Over 60,000 Clark County (Las Vegas) homes are in some state of foreclosure
- 28,316 are Bank Owned
- 10,853 are up for Auction
- 21,173 are in Preforeclosure
RealtyTrac - Las Vegas Foreclosures
Increasing unemployment will make matters worse
Recent post w/LV housing graphs
1/2 Homeowners w/mortgage are now upside down
Friday, December 19, 2008
Time to man the lifeboats
Excellent read over at Dave Eriqat's Blog. Dave has superbly articulated many of the thoughts/discussions that regularly take place here at Economicrot (only better): Time to Man the Lifeboats
Thursday, December 18, 2008
Oil, Gold and Dollar Charts/Discussion
Oil Weekly Chart: Oil is in a historic, massively oversold condition that looks to be finding a bottom.
I would suggest, based on huge OPEC production cuts of late, when combined with the recent "significant" downturn in the dollar's value (bottom two charts), prices wont stay down here for too long. Once the black PPO line (top right of chart) begins an upturn, you can likely expect to see a quick rebound in prices.
Gold Daily Chart: The US is currently undergoing a significant bout of (depressionary) deflation and with increasing unemployment figures, reduced credit availability and a maxed out population, these deflationary pressures are quite likely to get far worse over time.
A very concerned Federal Reserve, acting in desperation, has recently pulled out all stops in their quest to stop/reverse these deflationary pressures - before they spiral out of control. Recent implementation of ZIRP policy, when combined with the announced plan for a future Monitization Program (printing money to buy huge sums of debt) has investors correctly worried about 1) the long-term implications these activities will have on the future of the US dollar (the world's reserve currency) and 2) the potential this creates for igniting a new run up in inflationary pressures.
Thus the flock to gold as a long term safe haven - A store of value as people begin to lose faith in the future purchasing power of the dollar.
Note the chart of Gold below and how prices recently crossed the 200 Day Moving Average - a very good sign. Additionally, the PPO is positive and risng - another very good sign.
Now, that's not to say we won't see another price pullback - anything is possible these days, but as long as we stay above the last low of $741, gold remains in good shape. What we ultimately want to see is continously higher highs and higher lows upon each turn (up or down).
US Dollar Weekly Chart: The strong dollar run-up through November was caused by massive global deleveraging, a flock to safety and a few Plunge Protection Team (PPT) taxpayer funded tricks, but as the fed grew ever more concerned about growing deflation, he emptied his arsenal (ZIRP + highlighting a future monitization program) and dollar values QUICKLY cratered on anticipation of future inflation. Again, for those who don't really understand: Consumer inflation is merely the end-result of expanding a nations money supply. The increasing number of fiat dollars created by the fed (created from nothing) end up fighting for the same number of goods and services, increasing consumer costs by devaluing the currency's purchasing power. (more dollars chasing the same # of goods/services).
Note the dollar chart below. PPO is falling fast and the Dollar's value is quickly approaching and will likely soon slice through its 40 Week Moving Average.
Based on the historical downtrending pattern of this chart, I foresee a new "ALL TIME LOW" being reached quite soon - likely ~ 66-67 (maybe lower).
With all this said and before calling it a night. Futures are currently pointing to a lower open tomorrow (DOW Down 56), but no economic reports are due - which leaves the PPT in a pretty good position for manipulating the markets towards a positive close.
On the other hand, tomorrow is a Quadruple Witching day - A day on which contracts for stock index futures, stock index options, stock options and single stock futures (SSF) all expire.
From StreetAuthority.com:
On quadruple witching days, and especially during quadruple witching hours, many investors attempt to unwind their positions in their futures and options contracts before the contracts expire. This activity frequently includes repurchasing contracts and closing out other positions meant to hedge against these contracts.
Why It Matters:
Quadruple witching days are usually accompanied by considerable volatility in stock and derivative prices, as well as increased trading volume. As a result, investors can anticipate and plan for the potential effects of these relatively turbulent trading days.
Have a great evening
Randy
I would suggest, based on huge OPEC production cuts of late, when combined with the recent "significant" downturn in the dollar's value (bottom two charts), prices wont stay down here for too long. Once the black PPO line (top right of chart) begins an upturn, you can likely expect to see a quick rebound in prices.
