In the half century since Ed Thorp published Beat the Dealer, dozens of card counting systems have been developed and promoted. Any numbers nerd with a simulator and a couch can sit there and spit out card counting systems, complete with all the technical mumbo jumbo about the method of index generation, the true-count conversion, the optimal bet ramps, and don’t forget N0. From there the posers can endlessly debate merits of one system over another, without ever even having to suck a chip out of a casino rack.
When card counters suffer huge losses, they go back to those “experts” for an autopsy. Here it comes: Should I memorize more indices? Is my bet spread okay? What is the optimal wong-out point? Is HiLo good enough? Should I play on a card so I can get a buffet and a George Foreman grill?
Reflecting the irrational exuberance surrounding the Las Vegas Strip, it’s a done deal at The Cosmopolitan of Las Vegas. The $3.9 billion resort’s physical assets sold for $4 billion, albeit to a cloudy “group of buyers that includes a Blackstone real estate investment trust.” So there may be some jiggery-pokery at work here. The big news was that MGM Resorts International was unable to resist the dangled bait that was the Cosmo’s operating company, paying a hefty $1.6 billion and change, plus $200 million in annual rent for the plum. Our sources say Cosmo cash flow is about two-thirds of pre-pandemic levels so either MGM CEO Bill Hornbuckle is taking a big gamble or an infusion of M Life is just what the doctor ordered. Regardless, Blackstone is making out like a bandit on a property it bought for $1.7 billion back in 2014, as in $4.1 billion in windfall profits. It also reduces its exposure in its #1 market, Sin City.
Among those paying Blackstone far more than the Cosmo is worth is investment firm Stonepeak, as well as Panda Express founders Andrew and Peggy Cherng. The real winner in all this may Caesars Entertainment CEO Tom Reeg, who can ask several kings’ ransom for whichever Strip asset he chooses to put on the sell block next year (right now it’s looking like Bally’s Las Vegas). Hornbuckle and CFO Jonathan Halkyard claimed the Cosmo would expand MGM’s customer base but it’s hard to believe it isn’t the other way around. Regardless, they had to justify the megabucks they poured into a non-core asset. University of Nevada-Las Vegas boffin Amanda Bellarmino defended the splurge, saying, “The acquisition could help MGM to target younger travelers by acquiring this successful and attractive property.” (Wasn’t that what Park MGM was supposed to do?) Unlike predecessor Deutsche Bank, Blackstone knew how to run the Cosmo and the $500 million capex it put into the old gal clearly paid dividends.
Perhaps this is a very old game, but I just saw it for the first time recently. It looked interesting, so I thought I’d analyze it.
I was playing $5 NSU Deuces at Harrah’s Cherokee and had just hit four deuces for a $5,000 jackpot. Always nice, but it’s a once-every-5,356-hands event on average, so it’s not all that rare.
After a long bout with the flu, we’re back with our usual persiflage. One of the stocks that was on the sickbed last week was Las Vegas Sands, bedridden from proposed new restrictions on Macao casinos. Deutsche Bank analyst Carlo Santarelli put pen to paper to assure readers that the worst is behind us. His analysis “provides us with confidence that downside risk from current levels should be fairly limited, though we acknowledge, valuation in the current environment has seemingly been a function of the latest stock price, plus or minus the interpretation of the next headline, and as such, we don’t deny that the near term could be choppy.” Santarelli outlined several caveats: “we aren’t pretending to know or display confidence around our view of the potential outcomes of the Gaming Law process in Macau … we recognize the situation in Macau is uncertain, though we believe the market has taken a fairly draconian view on the potential outcomes [and] we recognize incremental investment into the Macau centric names at this time of the calendar year and with this level of uncertainty is challenging.” Still, “we believe, the medium to longer-term risk-reward is skewed favorably in LVS at current levels.”
In his book The 21st-Century Card Counter, Colin Jones talks about bankroll requirements. On page 81, in the chapter “Do I have What It Takes? The DNA of a Card Counter” he says this: “A card counter needs only two tools: a brain and a bankroll.” When I read that sentence, I almost threw an apoplectic fit. I thought, “Here it comes, this guy is going to perpetuate the myth that the main weapon of an AP—maybe even the defining characteristic—is a bankroll.” To my pleasant surprise, he then went on to dismiss that fallacy.
He writes that you need a brain, but he already dispelled the MIT Myth earlier in the chapter (as I did on page -3 of Exhibit CAA). You don’t need a great brain—me and my little brain will do just fine. Same with the bankroll. You don’t need $10k, he says—a little BR of $2k will do.
