Kirk Kirkorian says he's getting out of the car business (selling his Ford stake) to take advantage of compelling opportunities in the gaming business. Problem is, things are till getting worse there. Gambling stocks have had a horrendous year, and they're not turning around yet. Marketbeat points out that conditions at Kirkorian's MGM continue to get worse, as Fitch downgraded the company's debt and financing for its ambitious City Center development looks scarce. Shares of MGM fell almost 13% today. They're now down almost 90% for the year.
Conventional wisdom used to be that gambling, and Las Vegas, were impervious to recessions. But take a look at the website for City Center. Notice anything? How about the lack of emphasis on gaming? There's a fine art program, a spa, residences and a convention center, but it's not even clear that there is a gaming floor there. Would you fund those things in this environment?
This is true for all of Vegas, really, which has turned itself into a family destination at the expense of being a pure play on degenerate activity, which is more acylical (anecdote: there's a sad guy who lives on our block who, every morning while we're walking to the subway sits on his stoop scratching of lotto tickets. Unless he literally runs out of money, we doubt he's ever going to stop).
All that being said, the decline in traditional resort activity can't be the whole story. Over in Europe, where online gambling is legal, and its firms publicly traded, investors haven't avoided the pain. Shares across the sector are down over 50% in the year. When you see moves like that, you know there are few places to hide in this economy.
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