Tuesday, April 15, 2008

The Las Vegas Economic Downturn Has Started

The spillover effect from our national economic downturn has finally started to impact Las Vegas, and casino layoffs have officially begun (as I’ve been forecasting for some time):

MGM Mirage layoffs blamed on penny-pinching vacationers:

MGM Mirage Inc., the largest casino operator on the Las Vegas Strip, told more than 400 middle management employees they would be terminated immediately in a cost-saving move, the company said.

The decision will save $75 million annually and came after the company saw weakness since August at its properties, which include Bellagio, MGM Grand, Mirage and Mandalay Bay, spokesman Alan Feldman told The Associated Press on Monday.

The move is the largest and swiftest by a casino operator in the current economic downturn, although the use of so-called "extra board" employees such as dealers and busboys who take fill-in shifts as needed has been down citywide.

Budget-tight guests have shown a tendency to spend less in all major segments of the business, Feldman said.

"Instead of four days, people stay for three. Instead of a five-star experience, they are going for four stars. Instead of two shows, they're going to one," he said. "There certainly is the possibility that there are people who are also making a decision to gamble less."

My thoughts on the casino job cuts:

Looking into the future, I’m certain this “recently released” news is merely the opening salvo for thousands, upon thousands of additional Las Vegas job cuts to come.

The worsening housing crisis, dried up credit markets, high fuel prices, loss of consumer wealth effect and uncertain employment outlook will only lead to reduced visitor volume levels and exacerbate the already reduced discretionary spending levels of the tourists who do come.

I have written about this “Las Vegas Domino Effect” several times in the past. A couple of my posts below:

- Las Vegas House of Cards Bound fall
- Las Vegas Preforeclosures Hit Record

In other Nevada News -- Gaming Revenue down:

Nevada casino wins down nearly 4 percent in February (Note: Las Vegas makes up the majority of the casino/gaming market in Nevada)

There was no leap in the win for Nevada casinos in February despite an extra Leap Year day in the month and other seemingly positive factors. The clubs won $1.01 billion, down nearly 4 percent compared with the same month a year earlier.

The slump occurred despite a 29th day for the month, the reopening of a major Las Vegas resort that had been closed by a fire, and tourist draws including Super bowl and Chinese New Year activities and a three-day President's Day holiday.

"We were disappointed but we can't say it was unexpected," Gaming Control Board analyst Frank Streshley said in releasing the February win report on Wednesday. "It's definitely a reflection of the soft economy and people tightening up their spending habits."

Wednesday's Control Board report is the latest in a series of reports with grim economic news. In late March, other documents showed a continuing slump in sales and higher-than-average unemployment in Nevada.

The Nevada Real Estate market also made headlines today (again--for the 15th straight time): Foreclosures jump 57% in March -- Nevada once again leads the nation in defaults (Note: Las Vegas foreclosures make up the vast majority for Nevada)

NEW YORK (CNNMoney.com) -- Foreclosure filings jumped 57% in March compared with the same month last year and rose 5% versus February, as the nation's housing market continues to deteriorate.

RealtyTrac, an online marketer of foreclosure properties, said Tuesday that 234,685 homes were hit with foreclosure filings last month, which include default notices, auction sale notices and bank repossessions. Of those, 51,393 homes were lost to foreclosure - a 10% increase over the number of homes lost in February.

"What this report shows us is that the housing market correction is ongoing and we shouldn't expect the subprime problem to vanish anytime soon," said Jared Bernstein, a senior economist with the Economic Policy Institute.

On a year over year basis, the number of homes repossessed by banks are up 129%.

Nevada had the highest foreclosure rate of any state in March, marking the 15th consecutive month that it's has topped the list. One out of every 139 Nevada households received a foreclosure filing last month, which is nearly 4 times the national average, and an increase of 62% versus March 2007.

Nevada State tax receipts have fallen almost 9% short of expectations because of the economic downturn spawned by the collapse of the real estate market: Nevada Budget shortfall hits $913.7 million (My thoughts--State/County/City Job cuts to follow shortly?)

Of the $913.7 million total shortfall, about $643 million is the revenue hit directly on the general fund from reduced tax collections. In addition, the state must kick in $194 million to cover the sales tax shortfall to Nevada school districts, which is required by statute, $60.7 million to Medicaid because of higher than expected caseloads, the $15.5 million shortage in the Division of Child and Family Services and a $280,000 shortage in welfare services.

Agencies already cut their budgets by 4.5 percent in January. That included more than $200 million in operational and program reductions out of a total of $564.7 million in first round reductions.

“We just hope we’re not going to be doing this again in three months,” said Ways and Means Chairman Morse Arberry.

