An excellent article in the Wall Street Journal on a topic we've been following since blog inception in 2007: Las Vegas. (Oct 3, 2007: A Top in Casino Names? Wynn and Las Vegas Sands) Long time readers know I targeted Las Vegas as one of the canaries in the coal mine - as really there is no better city to represent the excess of America. We had the crossroads of housing speculation with conspicuous consumption, all in 1 spot - I mean where better else to observe homo sapiens Americana. In (Apr 14, 2008: Things I've Been Negative on Since Fall 2007)

I cannot continue to stress enough how wrong analysts are on 2008 estimates and any company with focus on the US consumer is simply going to be blown apart in due time - if not this earnings season - then in the future. We are told daily how "cheap" these stocks are; this is based on the fictional body of work called "analysts 2008 estimates". Don't believe the hype. The subprime nation (us) is in trouble. Consumers make 70% of GDP. Its a consumption culture where the consumer is being drowned in negative wealth effect from housing, inflation from the Federal Reserve/global forces, and underemployment if not outright unemployment. (Apr 2: The Underemployment Rate is Rising) It is bad out there in the bottom 60% and it's creeping up to the formerly immune 20-40 percentile as well. It is the perfect storm and I will utter the most dangerous words a financial commentator can ever utter - it *IS* different this time.

People were asking me for individual names for shorts - I continue to
stress the same themes I've stated since last summer - anything consumer related or based on American conspicuous consumption - it will all go. These stocks bounce every time the bulls pass their... well bull... that the consumer will be back any moment now and just "trust us" because in 6 months they'll be back in the malls spending like mad. Just. Plain. Wrong. These are going to be shorts for a long time. It won't be so easy as when I first called it out in early fall because we were still in the "no recession at all" camp, and the stocks had just began to weaken from much much higher levels.

Next to go on the food chain will be entertainment - think casinos - Wynn (WYNN), Las Vegas Sands (LVS), MGM (MGM) - it is all going to suffer (Nov 1: A Top in Casino Names? Wynn and Las Vegas Sands) - that's an "extra" you don't "need".

If not for a furious series of credit amendments, 2 of our 3 largest public casino players would be in bankruptcy court by now, and home prices have given back a decade of gains. (Apr 29, 2009: Median Home Prices in Las Vegas Fall to Lowest Since 2000) Even Steve Wynn has lost some magic and has had to discount aggressively to fill his new high(er) end hotel. (Dec 23, 2008: Wynn Encore Casino Struggling to Fill Rooms During Launch) Thankfully however, in the stock market all you need to do nowadays is show that you can survive (not thrive, just survive) and your stock skyrockets on green shoots, so in the intermediate to long term the casinos are actually (after 2 years of pain) more likely buys than shorts. But we won't be seeing "the good ole days" for a long time.

With Las Vegas, you would be hard pressed to find a better municipal example of our transformation from a producing country to a consuming culture, and how the mirage of prosperity through multiple Fed induced bubbles created a false sense of "well being". This article, aside from touching on "how we got here" also speaks to those in the middle tranches of society who are increasingly running out of ways to make a living that has them increasing their living standard. It's not quite so easy in this new age "service economy"as it was 30+ years ago. "Trickle ON" economics is just not a great thing for most of the middle of the country, contrary to dogma.