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Quick-takes: The month's trends in a glance - February 2005

2 May 2005

February was not a bad month for the economy, and if you measure the economy on stock prices, it was a pretty good month. The stock market has been flirting with record highs since the middle of February leading one to think better times are indeed on the way. Other economic indicators were also favorable, if not great, with the caveat that oil prices and interest rates continue to increase and are bound to impact the economy at some point, though for now we are getting accustomed to gas at over two dollars (so what is so difficult about three dollars) a gallon, and interest rates have a long ways to go to reach the highs that completely stifle economic growth.U.S. stocks rose on Tuesday, pushing the Dow and S&P 500 to fresh 2005 highs, as retail shares got a boost from better-than-expected January retail sales, while an unsolicited bid for Circuit City Stores Inc. raised hopes for more M&A activity to come.

…M&A activity, in addition to sparking talk about which other companies could be targeted, is positive for stocks as it indicates a general confidence in the economy. The Dow Jones industrial average was up …to finish at 10,837.32. The Standard & Poor's 500 Index was up…to end at 1,210.12…The Dow and the S&P 500 closed at their highest points for 2005. Megan Davies, Reuters, 2-15-05

Good economic news and merger buzz set the tone for the day. The Commerce Department Friday revised GDP for the fourth quarter to 3.8%, at the higher end of forecasts, up from the 3.1% estimated a month ago. And while U.S. home sales fell 0.1% to a seasonally adjusted annual rate of 6.8 million units in January, that's still well above economists' expectations. Now all eyes are turned to February job numbers and manufacturing data, which are due next week. The Dow rallied for the third straight day, closing at 10,841.60, a high for the year. Julia Boorstin, Fortune, 2-25-05

U.S. employers created 262,000 jobs last month, the biggest gain in four months and double January's pace. Reuters, Yahoo! Finance, 3-4-05

U.S. stocks rose on Friday, boosted by oil company shares, which touched historic highs, and a government report that showed growth in the fourth quarter was slightly better than Wall Street had expected. With oil prices above $51 a barrel…boosted price targets on major oil companies. Anupama Chandrasekaran, Reuters, 2-25-05

…buying frenzy on oil markets is setting the stage for sharply higher gasoline prices as early as next week. Crude oil futures traded above $53 a barrel again on Friday. Associated Press, Yahoo! Finance, 3-4-05

A brightening jobs picture, early tax refunds and a later date for the largest single US sports event boosted February sales at Wal-Mart, other discount retailers and warehouse shopping clubs…. Overall, same-store sales rose 4.8 percent last month, beating average expectations of a 3.8 percent rise, according to Retail Metrics LLC. Retailers faced a tough comparison with February 2004, when the companies reported 7 percent comparable sales growth. Pakistan Daily Times, 3-4-05

For the last four or five years, investors have dreamed of the glory days when the Dow danced around 11,000. Those days are getting closer and closer; the Dow closed at 10,940 on Friday, March 3rd. If the NASDAQ could just hit 5,000 again, possibly we could all believe in a dotcom world, a "new economy" with every investor a millionaire again.

Modest but steady gains from U.S. stocks in the past few weeks have sparked trader talk that the blue-chip Dow could soon breach 11,000, a level not seen in more than 3-1/2 years. …"I don't think 11,000 will be much more than a psychological resistance level, because it's a round number," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. "I was looking for a week or two of pullback and then for the market to start to rally -- so sometime in March or April, we should be able to surpass the 11,000 level." Megan Davies, Reuters, 2-18-05

Instead the NASDAQ is at 2,000, brick and mortar stores are still a fundamental part of nearly every business model, even where internet sales are a significant if not major segment of sales. In general the economy looks much as it always has, and that means mergers and acquisitions as a way for the biggest of companies to grow, expand and gain market share.

