Thinking about Vegas

Las Vegas will rebound from this recession. It will. I can promise that. But when?

The chart above is of the Las Vegas Convention Authority's visitor statistics for the past 5 years. There was some growth between 2005 and 2006, but hardly any from 2006 to 2007. This chart also shows us when the current recession really began in Las Vegas. June 2008 looks par for the course, but traffic began plummeting in July. According to some, the recession technically began at the end of 2007, so Vegas is somewhat recession resistant. It took an additional 7 months before traffic started to decline.

So, is now a good time to buy Vegas equities? I like MGM Mirage (Jim Cramer favors Wynn) and I bought it back in October at $15.23 a share. I lost more than 50% on it when I got rid of it last month. But now it's trading below where I sold it, and when the market changes direction again, I'm quite sure it will benefit.

Usually Vegas sees a slower February than January, so it's a good sign that February this year was the stronger. That must mean that we're coming up off the lows, right? The dip in traffic that normally happens in April was also more mild. If we're going to see some benefits from the stimulus package in the second half of 2009, and growth in 2010, isn't this the time to buy in? There was a real threat of bankruptcy until recently, but MGM's accountants have removed their qualifications from financial statements, and now it looks like MGM will survive. MGM has fully financed CityCenter and it will open in December. How will all that new capacity affect rates? How soon can the casinos raise their rates back to 2007 levels? Ugh. It's all speculation. But that's where the real returns are located.