Gold Daily Chart: The US is currently undergoing a significant bout of (depressionary) deflation and with increasing unemployment figures, reduced credit availability and a maxed out population, these deflationary pressures are quite likely to get far worse over time.
A very concerned Federal Reserve, acting in desperation, has recently pulled out all stops in their quest to stop/reverse these deflationary pressures - before they spiral out of control. Recent implementation of ZIRP policy, when combined with the announced plan for a future Monitization Program (printing money to buy huge sums of debt) has investors correctly worried about 1) the long-term implications these activities will have on the future of the US dollar (the world's reserve currency) and 2) the potential this creates for igniting a new run up in inflationary pressures.
Thus the flock to gold as a long term safe haven - A store of value as people begin to lose faith in the future purchasing power of the dollar.
Note the chart of Gold below and how prices recently crossed the 200 Day Moving Average - a very good sign. Additionally, the PPO is positive and risng - another very good sign.
Now, that's not to say we won't see another price pullback - anything is possible these days, but as long as we stay above the last low of $741, gold remains in good shape. What we ultimately want to see is continously higher highs and higher lows upon each turn (up or down).
US Dollar Weekly Chart: The strong dollar run-up through November was caused by massive global deleveraging, a flock to safety and a few Plunge Protection Team (PPT) taxpayer funded tricks, but as the fed grew ever more concerned about growing deflation, he emptied his arsenal (ZIRP + highlighting a future monitization program) and dollar values QUICKLY cratered on anticipation of future inflation. Again, for those who don't really understand: Consumer inflation is merely the end-result of expanding a nations money supply. The increasing number of fiat dollars created by the fed (created from nothing) end up fighting for the same number of goods and services, increasing consumer costs by devaluing the currency's purchasing power. (more dollars chasing the same # of goods/services).
Note the dollar chart below. PPO is falling fast and the Dollar's value is quickly approaching and will likely soon slice through its 40 Week Moving Average.
Based on the historical downtrending pattern of this chart, I foresee a new "ALL TIME LOW" being reached quite soon - likely ~ 66-67 (maybe lower).
With all this said and before calling it a night. Futures are currently pointing to a lower open tomorrow (DOW Down 56), but no economic reports are due - which leaves the PPT in a pretty good position for manipulating the markets towards a positive close.
On the other hand, tomorrow is a Quadruple Witching day - A day on which contracts for stock index futures, stock index options, stock options and single stock futures (SSF) all expire.
From StreetAuthority.com:
On quadruple witching days, and especially during quadruple witching hours, many investors attempt to unwind their positions in their futures and options contracts before the contracts expire. This activity frequently includes repurchasing contracts and closing out other positions meant to hedge against these contracts.
Why It Matters:
Quadruple witching days are usually accompanied by considerable volatility in stock and derivative prices, as well as increased trading volume. As a result, investors can anticipate and plan for the potential effects of these relatively turbulent trading days.
Have a great evening
Randy
Wednesday, December 17, 2008
Peter Schiff on Kudlow - Target Rate To Record Low
Peter Schiff on Kudlow Panel 12/16/2008
Don't miss this excellent exchange!
Part 1
Part 2
Part 3
Part 4
Don't miss this excellent exchange!
Part 1
Part 2
Part 3
Part 4
Tuesday, December 16, 2008
Just how bad is the Las Vegas Unemployment Situation?
I've been discussing the deteriorating Las Vegas Job Market for quite some time now (my most recent LV post). With an "Officially" declared unemployment rate of 7.6% (Note: the real rate is closer to 15%) Las Vegas is currently home to one of the worst economies in the nation.
So, just how bad is the LV unemployment situation? Please allow the following Las Vegas Sun Article to illustrate just one small example that is indicative of a much broader and growing, city-wide unemployment problem.
A vast hunger for work at In-N-Out cattle call
Hundreds line up for shot at fewer than 50 jobs at new fast-food store, with similar turnout expected today
So, just how bad is the LV unemployment situation? Please allow the following Las Vegas Sun Article to illustrate just one small example that is indicative of a much broader and growing, city-wide unemployment problem.