The look and feel of a Sears-Kmart combination started to take shape yesterday when Sears announced it would open 25 "Sears Essentials" stores this spring. …Sears and Kmart announced plans of their $11-billion merger in November, setting off speculation about what the transaction might mean for consumers and for the identities of the two storied but troubled icons. Lauren Weber, NY Newsday, 2-9-05

The $11 billion takeover of May Department Stores by Federated Department Stores will create a retailing giant with more than 1,000 stores and $30 billion of annual sales. David Litterick, UK Business Telegraph, 2-28-05

The only thing in the merger story that a gaming observer might find startling is that gaming mergers are now as large as the mega mergers in other segments of the economy. $10-billion dollar companies seem to be the size of the day. Granted MGM-Mirage-Mandalay is only $8-billion, but Harrah's will meet the test. Retail chains measure their empires in thousands of stores. By that measure, gaming company mergers of 20 or 30 casinos reflect an industry that is unique in its profitability.

The biggest gaming story of the month may well have been the Federal Trade Commission and Nevada's approval of the MGM-Mirage merger. The deal is widely being report as creating the largest casino company in the world, that is, of course, until the Harrah's-Caesars deal is approved. The approval of Nevada and the FTC are being treated in Nevada as the final step in the process.

The Federal Trade Commission on Wednesday approved MGM Mirage's proposal to buy rival Mandalay Resort Group…The commission voted 5-0 to close its investigation and place no conditions on the transaction.. Adam Goldman, Associated Press, 2-21-05

The Nevada Gaming Commission…MGM Mirage's $7.9 billion acquisition of Mandalay Resort Group…board concluded that the deal is in the best interests of the public and unanimously voted to clear the way for the formation of what will become the largest casino company in the world…Richard N. Velotta, Las Vegas Sun, 2-25-05

That might be true were it not for a couple of wrinkles in Michigan and Illinois. In Michigan all casino deals are tied up by a lawsuit claiming the original licensees were illegally awarded. For years, the suit has prevented permanent casinos in Detroit. Illinois is just as complex; there has been no functioning gaming commission for months and no prospect for one in the near future. The governor attacked the commission over a casino license, claims their decision lacks integrity. In the meantime, there are no decisions, and so far he has refused to appoint additional members. The governor claims no one is willing to serve. Neither of these situations in Michigan and Illinois suggests a quick and simple final approval of the merger.

For eight years, a tiny Upper Peninsula Indian tribe has tied up $1.5 billion in construction on three permanent hotel-casinos in downtown Detroit, claiming in a federal lawsuit that the original bidding process was tainted. Now, the 500-member Lac Vieux Desert Band of Lake Superior Chippewa Indians is asking the 6th U.S. Court of Appeals in Cincinnati to block the sale of any Detroit casino until the lawsuit is settled -- a move that threatens to complicate the $7.9 billion purchase by MGM Mirage of the Mandalay Resorts Group. Joel J. Smith, Detroit News, 2-24-05

Millions of dollars worth of construction and untold numbers of jobs have been on hold for months because Gov. Rod Blagojevich has failed to fill vacancies on the state board that oversees gambling. Since August, the vacancies have prevented the remaining two members of the Illinois Gaming Board from moving forward on several issues simply because they lack a quorum — the board must have at least three members to take any action. …The governor knocked heads with the board last year, saying the public couldn't trust its actions after board members approved allowing a casino in Rosemont over the objections of their own staff. Previous board members in 2001 had opposed a Rosemont casino, citing allegations of connections to organized crime. The village of Rosemont contends there are no such connections. Maura Kelly Lannan, Associated Press, Chicago Sun-Times, 2-17-05

Gov. Rod Blagojevich's suggestion that he might overhaul or even eliminate the Illinois Gaming Board drew warnings Friday from the gambling industry, which said doing so without legislative approval could violate state law, and criticism from a key lawmaker, who said the governor wasn't providing enough details. Maura Kelly Lannan, Associated Press 2-19-05

The situations in Michigan and Illinois would seem unique as well as bizarre if Indiana were not embroiled in a very similar situation. The issue in Indiana is very much the same as Illinois. The governor objects to the way the commission granted a license. In Indiana that was the last license granted to Trump for French Lick. The press coverage of Trump casinos' financial woes caused more than one person to question the choice. The governor, however, was the only person with the power to impact the process.