Casinos along the Boardwalk continue to be impervious to the economic recovery that is prevalent in the gaming industry. Atlantic City was down 8% last month compared to 2019, grossing $262.5 million. Sports betting brought in $52 million (+32% from 2020) on handle of $646 million and Internet gambling generated $119 million (+29%). Terrestrial slot revenue was down 5% on 7% lower coin-in and luck was not with the house as regards table games, where revenues tumbled 18% on only 5% less wagering. Borgata got its clock cleaned (-28%), plunging 52% at the tables on 25% less drop, while slot win declined 20% on 23% less handle.
The Caesars Entertainment triumvirate slipped 13%, driven by 15% less win on 7% lower wagering, whilst slots were a bright spot, flat despite 12% less handle. Only Ocean Casino Resort and Hard Rock Atlantic City were revenue-positive for the month, with Hard Rock ($46 million) breathing down Borgata’s neck ($52 million). It gained 19% while Ocean was 38% higher than in 2019, grossing $33 million and grasping third place in the city. Caesars Atlantic City won $25 million, down 20%, Harrah’s Resort snared $28 million, off 10% and Tropicana Atlantic City ceded only 8.5% to finish at $29 million. Resorts Atlantic City did relatively well, just -2.5% down to $18.5 million, Golden Nugget swooned 23% to $16 million and Bally’s Atlantic City stumbled 17.5% to $15.5 million.
I’ve had a relationship with Anthony Curtis for more than 25 years. Mostly it’s a business relationship, but over the years we’ve also become friends of sorts. Not best friends, but friends nonetheless.
I received a telephone call from him at about eight o’clock one Saturday evening recently. I took the call, of course, but this was a surprise. I would definitely not be his first choice on a call like, “Hey, I’ve got an extra ticket to the Raiders game tomorrow. You interested?”
Editor’s Note: Yours truly is still on vacation, so today you’re in the capable hands of Jeff Leatherock, who ponders Las Vegas‘ emergence as a major league sports town. Enjoy!
I have been a big sports fan for 50 years. I also wound up being a fan of the business of sports for about as long. I read The $4000,000 Quarterback for the first time around 1972.
The 1960s-70s were a great time to be a young sports fan because new leagues and teams were popping up all the time and everywhere. From 1960-80 there was, on average, more than one new team added each year to the “big four” North American sports (baseball, football, basketball and hockey). Two football leagues, one basketball league, nine MLB teams. The NHL doubled in one Swell Foop in 1967, going from 6 to 12 teams, and by 1980 had 21 (!) teams. The NFL had endured the best shot of the AFL being formed and had a merger agreement with them by 1967. The attempt by the WFL to get in on the action in the early 70s was an abject failure. The ABA began their decade long war of attrition with the NBA in 1967 and ultimately staggered into the league with the Nets, Nuggets, Pacers and Spurs “allowed” to buy their way into the NBA.
If you’ve ever kicked the top off an ant mound to trigger and reveal an alarming frenzy of activity that is ultimately meaningless, then you know what it’s like to make an online post defending Colin Jones. The lurkers come out in full hater mode, trying to sting and bite everything in sight. A meta-analysis of the various websites now puts Colin Jones in a statistical tie with Jake “The Snake” Roberts, measured in terms of Villain Power Ranking. FiveThirtyEight projects CJ’s VPR to surpass Marlo Stanfield by the end of 2021.
There really weren’t any new criticisms. There are still three main categories: CJ markets easy money from counting like a snake-oil salesman; I learned on my own; CJ is killing the games.
Continuing JP Morgan‘s march through Las Vegas, senior analyst Joseph Greff met with Boyd Gaming CEO Keith Smith and CFO Josh Hirsberg. They seemed pleased, on the whole, marveling and the resilience of their customers, whose play was “amazingly consistent” no matter how many Covid-related mandates you throw at them. Downtown, they conceded was somewhat more of a challenge, given the lack of Hawaiian players. Spend per visitor, however, is above 2019 levels “which management attributed to a healthy consumer backdrop and a higher value customer coming through the doors.” This is some cooling-off in the regional markets, although Las Vegas locals and drive-in players remain stalwart. Boyd has even ceased marketing to low-value customers, what with Baby Boomers returning … albeit not yet at previous magnitude.
Management said it’s have trouble filling jobs, “noting that the shortage is somewhat limiting the amenities that can be offered.” That, in turn, is inhibiting revenue growth. Currently Boyd is at 60% of workforce strength compared to two years ago and “Surprisingly, the expiration of unemployment insurance/stimulus in some states has not resulted in people coming back to work.” Boyd is improving its profit margins by savaging marketing spending and relying less on full-time employees. (And they wonder why they’re having problems re-staffing.) Dark Eastside Cannery will remain so until January, possibly March. After all, it’s redundant to Sam’s Town next door, where business is “strong, but not overdone to level where additional capacity is needed.” A final bit of good news is that Boyd has gotten its leverage down to 3X equity or thereabouts, another sign of a company that rarely strays from sound business fundamentals.