A vast hunger for work at In-N-Out cattle call
Hundreds line up for shot at fewer than 50 jobs at new fast-food store, with similar turnout expected today
Michael Rayford, left, poses a question to manager Steven Posada as job-seekers wait Monday afternoon inside a hotel to apply for jobs at an In-N-Out burger joint that is set to open at Tropicana Avenue and Tee Pee Lane.
By Timothy Pratt - Tue, Dec 16, 2008 (2 a.m.)
If president-elect Barack Obama could have stepped out of the flat-screen TV on the wall of the Holiday Inn Express on Rainbow Boulevard on Monday, he would have come face to face with the stark reality of the economy.
As rain pelted the roads and Obama announced more Cabinet appointments, close to 500 people filed through the hotel lobby, hoping to get a job flipping or serving burgers.
Today more of the same is expected, meaning that by day’s end close to 1,000 will have applied for no more than 50 $10-an-hour jobs at an In-N-Out restaurant opening at Tropicana Avenue and Tee Pee Lane.
Some wore ties. Some wore their pants too low. Some were balding. Some owed two months of mortgage payments. Some spoke openly of suicide. Some asked this reporter for a job. Some asked the manager at the hotel hosting the event for a job.
Of the crowd, Blande Pittman, regional division manager for the chain, flatly observed, “We expected a high turnout, because of the economy and all.”
But Sharell Hewlett, who will be one of the managers of the new restaurant and had the frontline job of handing out applications, said she found the range of applicants, from teens to retirement age, “incredible.”
There was 42-year-old Freda Beckwith, who Wednesday observes three months of joblessness. Her resume ends at the Bellagio, where she was a cashier until Sept. 17, when she and 14 others in her department were stripped of their jobs.
Her curriculum vitae also includes nine years of cooking at New York-New York, a certificate that shows she was once employee of the month and another that shows she was never late or absent.
Her husband is disabled and brings in only $700 a month in Social Security disability payments, so they are now two months behind on payments on their house, she said.
She has applied for jobs at every hotel and casino on the Strip; she has filled out dozens of applications. She thinks younger people are getting the jobs.
“Sometimes I want to sit down and cry,” she allowed. “But what good would that do?”
Like others in the various lines — one to get an application, one to be called to cross the parking lot to the interview queue, the one to await an interview, and, for the lucky few, another to be interviewed a second time — Beckwith said she never imagined herself applying for a job at a burger joint.
One guy, also in his 40s, looked more corporate than most anyone who has ever taken an order for fries — floor-length wool coat, white shirt and blue tie. He turned a reporter’s questions immediately around.
“Does your newspaper need anybody? I studied communications in college and have that stuff down pat.”
He’s staying with friends until he can find his own place. He assures a listener he is “not going to give up. I’m not going to knock myself off.”
He was one of two people in line who brought up suicide.
And though he began the conversation by offering his hand and his name, he later left a message asking not to have his name printed.
“I don’t want my homies to know I’m not working,” he explained.
Grace Robinson, manager at the Holiday Inn Express, said she had never seen such an event draw so many applicants. She had to scramble to find extra rooms and chairs to allow the throng to come in out of the rain.
She said her hotel is not immune to the same conditions drawing those hundreds, however; with fewer guests, her staff works fewer hours now than in the past.
“Maybe this (event) will allow them to see how thankful they should be having the hours that they do,” Robinson observed.
A few enterprising would-be grill-tenders also approached Robinson. More than one had what she called “amazing resumes,” including a union carpenter who, at In-N-Out, would earn less than a third of his former salary.
“People want to work,” Robinson said. “There’s just no jobs.”
Among the applicants for the type of work that in the past largely belonged to teenagers was 22-year-old Javaris Pickard, who had sat on a bus for three hours to be number 283 in line early Monday afternoon.
He has been seeking work for four months. During that time, he said, he has passed written and physical exams for Metro Police, a job he said he would like so he could give back to the community where he grew up, the gritty streets surrounding Martin Luther King and Lake Mead Boulevards.
But he found his way to the Holiday Inn Express, he said, “because any income is better than none.”
Hewlett, who the applicants didn’t know was their potential future boss, made a trenchant observation after a series of grunts from applicants as they received or handed back the forms. Few matched Hewlett’s friendly banter.
