpur, airfares within the region are dirt cheap, even at the last minute. Having spent a lot of time in Las Vegas when I was 22 and building my first business – sadly, from The Land of the Free – I’m still getting emails from casinos there. After spending billions of dollars buying up land to build casinos that are now nothing but proving ground for tumbleweeds, Las Vegas casino owners are desperate to put bodies in their towers. Phil Ruffin is one of the lucky ones. After scrapping plans to build a $2 billion casino on the north end of Las Vegas’ Strip, he sold the land to an Israeli development company for $1.2 billion. Land that now sits empty, holding nothing but the failed dreams of replicating New York’s Plaza Hotel in the desert. When the MGM Mirage – then the company that owned the Strip’s Treasure Island – was in debt up to their eyeballs and their partners in Dubai were on the brink, Ruffin bought Treasure Island from them for a few hundred million, one of the luckiest moves in recent Las Vegas history. Even Ruffin, a guy who actually came out of the Las Vegas meltdown smelling like roses, is now hurting. For instance, Treasure Island is now begging me to come and stay with them for the grand price of $49 a night. Friday, Saturday, Tuesday… whenever I want. For $59, they’ll throw in a buffet. For $99, they’ll also throw in show tickets and perhaps even a foot massage or one of those giant stuffed animals. And I haven’t gambled there in years. Basically, the guys who ended up on the sucker end of the once never-ending Greater Fool Theory – the idea that land in a tourist oasis such as Las Vegas would always go up – are not scratching to get whatever they can out of their investments while the smart money has left the country. The same $49 I could stay at Treasure Island for wouldn’t rent me a room at a flophouse here in Macau. In fact, I’m currently working on finding an independent contractor to help me with increased interest from China, and I couldn’t even find them a decent long-term apartment for that price. You could argue that that means Las Vegas is on sale and worth a visit. In reality, the city is crumbling. Earlier this year, I held our first offshore conference, Passport to Freedom, in Vegas. We were a little off the Strip so that attendees could enjoy a little more privacy. While we decided on Las Vegas after surveying our audience, we also decided we won’t return. Our next Passport to Freedom conference is being held in Cancun in January 2015. Tickets will be on sale to the public in the next month, so keep an eye out. It’s all part of my “go where you’re treated best” philosophy. Cancun rolled out the red carpet for us, while Las Vegas – which we got proposals from for grins – is still acting like they’re kings of the world. Meanwhile, the entire city is practically in ruin. Walking into the allegedly five-star Bellagio for dinner one night, we discovered none of the moving walkways worked. Apparently, the things broke some time ago, and management figured it wasn’t worth the expense to fix them. Inside, service was surly. My business partner said he’d never felt so demeaned while spending $300 on dinner for two. The experience was the same all up and down the Strip. Basically, Las Vegas decided to market itself as an adult playground for the type of people who take out five mortgages on houses that, ironically, they also thought would “never go down”. Now that that party set is tapped out with no hope of recovery, Las Vegas is fighting for scraps. In my mind, Las Vegas is an analogy for what is happening in the United States. The Land of the Free is the home of 300 million people who followed what I call the Paris Hilton Effect; they have no idea why they became so wealthy, and figured the party would never stop. Now that China is about to eclipse them as the largest economy and the world’s wealth creation is moving to Asia, they are freaking out. It’s like the five stages of grief. First comes denial. Right now, most westerners still believe their entitlement-minded lifestyle can go on forever. They shrug at the idea that any other country could ever be wealthier. Even, as I explained last week, the United States is the wealthiest country in North America at eleventh place. The next part is the scary part, though. For the second step in the Five Stages is anger. This is what we’ve seen in places like Greece, where protesters angry at their gravy train being derailed started throwing Molotov cocktails around town. And it will happen in every country that believes its economic fortunes can never decline, as if by virtue of some magic soil their nation sits on. We’ve talked before about the protests that will come to the United States when the government confiscates – or “redirects” – retirement funds and seniors can’t get off the hamster wheel. Or when the FDIC declares that it’s $0.003 per dollar in insurance funds aren’t enough to repay the next big bank failure, and Congress can’t put together the inflated money to buy everyone off. Or when the real estate market crashes for real this time, after artificial demand and hedge fund sell-offs cause the next big crash. Look at the protest thrown by union members when the aforementioned Steve Wynn tried to include pit bosses on the dealer tip chest. Now imagine what will happen when unemployment in a place like Las Vegas skyrockets and a new wave of people are thrown out of their homes with no funds to support them. Now imagine what happens when the US government, with its reduced credit status, can no longer print and borrow itself silly to hand out inflated US dollars to anyone who asks for them just to avoid political turmoil? As I mentioned on this weekend’s radio show, the political turmoil that happened during Argentina’s corralito, or Yugoslavia’s hyperinflation, or Greece’s austerity, can easily happen anywhere. While weak casino results aren’t exactly the last step before a total meltdown, they are one symptom of the writing on the wall that affluence has left countries like the United States, and that affluence that never existed there is staying out. As the trend continues, denial will be harder, and the fallout from anger will become more prominent. We’ve seen those consequences play out already. Where do you want to be when that happen?

Andrew Henderson
Last updated: Dec 28, 2021 at 10:27AM