Closing Thoughts:

As previously stated by this author: The Las Vegas economy lacks any real/substantial diversification from gaming/tourism and we are completely dependent on the discretionary spending of vacationers.

As you just read above, this discretionary spending has now started to slow and the negative consequences are beginning to effect the broader economy & casino employment numbers. I personally expect these problems to get much worse over the next 24+ months... As the layoffs increase, mortgage defaults will continue to swell and the availability of 1-way U-haul rentals (out of town) will become very scarce.


Randy -- Economicrot


Anonymous said...

really nice work and glad to see this finally happen, finally the true adjustment to the sleaze city

"what happens in vegas.....happens to vegas"

Anonymous said...

I just found your site off of dollarcollapse.com good stuff so far

Chris said...

I just found your blog and must say it is excellent. I have similarly been researching these various topics and have come to the same conclusions over the last year. Have you spent time over at the Financial Sense website (run by Jim Puplava), and/or studied any of Peter Schiff's work? I find them very much in tune with your predictions.

I question: for the videos section on the right side of your blog, the links to the videos do not seem to be actual hyperlinks. Can this be corrected, or am I doing something wrong?

Keep up the great blog, and position yourself appropriately.

Randy said...

Appreciate everyone posting up -- and thanks for the kind words.


Yes I follow both and agree with much of what they say. However, though I think Schiff is extremely intelligent (and I even read his book "crash proof"), I don't think we'll see the world "decouple" from the US as he predicts.

As for the video section: I just checked out all the links and they seem to work fine. Some will link you to imbedded videos internal to posts at this site (economicrot) while others will link you over to You Tube.

Pls try again: Click link, give it some time for loading (hopefully you are DSL or Cable--not dialup) and let me know the outcome.

Again, thanks


Sid R Real said...

To comment on two posts at once...
Your post from monday mentions crude @ $112, and as we've seen today $114 is looking like a shoe-in for tomorrow (I think $113.80 was interday today)

Starting to see more 'analysts' talking about $150 before $100 based on current data.

So... out here in AZ I saw gas jump about a dime ($0.10) overnight.

I don't even wanna know what $150 bbl translates out to in DPG ($ per Gal.)

I'm wondering how that's going to effect the 'Lost Wages' drive in tourists crowd? (eg: L.A., PHX, etc.)

Based on the prices I'm seeing in AZ, I'm thinking there's LOTS of $4 gal. gas in CA already, not just that coffeshop/gas (one pump) station in Big Sur that they've used previously as a photo op to illustrate high gas prices. (expensive as Cali is, that place is usually about $0.50 more than the rest of the state, just like those 'last chance for 75 miles' gas stations out in 'Ft Stinkin Desert,' AZ, CA, NM, & NV' because it's the last gas on the PCH (Hwy 1) for quite awhile)

Anyway, I'm just wondering how fewer people will be arriving in the coming months to 'attend one show, instead of two, etc.

Speaking of that, I noticed a weird thing, Penn Jillette has a video blog AND was just recently on 'Dancing With The Stars'
Not to weird on it's face, but Penn made a comment once on the v-blog elluding to someone telling him he needed to do this extra promo for himself.
(I extrapolated that to mean that attendance is down at their show @ the Rio, and this may be an attempt to bolster interest (and thereby attendance) in their show.)

Anyway, I'm probably reading a bit too much intrigue into it, but the timing seems dead on regarding my proposed scenario.


Anonymous said...

My husband and I live in Las Vegas, and we thank our lucky stars that this year, since the first of January, he has remained steadily and gainfully employed in the construction trade. Last year, he got laid off from the Paris Hotel-Casino in September and was without work for a total of about 3months.

Our hope is that, as the economy worsens, people who would otherwise plan overseas holidays, will nevertheless continue to get away to Las Vegas. A 3-day stay (as opposed to a 4-day stay) is still better than nothing. No matter how hard the times become, people still enjoy spending money on enterrtaining themselves.

Given the nature of the situation, perhaps Las Vegas will return to being the bargain destination it used to be: $1.99 breakfast buffets and $49 a night rooms. Wouldn't that be loverly? Viva Las Vegas!

Anonymous said...

This post just prompted a thought. Will the gambling houses have to offer gambling in currencies other than the dollar to attract tourism?
Before you know it, there will be an underground society that conducts commerce by exchanging foreign currency. Vegas could very well be the launch pad for permeating foreign currency throughout the entire USA.

Steve Harless said...