“You know,” she said, “the experience is important, but we also train people in the system we use. What we look for is smiling people. We want their personalities to shine through, since they’re going to be dealing with customers every day.”
On Monday afternoon, smiles were as scarce as jobs
NEW Updated Dollar Chart - 16 Dec 08
Holy Crap Batman - the US Dollar looks like it fell off a cliff today! A one day loss of nearly 200 basis points - this is massive! Click pictures to enlarge:
Dollar Weekly Chart:
Dollar Weekly Chart:
Dollar Daily Chart
FROM YESTERDAY'S POST (BELOW)
The US Dollar was creamed today - falling over 100 basis points on anticipation of additional Fed Rate cuts tomorrow.
Looks to me like market deleveraging and PPT induced US Dollar Rally may be near completion - will likely take some time (couple/few months), but it's now set off to tests new lows once again - causing oil to spike back up over $100 again and spawning a new wave of consumer inflation.
Monday, December 15, 2008
Housing Charts of Interest
Note: Click pictures to expand their view
RealtyTrac US Foreclosure Heatmap - Feb 2008
Early 2008 BusinessWeek map illustrating option ARM prevalence by U.S. region
Moving a little closer to home:
RealtyTrac US Foreclosure Heatmap - Feb 2008
Early 2008 BusinessWeek map illustrating option ARM prevalence by U.S. region
Moving a little closer to home:
1/2 of Nevada Homeowners Upside Down
Quotes from video:
"In fact, the Center for Business and Economic Research says about 50-percent of all homeowners in Nevada are upside down. That means half of the homes are now worth less than the mortgage."
"Virtually all neighborhoods in the Las Vegas area show the signs of recession. In some cases, 30-percent of the homes in a neighborhood sit in foreclosure. The huge number of them pulled prices down 34-percent from the peak house value. Nevada ranks second in the nation, only to Phoenix, in that category."
"In fact, the Center for Business and Economic Research says about 50-percent of all homeowners in Nevada are upside down. That means half of the homes are now worth less than the mortgage."
"Virtually all neighborhoods in the Las Vegas area show the signs of recession. In some cases, 30-percent of the homes in a neighborhood sit in foreclosure. The huge number of them pulled prices down 34-percent from the peak house value. Nevada ranks second in the nation, only to Phoenix, in that category."
Dollar and Gold Charts
The US Dollar seems to be losing a bit of its luster and Bernanke's rate cut tomorrow is unlikely to make things any better
US DOLLAR DAILY CHART
Note how it has recently fallen through its 50 day Moving Average
US DOLLAR DAILY CHART
Note how it has recently fallen through its 50 day Moving Average
US DOLLAR WEEKLY CHART
Note the significant PPO downturn (black line, top right)
GOLD DAILY CHART
Note the rising PPO. Additionally, the 200 day Moving Average is close and will likely soon be crossed to the upside 
Sunday, December 14, 2008
60 Minutes: A Second Mortgage Disaster On The Horizon
As correspondent Scott Pelley reports, it turns out the abyss is deeper than most people think because there is a second mortgage shock heading for the economy. In the executive suites of Wall Street and Washington, you're beginning to hear alarm about a new wave of mortgages with strange names that are about to become all too familiar. If you thought sub-primes were insanely reckless wait until you hear what's coming...
The trouble now is that the insanity didn't end with sub-primes. There were two other kinds of exotic mortgages that became popular, called "Alt-A" and "option ARM." The option ARMs, in particular, lured borrowers in with low initial interest rates - so-called teaser rates - sometimes as low as one percent. But after two, three or five years those rates "reset." They went up. And so did the monthly payment. A mortgage of $800 dollars a month could easily jump to $1,500.
Now the Alt-A and option ARM loans made back in the heyday are starting to reset, causing the mortgage payments to go up and homeowners to default.
"The defaults right now are incredibly high. At unprecedented levels. And there’s no evidence that the default rate is tapering off. Those defaults almost inevitably are leading to foreclosures, and homes being auctioned, and home prices continuing to fall," Tilson explains.
"What you seem to be saying is that there is a very predictable time bomb effect here
Asked how many of these option ARMs he imagines are going to fail, Tilson says, "Well north of 50 percent. My gut would be 70 percent of these option ARMs will default."
