For those of you who have missed it, Bunge Ltd. (BG) is back on a run, rushing past $73 in the last few days of trading.
It took a while, but my portfolio was not deterred for long. Let the overpriced grain spectacle commence.
Last night, after a meeting and an accompanying trip to the bar (which itself was accompanied by a late night meal from a rather talented fry cook and a dark beer), I decided to swing over the MGM Detroit, to test just how business was doing.
The place was uncomfortably crowded, on a Wednesday night. Money was flowing freely, and I won a hundred bucks or so at the tables.
Two weekends ago, I went to MGM Detroit with an entourage of friends. The place was absolutely packed.
Look, if people in Detroit are able to carry on like this, how can you think the Vegas downturn will last for much longer? Albeit, Vegas is far more ritzy than Detroit, but it is also far more popular; if Detroit’s outer city destitute can afford to throw dice on a Wednesday night, I cannot imagine that Vegas is not in a similar boat.
Why, our own Checklist was commenting on that just a few days ago. I’ve been pulling the reports from MGM for the past five years, and putting the numbers into a spreadsheet. It’s taking a while, because I don’t have a plethora of time to work on it, but when it’s done, I’ll try to show you their debt story and why I’m a shareholder.
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CT, are you from Detroit or just here on business? I am from the ‘burbs and visit all three casinos here regularly. MGM Detroit is busy for a variety of reasons, including conventioners, drug laundering, and the homeless that like to throw what little money they have away.
There is a reason that this property is the 2nd most profitable in their enterprise behind Bellagio. There is so little overhead with that place relative to the others, while people just come endlessly to hand their money to the casino gods. Look at Greektown or Motor City on any given weekday or week night, you will see the same thing…just not quite as much as MGM…but MGM has the cache, so they get more business. They also have done a better job at attracting the chaldean high roller market, which seems to dump a fair amount at the tables on a regular basis.
I think comparing Detroit to Vegas is dangerous because Detroit will continue to lure stupid poor people over and over again (especially since we keep giving them more unemployment checks), while Vegas truly requires an economic recovery. In addition, LV is so saturated right now with the opening of Cosmo and Aria, it’s going to take a good 5 years before anybody has pricing power again…even Bellagio rates are low by historical comparison, and everybody is still pounding to get in there.
One more anecdotal piece of information. I get offers from every MGM property and I can tell you that they are extremely generous right now when comparing to prior periods. They are throwing everything they can for all LV properties, Biloxi, Tunica, and yes, Detroit…last month they did an offer in Detroit for a suite, dinner anywhere, breakfast, and a couples massage…with no limits! I got the A5 kobe steak, which is $30/oz…all-in we estimated that trip “cost” them $1,200, and I know we were not the only ones who got that offer.
In the end, I think MGM is a great franchise with an amazing brand, who no doubt will be profitable for years to come. I am concerned that LV is going to continue to have little impact…Detroit will be stable but will never provide any meaningful growth, and Biloxi and Tunica are the same. I haven’t looked at the numbers themselves, but I just don’t see how they can grow revenue or earnings in any meaningful way for another year or two.
You are right, comparing Las Vegas and Detroit is apples to oranges, as that adage goes. I guess I just have to believe that the Las Vegas economy is generally doing better than the Detroit economy. But, that may be a fallacy.
Most of the people I saw last night were actually suburban types, though. They don’t really fit into your generality. The blue collar guy to my left was throwing a couple hundred. Two business dressed individuals to my right were about the same.
No real poor looking folks walking around, although the SS checks were out in force.
MGM definitely attracts more of the “suburban crowd” which for the sake of being PC, I would say the $40k-70k people. They have the money to play the quarter tables…but really they don’t. No doubt Motor City and Greektown attract the lesser audience.
I have been to Vegas 3 times this year and each time the people there seem to be a little more optimistic than the last…but their stories are still relatively negative and volume seems to be down. The gourmet restaurants are busy, but not AS busy. The taxis are busy, but are not seeing the same types of trips they were before. It’s all realtive and so far it’s just not there.
I’ll say this, if Detroit was as not busy as Vegas, things would definitely feel different than they do right now!
Not a huge fan of casino stocks here, but….
Vegas economy is no longer sucking, I would say they are no more than a year from being cocky again at te clubs and so forth