Latest Las Vegas Real Estate Report For March 2008

This report reflects the number of sales in each Zip code, as well as the lowest, highest, and median price of homes sold. The Zip code with the highest number of closings for March was 89178, which had 90 SFR closings and a median price of $248,627. In the same month one year ago, this Zip code posted 221 SFR closings. There was a total of 1,390 SFR closings last month. Interest rates are on the rise. Yesterday morning rates were at 5.75% on a conventional loan with 1 point - 6.0% with 0 points & now they are 6.125% with 1 point & 6.375% with 0 points. Some good (great) news: "Expect a full recovery of the housing market by 2010 and likely a shortage of residential units by the end of that year, reversing today's glut of 23,000 homes for sale." "...Las Vegas will need a quarter million new residential units over the next three years as 40,000 to 100,000 jobs are added to the [Las Vegas] economy." - Source: Las Vegas Business Press, Hubble Smith.

Randy said...

Steve Harless,

As a realtor, I understand that your livelihood depends on being positive and selling this market regardless, but I certainly hope you’re not betting the bank on that EXTREMELY optimistic Las Vegas Business Press article, because we won’t even be at the bottom by then. Please take a look at the mortgage reset chart in this post -- MASSIVE Alt-A/Option ARM resets through 2012:
Inflation or Hyperinflation

Bottom Line: This downturn will take a DECADE or better to wring out all the excesses and it will be very difficult for everyone.

If you really need to cling to that forecast--good luck with that, but you were warned.

This severe downturn that is coming is about MUCH, MUCH more than just a popping Housing Bubble. It is about the popping of a World-Wide CREDIT Bubble, the loss of the World's Reserve Currency, a shift of global forces eastward and the potential failure of our G-7 financial system.

A Hyperinflationary recession and/or depression is right around the corner as the fed tries to monetize our way out of this financial crisis.

Best regards and I hope that you're able to open your eyes and grasp what is really in play.


Randy said...


$150 Oil probably equates to $5 Gas and will spill over into prices everywhere.

Regarding Penn and Teller. Don't know but quite possible.

Anon 9:27,

Glad to see you husband get back into a good job and I hope you stay in good fortune.

Additionally, Agree with you 100%. It certainly would be nice to see bargains again--this place has become far too expensive for my tastes.

Anon 5:38,

Very good "out of the box" thought there. As the dollar continues falling into the abyss, business/consumer demand for foreign currencies may rise dramatically (as a store of value)

Regards to all and thanks for posting up


Steve Harless said...

Randy: Lots of truth is presented in your article(s)and I commend you for your points of view, as I share many of your thoughts.

I am not afraid of being wrong or incorrect in my views. I am living in the present and making my accessments as of now.

My intent is not to be another transparent real estate cheerleader, but a realist for my clients shopping for homes for many reasons: They need a home, and I am a bright, energetic, experienced agent who can deliver that home for them.

My job is to find them the best home for their money and negotiate the best deal possible.

Las Vegas has more potential then most American cities right now....As an example where else will you find iron workers that make 10-12k a month working on high rises? Currently there are 8 people an hour moving to Las Vegas.
You will not find that anywhere else in the states.

My biggest fear is the new world order is being manufactured by the banking crises and developing quickly and that you will be right in all of your predictions.

Thank you for your articles, and keep'em coming.

Out at the peak said...

This reminds me that I skipped my yearly Las Vegas vacation this year. It's not that I couldn't afford it, I've just been more focused on conserving cash just in case I do lose my job. I'm already considering skipping 2009 as well unless I land some extra cash by October.

Anonymous said...

This is what happens when one mob sits on their asses and does nothing to shut down a much bigger mob one filled with incompetent treasonous mad bombers like the Cheney /Bush gang.
In my view the dollar "collapse" is closely related to the building "collapse" on 911

Anonymous said...

I just got back form Vegas and it looks like Europeans are having a "dandy" of a time spending those Euros. Adios Americano. Looks like the fall of the US is upon us.

Chris said...

Thanks for the help, I tried the links again but still can't get them to open. I'm referring to the ones that say **Must Watch Videos** on the right sidebar. I am just curious to see what they are, but perhaps my old computer isn't recognizing them as hyperlinks. There is just nothing for me to click on when I move my mouse over there.

Anyway, I am enjoying reading your blog, because I think that Las Vegas is a microcosm for the ills that have plagued the most speculative parts of the nation as a whole over the last two decades.

Randy said...


Thanks for the clarification and I'm glad you're not a cheerleader. I too share your concerns with regard to TNWO.

Peak, What's wrong, come on out and pay my taxes. Didn't you realize: EVERYBODY WINS!!

Anon 7:22: You're probably right--See post: Final End Game

Anon 3:37: I hope not but our future certainly doesn't look good

The links do work, so you're probably right--something to do with your computer.

Again thanks to all for posting up your thoughts


Anonymous said...


