Report/Commentary/Opinion
by Bud Meyers
(Other MGM Mirage UPDATES here)- Ties to the Mob, Slave Labor, Lawsuits)
"Once I built a tower, up to the sun, brick, and rivet, and lime;
Once I built a tower, now it's done. Brother, can you spare a dime?"
Lyrics by Yip Harburg, music by Jay Gorney
A few months ago Goldman Sachs upgraded the casino corporation MGM MIRAGE to a "buy" from "neutral." Goldman Sachs is a bank holding company and investment banking firm. Their holdings are massive. How many shares of MGM Mirage do they own? Can they rate the value of their own investments? A full list of their holdings, shares, and value as reported to SEC are here.
Goldman Sachs ONCE SAID that they expect Las Vegas trends to start getting "less bad" over the next several quarters. That was the basis for their upgrade..."less bad". Is that how we've been rating corporations lately? How about an increase in business, much less debt, and a positive future outlook for profits?
Goldman Sachs had said the upgrade offered both high risk and high reward, based on a Vegas recovery that is in its very early stages. (That's why I say "living on a prayer")
Goldman could just as easily have downgraded MGM, then saying "the downgrade offers both low risk and low reward, based on a Vegas downturn that is in its very late stages."
This is pure nonsense, and here's why:
I've lived in Las Vegas and worked in the hotel/casino industry for the past 20 years...I see the visitor traffic on the casino floors, and it's not good. Air traffic and booked conventions are down, thanks in part to Obama, Reid, AIG, and Goldman Sachs.
This city depends too much on tourism and MGM needs "whales" (high-rollers who bet BIG) to pull them out of the slump. And they usually come from Asia, but they have Macau and Singapore - so why go all the way to Vegas? Been there, done that...
Room capacity in Las Vegas is at least 20% over visitor volume; a price war for rooms is being waged. MGM must cannibalize their own properties to get people into Center City.
MGM's condo sales are flat (and were heavily discounted).
There have been complaints about customer service at CenterCity too.
Las Vegas (the largest city in Nevada) has the 3rd highest unemployment rate in the country. People still fear losing their jobs. Expendable capital is not forthcoming any time soon...at least not in 2010. Ten million people are collecting unemployment benefits, but almost 18 million don't have jobs. 85,000 jobs were lost just last month.
MGM carries too much debt, and the new financing they received (thanks indirectly to bank bail-outs to Goldman Sachs) only delays the real pain. Eventually MGM (like the government) may be able to pay down some of their debt with cheaper dollars, but it's too bad they didn't get the same terms for borrowing cash from the Feds like Goldman Sachs.
Are the days of excess over? 55 years ago we thought so...
...but the days of $400-per-bottle are over (at least, this year). Stretch limos are no longer the "norm" in Las Vegas anymore.
All gaming and food & beverage businesses (bars and restaurants) in Las Vegas are suffering badly...people here (the locals, whom MGM has always neglected) will not spend their money on the over-priced offerings at the glitzy casinos...or gamble away their money - they are hunkering down and saving money, because many more job losses are expected in 2010.
Management at MGM bit off more than they could chew, burned their bridges with the locals, and made a HUGE bet that even the most irresponsible gambling addict wouldn't have made; and now they only have spin to minimize their losses.
Goldman Sachs made huge profits in 2009 and should buy lots of MGM shares as a write-off for 2010 (maybe they have already, hoping for a rebound, instead of a write-off - hence, the "upgrade".
Kerkorian can pump the share price as he likes, but it only delays the inevitable...City Center will go down in history as one of the biggest real estate/gaming blunders of all time.
And I don't have much faith in the MGM's CEO's character either (Jim Murren), who lied for 20 years about playing in the Philadelphia Phillies farm league. And he too, may be living on a prayer...I haven't spoken with Kirk lately.
I predict CenterCity will one day be a great tourist attraction, like the Great Pyramids.
Other MGM Mirage Posts
MGM Mirage: Settling Lawsuits with Junk Bonds?
http://tobuds.com/blogs/blog2.php/2010/03/29/mgm-mirage-settling-lawsuits-with-junk-b
How Can MGM Mirage Ever Survive?
http://tobuds.com/blogs/blog2.php/2010/03/27/how-can-mgm-mirage-ever-survive
MGM Mirage - "Leaving Las Vegas"
http://tobuds.com/blogs/blog2.php/2010/03/23/mgm-mirage-leaving-las-vegas
MGM Mirage - Only the "young and beautiful" people please!