The trouble now is that the insanity didn't end with sub-primes. There were two other kinds of exotic mortgages that became popular, called "Alt-A" and "option ARM." The option ARMs, in particular, lured borrowers in with low initial interest rates - so-called teaser rates - sometimes as low as one percent. But after two, three or five years those rates "reset." They went up. And so did the monthly payment. A mortgage of $800 dollars a month could easily jump to $1,500.
Now the Alt-A and option ARM loans made back in the heyday are starting to reset, causing the mortgage payments to go up and homeowners to default.
"The defaults right now are incredibly high. At unprecedented levels. And there’s no evidence that the default rate is tapering off. Those defaults almost inevitably are leading to foreclosures, and homes being auctioned, and home prices continuing to fall," Tilson explains.
"What you seem to be saying is that there is a very predictable time bomb effect here
Asked how many of these option ARMs he imagines are going to fail, Tilson says, "Well north of 50 percent. My gut would be 70 percent of these option ARMs will default."
The Las Vegas gravy train has ended
The Las Vegas economic boom of the last decade, much like the broader nationwide housing bubble, was fueled by cheap credit, irrational exuberance and a vision of unending parabolic profits far into the future. Leaders and businessmen, blind to any future economic downturn (remember: Las Vegas was recession proof), continued to play the only card game they knew and each new mega gaming facility had to outdo all of the previous. Thus, billions of investor dollars poured into the city - hoping to catch a splash of the never-ending tidal wave of gaming revenue generated profits, and it worked - for a while.
On the flip side: though this narrow-minded, one-way vision was great for those early enough to catch a ride on the gravy train, it prevented the city from developing any "real" economic diversification and the economy grew ever more dependant on increasing 1) the volume of tourism and 2) their discretionary spending.
Back in March of 2006 I wrote:
The (currently) thriving Las Vegas economy is completely dependent on the discretionary spending of vacationers (Airlines, Hotels, Restaurants, Shows, Gambling, Drinking, Strip Clubs, etc), as the city lacks any real or substantial diversification. Gaming is big money and people have been more than happy to live life to the fullest and part with their cash in a strong U.S. economy. This spending has kept thousands upon thousands of Las Vegans gainfully employed.
But what will happen when the U.S. economy finally starts to contract, when millions of U.S. homes start to lose value, when consumer interest rates rise and payments double on credit cards, when gas & travel become prohibitively more expensive, when the American consumer is finally tapped out and no longer has the discretionary money to gamble away in Vegas?
Answer: Gaming revenues will drop, hotel occupancy rates will fall, and thousands of layoffs will follow.
Those who find themselves unemployed will quickly find that they have very limited options, as the entire hotel & gaming industry will be feeling the same economic pains. The lack of industry diversification in the city will be a killer...
Once the LV layoffs begin, more homes will go into foreclosure, as people won’t be able to make their mortgage payments. Then businesses outside of the casino industry (local restaurants, retail, home improvements, beauty, health care, etc) will also begin to feel the pain. Eventually, a chain reaction of dominoes will begin to fall, and ultimately the number of outbound U-hauls will vastly exceed those inbound...
Back to Today:
Though many gaming industry and community leaders have tried to keep it under wraps for several months now, the long-held Las Vegas secret is finally making it out to the masses: The gravy train has ended and Las Vegas is quickly becoming one of the worst economies in the nation.
- Airline numbers are down/tourism is falling
- Hotel occupancy significantly lower
- Tax revenue is cratering
- Massive State Budget Shortfalls
- #1 in foreclosures for 23rd straight month (1 in 61 houses)
- Top of the list in home price declines
- 1/2 homeowners upside down on mortgage
- Swiftly imploding construction industry
- Major Construction Projects canceled or "On Hold"
- "Official" unemployment rate of 7.6%
- Numerous casinos facing budget shortfalls/bankruptcy
I could go on, but believe the point has been made. The LV economic situation is becoming dire and unless we see a quick rebound in tourism and gaming (highly unlikely), it is destined to get far worse in the months ahead.
With that said, the most recent Gaming report released on December 11th announced Las Vegas Strip gambling revenue fell 26 percent in Oct - the worst report EVER!
