My wife and I went to Vegas over the weekend and unlike everyone else I know, we lost money.
When we went last year, The Tropicana still had $2 blackjack tables and most of the other places had $5 and $10 tables.
This year, its a little more expensive. Tropicana had $5 dollar tables and the rest of the strip was running $10 and $15 tables. The dealer now hits on soft seventeen.
If you are a good money manager, you can walk away from the table up 15 units of play or down 15 at any point in time, its an even money game. If you're a tourist thats never gambled, this place can now get into your pocket at a rather fast rate. Two dollars a hand is a not-too-fast a way to enjoy learning how to play. $15 per hand is a rather "doomsday" way to deplete your vacation spending money (IE you're going to remember that vacation for the wrong reasons).
The real question to ask about Las Vegas, is what is happening? Are we looking at inflation? On the surface it appears that way, but it could be misleading. My wife (who likes to gamble) had three comped rooms for the weekend, one at the Trop, one at the Flamingo, and one at Harris. We stayed in the Trop, relatives stayed in the other two hotels, all my wife did was go to each and register.
In 2000 they list 124,270 rooms total for Las Vegas, this year 310 hotels have 149,846 rooms. The increase in rooms is getting up there. I noticed that the drive from the Trop to the Flamingo is about 30 minutes in the evening---a pure traffic jam---the migraine you were not counting on. Its faster to walk if you count the time it takes to park your car.
Things are not as they appear. My wife's slot machine malfunctioned and a tech came to fix it. Come to find out, he's a laid off LA Northrup Grumman worker that came to Las Vegas, hates the place but he needs the job. Our waiter (at one of our 4 complementary meals for the free slot tournament), was a real estate agent that works for Liberty Realty, real nice guy named Nick. He said the real estate business was good, but you have to wonder about "how good."
So on the last day, we get in the car, I'm grumbling because the wife lost $1,000 at the tables. She tells me, "Where else can you get 3 free rooms, each for 3 nights and all the food you can eat for free?" (She was rationalizing the loss). I kind of had to agree.
Then we started the drive out of town. To my surprise every major contractor had at least one billboard up for condos or homes for sale, some starting in the low 100's. I don't think that I would be exaggerating if I said that I counted 20 full size billboards in one mile on the strip out of town.
Since we also got a free Las Vegas paper, I was reading that on the way home and had to chuckle over the headline that read, "Mountain Falls homeowners enjoy scenic commute--Couple makes 40 mile drive from Pahrump Valley to Las Vegas jobs." I was mentally thinking that if it was this hot in San Marcos, our air conditioning bill would be about $400 a month!
To sum it all up, Las Vegas has changed. No more 2 dollar tables, $15 is the norm. Traffic on the Strip is horrible. The rooms are free if you can prove you like to gamble. I predict several casinos will file bankruptcy in the coming year--the pie is sliced too thin to survive. There are just too many people that I have talked to, that want to leave Las Vegas rather than stay, that makes me so pessimistic about this place. And as for how it ties to The Great Depression of 2006, the party is not over, just yet, enjoy--your HELOC (home equity line of credit) It probably isn't maxed out yet. Reality is lurking right around the corner.
6 comments:
so $1.00 steak is the thing of the past also? :-)
ok, some people have money to burn... so does china...
so where does this fit in the puzzle?
Like 1929, everyone was having fun until the music stopped. I was suggesting that its still party time, its only money. The concept of having to earn it is just not there, unless you happen to work in Las Vegas.
The hard times are not here yet.
Jim,
When people have to "tighten the belt", it will be obvious because discretionary spending will be cut.
As for china, their wealth is built on a 70% export surplus to the US. If we have less to spend, they have less to spend. With the amount of liquidity sloshing around out there in the US, expect higher interest rates and much, much less construction.
John
I agree interest rates are the key, I just can't figure out why they are so low. The Feds 2&1/2% rate increase has done nothing but invert the curve. I don't think that the Fed is a real player in the game.
My only guess is that maybe the hedge funds and derivatives market have some sort of insurance lock on the market that is keeping it from adjusting.
If housing forclosures hit 10% the 6% prime is toast.
Just to add to your account, Jim, I remember not too long ago (1997 or so) hearing about the $4 or $5 all-you-can-eat buffets in Vegas. They used the cheap food to attract business and it worked, I guess. But that was then and this is now.
I really worry about how that city will survive a serious economic downturn. The entire town is based on outside income coming from tourists and going into the casinos. The rest of the population basically provides goods and services that are supported by the casinos. As the casinos go, so goes Vegas.
One more thing that I will be looking at is the level of competition for home buyers and job seekers between California cities and cities like Las Vegas, or cities in Arizona. As cities like Las Vegas and those in Arizona dry up economically, they get EVEN CHEAPER than their counterparts in California. I am sure that they might appear as an even better prospect to a potential home buyer or investor because they are buying lower and hopefully selling higher than they would in California.
Anonymous, I agree with you. Las Vegas is the canary in the coal mine.
I think that the reality of the collapse is going to be beyond comprehension--Boxcars all around!
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