- Forwarded Message -

To: carolyn@carolynbaker.net,carolyn@jpost.com

Subject: Carolyn, It's By Design--not happenstance or accident

Re: "The Coming Ecological Collapse..."



Carolyn, please scroll down to the bottom of this page and read the excerpt to my essay, "The NAFTA Debacle," then open the link and
read the entire text ((and read all of my thoughts and links in here, as you'll come to see the Big Picture if you do; and you may post anything of mine without attribution, nor do you need to contact me to acquire my permission)):


To: OpEd@csps.com

Subject: Turn Your Investigative Reporters Loose

Pass along my essay, "Planned Destruction...," to your investigative reporters, and confirm or deny what I've written:

Planned Destruction of America


- Forwarded Message -


Why China is the REAL master of the universe

My April 7th letter to editors at DailyReckoning.Com:

Pay attention, folks!

This is a conspiracy-driven dismantlement of the West's financial underpinnings, for a certain purpose: TO EQUALIZE GLOBAL ECONOMIES, for future installation of one-world government.

I've provided all the details in my essay, "Planned Destruction of America" (linked below), which is my report on Lt. Col. Archibald Roberts' 1968 booklet: "The Anatomy of a Revolution".

Study my essay, then write as if we're all being led down a path to hell on Earth by secretive, elite movers and shakers on the Left and Right (path to hell aka “Third-Way
Global Economic Socialism”). Read and learn and teach:

The EU and the coming North America Union are products of the 1940s GATT formulations, and very few analysts are aware of it ((GATT, NAFTA, and CAFTA are socialistic attempts at equalizing global economies, in order to install one-world government under THIRD-WAY Global Economic Socialism)).

My missive to Ron Paul’s staff, regarding my view that this financial crisis is not by happenstance nor mismanagement—but BY DESIGN!:

The Honorable Ron Paul is ignorant of an ongoing conspiracy to topple, financially, the West, in order to equalize the world’s economies; for building one-world government under GLOBAL ECONOMIC SOCIALISM. // The conspiracy began in the 1940s with the GATT formulations. // Ask why Greenspan had violated his chairmanship duties by advising
prospective home buyers to take out an ARM. // Ask why Greenspan had sent out fed regulators to warn banks that they’d be charged with RACISM if they didn’t loosen home loans for minority, HIGH RISK home buyers. // Ask why Greenspan recently, TRAITOROUSLY, had advised OPEC oil producers to de-link from the U.S. dollar. // Greenspan - the FEDERAL RESERVE - has embarked on a purposeful set of monetary policies designed to destroy the West’s financial underpinnings. // Read about the WHO, the HOW, and the WHY of it in my below article (first one):

Planned Destruction of America

Corporate America: What Went Wrong?

This one helps to confirm efforts to PURPOSELY trash America’s financial underpinnings:



Oil is payoff for the West's efforts at providing PROXY COMBATANTS for Israel--for protecting Israel from expanding,
encircling Islamic Arabism; a Jewish nation-state having supporters throughout the West willing to destroy the entirety
of Western civilization for Israel's sake.

That's the gut-wrenching truth of why Western democracies are sacrificing blood and treasury in the Middle East; especially the U.S., which has enough off-shore and on-land oil reserves to last 300 years at her present rate of consumption, and which reserves were PURPOSELY capped and/or not drilled because Israel's supporters poured millions of dollars into ENVIRONMENTAL MOVEMENT groups' coffers, to work at keeping America from oil/energy independence and tied to Israel's interests in the Middle East. That's the truth you'll NEVER see nor hear reported in Western mainstream news media, because Israel's supporters control what's fit to be said or printed about why the West wars with Islamic Arabism.





“Because many nations’ agricultural production will decline under NAFTA and GATT, in becoming dependent on the more productive nations’ capacity to export cheaper product to them, they’ll become gravely vulnerable to any of the exporting nations’ food-production declines, possibly resulting from bad weather conditions or bad economies. ‘Free trade’ in food sets up a looming catastrophe (read my essay, GATT: Ubiquitous Treason)…Wouldn’t such worldwide economic interdependence necessarily set the stage for a worldwide economic collapse should any one nation seriously falter? Such a worldwide collapse would make America’s Great Depression appear like good times. Why aren’t the NAFTA and GATT crafters arguing for more economic independence for nations - for rugged individualism among nations – rather than building this One World interdependency that their brand of ‘free trade’ necessarily engenders?”

The NAFTA Debacle (1995)

= = = = = = =

“After sopping up aid these past sixty years from the most benevolent and generous people the world has ever known, Third
Worlders demand that we send them our industries or they'll send us their poor.”

NAFTA Revisited

Population Bomb and China