-- Posted Wednesday, 12 November 2008 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Wednesday, November 12, 2008
“Phenomenally accurate forecasts”
In the world of risk-takers, Steve Wynn is in a class by himself. We’ve heard of commodity traders bragging about how their account balances would swing $50 million in a day, but they’re just pishers compared to Wynn, who has gambled fifty times that on a business deal. Moreover, if a soybean or bond position blows up, a trader can unload the whole mess in an afternoon and start over. Wynn, on the other hand, has nowhere to run. Of course, any guy who builds a billion dollar casino in the middle of the Nevada desert, then puts a lake with a thousand dancing fountains in front of it, is not exactly thinking about an escape route. Far from it – even now, with the worst U.S. economic downturn since the 1930s threatening to crush casino operators in Las Vegas and elsewhere. Is Steve Wynn hunkering down, bracing for disaster? Far from it. In fact, he is putting the finishing touches on Encore, a $2.3 billion resort that will take opulence to new extremes even by Las Vegas standards.
We first came to admire Wynn when he turned up in our home town of Atlantic City, ready to wheel and deal after New Jersey voters approved casinos in 1976. Wynn bought the property that was later to become the Golden Nugget from Manny Solomon, a popular local hotelman who had fallen on hard times through no fault of his own. Solomon had been forced to take back his Strand Motel in bankruptcy after the guys who’d bought it from him a couple of years earlier ran it into the ground, stealing the televisions and furniture on their way out the door. When the Vegas casino mogul walked in off the street one afternoon, wearing sneakers and painter’s overalls, Solomon could not have guessed this guy was going to write him a check for $15 million before he left.
Unfortunately for Atlantic City, the town’s and state’s small-mindedness eventually drove Wynn out of New Jersey, but not before he’d established benchmarks for the casino business that helped attract many of the operators who remain there to this day. Today Wynn is the major stakeholder in Wynn Resorts, the largest publicly traded casino company in the world, with a capitalization of $4.26 billion. That figure reflects a 76% price decline in Wynn shares since last October, but other casino shares have fared still worse.
Even with the country slipping into deepest recession, we would never bet against Wynn. While there is no question that the extravagance of Encore will test his financial staying power, Wynn’s big casino bet in Macau seems likely to pay off no matter what happens to the U.S. economy. A U.S. recession will take China’s economy down with it, to be sure, but China is certain to bounce back much more quickly and robustly. When it does, Wynn will be ready to accommodate Asia’s high rollers at Wynn Macau, a luxury resort with 600 hotel rooms and a 205,000 square foot casino. By hedging his bets with a foothold in Macau, Wynn may eventually be in a position to acquire rivals’ properties in Las Vegas at distress prices. If the guy eventually winds up owning the town, no one should be surprised.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Wednesday, 12 November 2008 | Digg This Article | Source: GoldSeek.com