Las Vegas Strip - gambling revenue falls 26 pct
"As expected, October was another difficult month for the Las Vegas Strip as the credit crisis took hold and paralyzed consumers," Jacob Oberman, director of gaming research and analysis for CB Richard Ellis, said in an e-mail to clients and investors. "More importantly, housing markets across the nation continue to weaken, which will continue to pressure Las Vegas going forward."
So what can we expect to see in the weeks and months ahead?
Dear readers, many Las Vegas casinos are operating on life-support and though they've been trying to reduce operating expenses/costs in the attempt to pull through to the other side, there currently is no "other side" - not even a glimmer of light at the end of this tunnel, and (I believe) future layoffs are the next big domino to fall...
Though industry personnel cuts have largely been held "under the radar" while quietly picking up steam, we've yet to see the MASSIVE cuts required to keep the industry solvent - this will likley change in the coming weeks and months ahead, as thousands upon thousands of newly unemployed Las Vegans usher in a bleak 2009.
Merry Christmas, Your Fired! Las Vegas Casino Tells Employees
Starting today, lay offs will be the fate of more than 200 Las Vegas Sands Corporation employees.
The company, taking a line straight from Ebeneezer Scrooge, decided that over $6.5 million in bonuses were being cut for 2008. They did not stop there, however, announcing that they would be firing over 200 employees right before the holidays.
On Friday, employees will begin to be notified that their childrens' Chirstmas would become a product of the slow economy. Employees who have been with the company for years will be told they no longer have jobs.
"To do this right before the holidays shows just how desperate Las Vegas Sands has become. They have now tipped their hand on just how much danger they are in, and it will hurt them dearly with their investors," said financial analyst Thomas Drowley.
Sands was quick to try and diffuse the situation through the media, trying to ensure customers that their casinos are still up and running. "It won't impact the customer experience at our properties," said spokesman Ron Reese.
What it will impact is the families of 216 workers. Many of these workers have already spent money for the holidays, and now they will be struggling to pay their bills.
In closing, I'd like to leave you with a few more words that I wrote in 2006:
When tourism starts to wane, due to people running out of discretionary cash, gaming/hotel industry layoffs will follow, cascading the impacts of the already doomed Valley housing market, as more locals will be unable to meet their monthly mortgage obligations. Reduced spending levels, increasing layoffs, magnified home foreclosures and tightening credit conditions will cause a doubly painful domino effect on the commercial real estate markets and retail sectors and in due time, the impacts will be extremely painful to the entire economy. State tax revenue will tank, crys for budget cuts will prevail and the government layoffs to follow will only exacerbate/compound the situation.
Yes dear readers - the gravy train has ended for Las Vegas and I expect unemployment to be brutal in 2009 - the next big domino to fall!
On the flip side: though this narrow-minded, one-way vision was great for those early enough to catch a ride on the gravy train, it prevented the city from developing any "real" economic diversification and the economy grew ever more dependant on increasing 1) the volume of tourism and 2) their discretionary spending.
Back in March of 2006 I wrote:
The (currently) thriving Las Vegas economy is completely dependent on the discretionary spending of vacationers (Airlines, Hotels, Restaurants, Shows, Gambling, Drinking, Strip Clubs, etc), as the city lacks any real or substantial diversification. Gaming is big money and people have been more than happy to live life to the fullest and part with their cash in a strong U.S. economy. This spending has kept thousands upon thousands of Las Vegans gainfully employed.
But what will happen when the U.S. economy finally starts to contract, when millions of U.S. homes start to lose value, when consumer interest rates rise and payments double on credit cards, when gas & travel become prohibitively more expensive, when the American consumer is finally tapped out and no longer has the discretionary money to gamble away in Vegas?
Answer: Gaming revenues will drop, hotel occupancy rates will fall, and thousands of layoffs will follow.
Those who find themselves unemployed will quickly find that they have very limited options, as the entire hotel & gaming industry will be feeling the same economic pains. The lack of industry diversification in the city will be a killer...
Once the LV layoffs begin, more homes will go into foreclosure, as people won’t be able to make their mortgage payments. Then businesses outside of the casino industry (local restaurants, retail, home improvements, beauty, health care, etc) will also begin to feel the pain. Eventually, a chain reaction of dominoes will begin to fall, and ultimately the number of outbound U-hauls will vastly exceed those inbound...