http://tobuds.com/blogs/blog2.php/2010/03/19/mgm-mirage-only-the-young-and-beautiful
Opps! More bad news for MGM's CityCenter
http://tobuds.com/blogs/blog2.php/2010/03/17/opps-more-bad-news-for-mgm-s-centercity
Just like the Titanic, MGM headed for Huge Iceberg
http://tobuds.com/blogs/blog2.php/2010/03/14/mgm-mirage-citycenter-green-but-not-in-t
MGM Mirage - Illegal Hiring Practices?
http://tobuds.com/blogs/blog2.php/2010/03/12/mgm-mirage-illegal-hiring-practices
MGM-Mirage’s CityCenter: A Civic Failure
http://tobuds.com/blogs/blog2.php/2010/03/02/mgm-mirage-s-citycenter-a-civic-failure
Leaving Las Vegas in 2010 - Do not expect MGM Mirage's luck to change soon.
http://tobuds.com/blogs/blog2.php/2010/02/23/leaving-las-vegas-in-2010-do-not-expect
MGM Mirage - CityCenter - The Great Boondoggle
http://tobuds.com/blogs/blog2.php/2010/02/10/mgm-mirage-citycenter-the-great-boondogg
L.A. Times - MGM Mirage City Center: Final bender for Wall Street's Decade of Unreason
http://tobuds.com/blogs/blog2.php/2010/01/14/l-a-times-mgm-city-center-final-bender-f
MGM MIRAGE (NYSE: MGM) - Living on a Prayer in 2010
http://tobuds.com/blogs/blog2.php/2010/01/13/mgm-mirage-nyse-mgm-living-on-a-prayer-i
Casinos Won't Recover - What it Means for MGM Mirage
http://tobuds.com/blogs/blog2.php/2010/01/11/casinos-won-t-recover-what-it-means-for
MGM Mirage on Life Support - 2010 Not a Happy New Year
http://tobuds.com/blogs/blog2.php/2010/01/07/mgm-mirage-on-life-support-2010-not-a-ha
MGM Mirage - City Center is Doomed in 2010 to Cannibalism
http://tobuds.com/blogs/blog2.php/2009/12/31/mgm-mirage-city-center-is-doomed-to-cann
James "Jimmy" Murren - CEO MGM Mirage, Has A Magic Dream
http://tobuds.com/blogs/blog2.php/2009/12/29/james-jimmy-murren-ceo-mgm-mirage-has-a
MGM's Kirk Kerkorian's CEO (Jim Murren) - A Con Artist?
http://tobuds.com/blogs/blog2.php/2009/12/21/james-j-murren-chairman-of-the-board-and
MGM's Mister Kerkorian is a Very Wise Man
http://tobuds.com/blogs/blog2.php/2009/12/21/mgm-s-mister-kerkorian-is-a-very-wise-ma
Also see > CityCenter, Infinity World Development, MGM Mirage, Tracinda, Kerkorian
See all my well-researched posts on the current unemployment situation:
The New Poor - Millions of Unemployed Face Years Without Jobs
http://tobuds.com/blogs/blog1.php/2010/02/21/the-new-poor-millions-of-unemployed-face
Government Jobs (Bigger Government) Drive Employment Numbers
http://tobuds.com/blogs/blog1.php/2010/03/01/government-jobs-bigger-government-drive
Actual Unemployment in 2010 - Recession Worse than Reported
http://tobuds.com/blogs/blog1.php/2010/02/04/actual-unemployment-in-january-2010-rece
Deep Recession Shows No Sign of Letting Up - Maybe Getting Worse
http://tobuds.com/blogs/blog1.php/2010/02/24/deep-recession-shows-no-sign-of-letting
Largest U.S. Labor Union: AFL-CIO says Jobs Won't Return
http://tobuds.com/blogs/blog1.php/2010/01/07/largest-u-s-labor-union-afl-cio-says-job
More Bad News for the Unemployed in 2010 - and Beyond
http://tobuds.com/blogs/blog1.php/2010/02/23/more-bad-news-for-the-unemployed-in-2010
Almost 1 out of 5 People are Out of Work in the U.S.A.
http://tobuds.com/blogs/blog1.php/2009/12/31/unemployment-december-2009-new-release
FOX News Wages War on Unemployed - Thinks They're Lazy
http://tobuds.com/blogs/blog1.php/2010/03/02/real-reason-why-extended-unemployment-be
Tea Party, Fox News, and Conservatives Attack the Unemployed
http://tobuds.com/blogs/blog3.php/2010/03/04/tea-party-gets-in-wrong-on-unemployment
Extended Unemployment Benefits in 2010 - Fully Explained
http://tobuds.com/blogs/blog3.php/2010/02/16/extended-unemployment-benefits-in-2010
ALSO READ :
Why "Diversity" Exists in Corporate America Today
http://tobuds.com/blogs/blog3.php/2010/03/16/why-diversity-exists-in-corporate-americ
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