What were they thinking?


There are bulls. There are bears. There are quandaries.

This week, we are in a quandary.

For evidence, look at the reaction to the recent earnings of the Las Vegas-Macau triplets, Wynn, Las Vegas Sands and MGM Mirage.

All three reported essentially the same results—significant cost reductions, weakness in Macau, very significant weakness in Las Vegas. And their outlooks were the same—business has stabilized and an upturn is starting to appear.

So how did investors react? Wynn shot up 13 percent. LVS plunged 16 percent. MGM nudged up 3 percent.

Why such different reactions?

Some say it is the expectations game. Wynn did better than expected. LVS missed. MGM expectations were all over the place, so reaction was a little muddled.

But expectations alone don’t answer the question. No matter that WYNN did better. His numbers and outlook followed the pattern. The reaction diverged.

Part of the answer might be P and P: personality and prospects.

Steve Wynn is charismatic. He’s a combination of college lecturer and master schmoozer on his conference calls explaining results and soothing investor concerns for the future.

Only Wynn could get away with chiding the CEOs of LVS and MGM for lurking on his calls and asking no questions with a “Hello, Sheldon. Hello, Jim Murren. Hope you’re having a nice summer.”

So when Super Steve says things are looking up, the world listens. It doesn’t hurt that he has a relatively strong balance sheet and no borrowing ahead for new projects.

LVS’ Sheldon Adelson, on the other hand, is more like a scrap yard dog guarding the lot—more fearsome than sympathetic; more taskmaster than tutor.

And for Adelson, it does hurt investor sentiment that he hasn’t shelved his grand Macau plans and instead is pushing ahead, probably raising the money – and maybe the debt – in Asia since the darned Americans are too timid to lend.

Finally, there is Murren. Almost puppyish in his enthusiasm for the prospects of CityCenter, which make a lot of other people nervous, and superbly polished and eloquent.

It helps that MGM did some significant refinancing in the spring, and that it doesn’t have big projects coming after CityCenter.

But in the end, the Triplets are just too similar for such disparate reaction.

Wynn, for all of his focus and track record and financially conservative development style, still faces the same business environment as LVS and MGM.

And Adelson’s attempt at a grand slam in Macau is not so different from MGM, swinging for the fences at CityCenter. And while there’s so much attention on Las Vegas, and Macau financing, LVS is about to open a Singapore mega resort that could be a game-changer. But hardly anyone is paying attention.

In the end, the reaction may have more to do with investor quandary than fundamentals or prospects or personalities.

Step out of gaming for a moment. Look at the price of oil. Down 16 percent because of a few data points suggesting the world recession might last awhile longer, then up 20 percent because the next few data points suggest otherwise.

Meanwhile, consumption remains stubbornly restrained. Stockpiles are building, and OPEC is producing beyond its quota again.

But what the heck are fundamentals when investors have gotten stung so badly, both longs and shorts, and just don’t know?
 
So the quandary is a far wider investor phenomenon than just the Triplets.

Eventually, the haze will dispel. And it could be good times again when Las Vegas comes back, if Singapore produces dazzling numbers, and if CityCenter proves itself the market-lifting catalyst not the cannibal.

Until that clarity, investor nervousness will trigger more double-digit spikes and dips.

By Frank Fantini

Frank Fantini is the editor and publisher of Fantini’s Gaming Report. A free 30-day trial subscription is available by calling toll free: 1-866-683-4357 or online at www.gaminginvestments.com.

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