Back to Today:
Though many gaming industry and community leaders have tried to keep it under wraps for several months now, the long-held Las Vegas secret is finally making it out to the masses: The gravy train has ended and Las Vegas is quickly becoming one of the worst economies in the nation.
- Airline numbers are down/tourism is falling
- Hotel occupancy significantly lower
- Tax revenue is cratering
- Massive State Budget Shortfalls
- #1 in foreclosures for 23rd straight month (1 in 61 houses)
- Top of the list in home price declines
- 1/2 homeowners upside down on mortgage
- Swiftly imploding construction industry
- Major Construction Projects canceled or "On Hold"
- "Official" unemployment rate of 7.6%
- Numerous casinos facing budget shortfalls/bankruptcy
I could go on, but believe the point has been made. The LV economic situation is becoming dire and unless we see a quick rebound in tourism and gaming (highly unlikely), it is destined to get far worse in the months ahead.
With that said, the most recent Gaming report released on December 11th announced Las Vegas Strip gambling revenue fell 26 percent in Oct - the worst report EVER!
Las Vegas Strip - gambling revenue falls 26 pct
"As expected, October was another difficult month for the Las Vegas Strip as the credit crisis took hold and paralyzed consumers," Jacob Oberman, director of gaming research and analysis for CB Richard Ellis, said in an e-mail to clients and investors. "More importantly, housing markets across the nation continue to weaken, which will continue to pressure Las Vegas going forward."
So what can we expect to see in the weeks and months ahead?
Dear readers, many Las Vegas casinos are operating on life-support and though they've been trying to reduce operating expenses/costs in the attempt to pull through to the other side, there currently is no "other side" - not even a glimmer of light at the end of this tunnel, and (I believe) future layoffs are the next big domino to fall...
Though industry personnel cuts have largely been held "under the radar" while quietly picking up steam, we've yet to see the MASSIVE cuts required to keep the industry solvent - this will likley change in the coming weeks and months ahead, as thousands upon thousands of newly unemployed Las Vegans usher in a bleak 2009.
Merry Christmas, Your Fired! Las Vegas Casino Tells Employees
Starting today, lay offs will be the fate of more than 200 Las Vegas Sands Corporation employees.
The company, taking a line straight from Ebeneezer Scrooge, decided that over $6.5 million in bonuses were being cut for 2008. They did not stop there, however, announcing that they would be firing over 200 employees right before the holidays.
On Friday, employees will begin to be notified that their childrens' Chirstmas would become a product of the slow economy. Employees who have been with the company for years will be told they no longer have jobs.
"To do this right before the holidays shows just how desperate Las Vegas Sands has become. They have now tipped their hand on just how much danger they are in, and it will hurt them dearly with their investors," said financial analyst Thomas Drowley.
Sands was quick to try and diffuse the situation through the media, trying to ensure customers that their casinos are still up and running. "It won't impact the customer experience at our properties," said spokesman Ron Reese.
What it will impact is the families of 216 workers. Many of these workers have already spent money for the holidays, and now they will be struggling to pay their bills.
In closing, I'd like to leave you with a few more words that I wrote in 2006:
When tourism starts to wane, due to people running out of discretionary cash, gaming/hotel industry layoffs will follow, cascading the impacts of the already doomed Valley housing market, as more locals will be unable to meet their monthly mortgage obligations. Reduced spending levels, increasing layoffs, magnified home foreclosures and tightening credit conditions will cause a doubly painful domino effect on the commercial real estate markets and retail sectors and in due time, the impacts will be extremely painful to the entire economy. State tax revenue will tank, crys for budget cuts will prevail and the government layoffs to follow will only exacerbate/compound the situation.
Yes dear readers - the gravy train has ended for Las Vegas and I expect unemployment to be brutal in 2009 - the next big domino to fall!
Chart below:
Las Vegas Unemployment data as extracted from the BLS on Dec 14th 2008. Note: Though spiking upwards, these numbers are severely understated through the use of U-3 data - Click here for more info: Unemployment Rate Reality
Bottom line: Doubling the stated figures below will bring you much closer to the real unemployment rate truth.
Regards
Randy
Saturday, December 13, 2008
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