You Know You Are In A Recession When Casinos Are Broke

A recent article in the Wall Street Journal demonstrated what has been going on in Sin City, Las Vegas, Nevada. As the saying goes, “What happens in Vegas Stays in Vegas”, unless it is financial news.

It seems the Summer slow-down began in April, and it has been getting worse. This news is not good for the banks and other financiers who bet heavily on the growing economy of Vegas by putting up additional housing, retail establishments, and yes, more casino and hotel space.

The article states that the amount of debt that the casinos are in is staggering. This debt combined with other obligations has many casinos worried about the possibility of filing for bankruptcy protection.

Interestingly, the casinos in Las Vegas were viewed in the past as being recession proof; however, they are now facing the perfect financial tsunami with the mortgage crisis, credit crisis, airline industry crisis, and recession. The Las Vegas housing market has seen double digit losses with no end in sight. So, the downturn is affecting both markets: the casinos that cater to the locals and the casinos on the strip that cater to the visitors.

The big players, MGM Mirage, Wynn Resorts Ltd., Las Vegas Sands Corp., and Harrah’s Entertainment Inc. are all feeling the pinch in their cash flow. Several casino companies have already defaulted on their astronomical debt or filed Chapter 11. In May of 2008, Tropicana Entertainment LLC and Greektown Holdings have filed for Chapter 11 protection.

The biggest problem with Las Vegas and all of the areas with the highest foreclosure rates is that no-one saw this bubble bursting. I find that shocking. I just cannot believe that people actually believed that the house of cards that was built was not going to implode someday.

I do not claim to be able to see into the future. Lord knows I sometimes have trouble remembering what happened yesterday. But there are some simple truths in life that will always hold true. ” If it seems to good to be true, it probably is”