Saturday, August 8, 2009

Dollars for Dummies, The Las Vegas Experiment, Las Vegas Real Estate, Culture and Moralism 101

Dollars for Dummies
To call the Cash for Clunkers program a success is an understatement. A wildly popular program that takes gas-guzzlers off the road in lieu of newer fuel efficient cars has middle America buzzing with excitement. To be frank, I hadn't paid much attention to the program until two of my neighbors decided to trade in their "clunkers" for a new cars. defines a clunker as a decrepit car. For those of you who want to get technical, decrepit is defined as worn and broken down by hard use. If that is the intention of the Cash for Clunkers program, than neither of my neighbor's cars fit the description of a clunker. Rather each car was less than seven years old... and neither had rust. However, each "clunker" got less gas mileage than the car that was purchased. I would not call the program a boon for automakers, while Honda, Hyundai, Toyota, and Ford have seen an uptick in sales, all automakers are well below their 2007 numbers. Scrap dealers such as Alcoa (AA), Metal Management (MM), or Steel Dynamics (STLD). Some grumblings echoed of Smoot-Hawley claiming that monies should only be spent on American made cars. Can anyone really name a car that is totally Made in America? Sorry GM and Chrysler, you will not be enjoying this feeding of public dole.

The Las Vegas Experiment
About 50 years ago, the mob financed Buggsy Siegel's experiment that became known as Las Vegas. It was a city that was built is the desert... a place which under any normal circumstances would be seen as valueless land.
Today Las Vegas is known as the most entertaining city on the planet... A city dedicated to hedonism... the good life... fun... and over-indulgence. Still though, everyone I spoke to in Las Vegas cited a marked downturn in revenue. It's not to say that the casinos are not making money... the casinos are simply making less which is requiring many cash-strapped organizations like LVS to seek any financing arrangements. Casinos are all vying for the high end gambler. This is the guy who thinks nothing of dropping a $100,000 on a game of blackjack. Here is a list of casinos who are completing for those gamblers and shoppers:
Mandalay Bay, The Palazzo, The Wynn, Belaggio, and Mirage
While the recession has really hit all social classes in the United States, we were reminded that companies like WYNN seem to be less prone to losing gamblers... Should the recession receive two or three indications of bad news, I believe any one of these can be shorted near their March lows.

Las Vegas Real Estate Market

I have friend who teachers school in Las Vegas. Clark County Schools pays him well. There are no property taxes. The state pays 100% of his retirement. During the latest real estate boom in Las Vegas, he purchased a home for $275,000. A three bedroom cement slab with no grass located in the desert. Today, his home is worth $125,000. A mortgage broker who bought a home across the street paid $349,000 for his and has seen a loss of nearly $200,000 in equity.

But there is a plan to take care of everything. The mortgage broker is going to do a "short-sale" on his home... and bailout on his mortgage note. He is actually talking to my friend to do the same thing on his home. Don't ask me how, but this could be the way that homeowners attempt to crawl out from under the mortgages of homes which have lost over 50% of their value.

In areas further from the Las Vegas Strip, the term "Suburban Ghetto" now strikes a chord as homeowners and speculators alike are finding someone...anyone to live in the properties... In some cases, homes that were purchased for over $300,000 are now part of Section 8 housing.

Culture and Moralism 101
Middle class values are simple when it comes to education. Work hard in school. Get good grades. Get into a good college. And get a good job.

According to one teacher in Las Vegas, those values can be thrown right out the door. "The kids in my class have parents who deal blackjack and earn $80,000 a year. A valet at the right hotel can make an easy $100,000. The average parent in a city like Las Vegas does not stress education because it is more about the hustle than it is about the brains. Street Smarts are what you need to survive there. Save the books for those who earn money to visit.

KO System
I gamble more for entertainment...but let's face it... I also play to win. Here are my success and failures in Las Vegas:
Sports Betting: 4-2 in

Blackjack: I lost more than I won. In each case, I was AHEAD in my winnings only to give them back to the house with aggressive play. I used the KO Card Counting System along with basic BJ Strategy. In Single Deck BJ a +3 count is the time to get aggressive betting...from raising the bet to doubling down. And that is where strategy failed me. I will re-evaluate my victories and defeats in BJ and look to ammend methodology that failed me.


AX said...

A few observations:

1. Cash for clunkers is, like the stimulus, a short-term jolt for a dying industry. Most cars do not qualify as clunkers, and these cars are then being destroyed. Ask your dealer not only for the $4500, but the scrap value as an additional discount.

2. Even if you count successfully, the true value in such a system is in the bet-spread, not the odds-change. Are you willing to bet 5-10x your normal amount while not looking suspicious!

3. I didn't know until yesterday that Moe Greene was supposed to be Bugsy Siegel!

Tiger Coach said...

The point I did not mention on Cash for Clunkers is that you still need a job..and credit to qualify... The clunker however becomes a convenient down-payment... Clever huh?

When the dealer was showing 13 and I had two face cards, I split the hands...then double-downed... It hit twice.... lost once... then would have worked the third time except I chickened out... I would rather play a table by myself, or two other people who know what the hell they are doing....

Are you coming in again this fall?