At least four of the members have submitted resignation letters to the Governor. If they are accepted, the resignations would give the new governor more control over the planned development of a floating casino in Orange County. The seven-member commission chose Trump Hotel & Casino Resorts last year to operate the proposed casino. However, the deal has been questioned by many officials ever since Trump filed for bankruptcy. Governor Daniels has asked the commission's new executive director to review the deal. Inside Indiana Business, 2-1-05

This is deadline week for the Indiana legislature. …Some key measures that remain to be passed out of the House include…a bill to allow the Governor to replace members of the Indiana Gaming Commission… Inside Indiana Business, 2-17-05

There are other gaming battles in the country, and they are even reaching into Bush country. Things are changing in Bush country, long known as territories unfriendly to gaming; Texas and Florida are knee-deep in gaming wars. Florida's will come to a head first on March 8th, when voters in two counties vote on allowing slot machines. Texas, the other Bush country, is facing a large variety of gaming bills, at least one of which may reach the ballot in November. The Florida campaign has not been friendly nor cheap. Nor does it promise to end with the vote. If the anti-slots factions lose, lawsuits and constitutional amendments are being threatened. Governor Bush is doing everything within his powers to defeat the initiative, but as the Terri Schindler Schiavo case demonstrates, the governor does not always get his way. In the past gaming legislation has easily been defeated in Texas, but this year there is a different feel in Austin. For one thing, a statewide poll indicates the majority of Texans favors gaming, but not income or increased tobacco taxes, as a way to increase state revenues. Neither Florida nor Texas is likely to solve the issue and end the wars any time soon; both are important to gaming in general and promise large new markets if and when they decide to permit gaming.

Emotions and cash are flying in the final weeks before a March 8 vote to permit slot machines at pari-mutuel facilities …in Miami-Dade and Broward counties in south Florida. …Yes for Better Schools and Jobs, is in the process of spending much of the $3.7 million it raised from locals and the seven licensed pari-mutuel operators. …Meanwhile, a cadre of elected officials, including Florida Gov. Jeb Bush, has lined up to defeat the measure. In a letter to the Christian Coalition of South Florida …Bush contends that passage would create "a snowball effect" that would lead to full-blown casinos throughout the state. …Bush has asked Secretary of State Glenda Hood to investigate the industry's involvement in funding the election. In the legislature, central Florida Rep. Randy Johnson, a Republican strongly opposed to gambling, has filed a resolution in the Florida House that would place an amendment on the ballot statewide repealing slots. Johnson, too, has begun lining up support for harsh regulation on the operation of slots should the measures pass March 8. Scott Davis, Blood-Horse News, 2-28--5

Downtown Houston and Galveston Island could become casino destinations to compete with anything Las Vegas has to offer, a Houston senator said Thursday. "Why should we subsidize Louisiana and Nevada when we can create jobs and boost economic development here at home?" Sen. Rodney Ellis asked. Ellis filed a proposed constitutional amendment Thursday that would let Texans decide whether to allow seven casinos in urban areas, two on Gulf Coast islands and three in targeted economic development areas. Janet Elliott, Houston Chronicle, 2-25-05

A full circle; legend has it that ancient governments, such as the Chinese (and early American states) used lotteries to raise money for armies and ultimately wars. Modern lotteries in the United States most often have been established to help fund education. Now in Indiana a legislator would like to create a special, once-a-year Veteran's Day lottery to help support the state's National Guard. I wonder if President Bush has thought of that. We could have special national lotteries for specific purposes, wars in Iraq, social security or maybe a new computer system for the FBI, CIA and others to unite the efforts of the Homeland Security Secretary; just a thought.

An Indiana lawmaker expressed disappointment Thursday that her proposal for a special lottery to support the Indiana National Guard will not get a chance to advance in the state Senate. …proceeds from an annual, one-day special lottery to benefit the Guard could be used to supplement arms and equipment for Indiana soldiers The bill would require the lottery to conduct a special ticket sale on Veteran's Day and put the money in a fund to benefit the Indiana National Guard. Lottery Post, 2-11-05

When the Sands began reporting results from Macau gaming, the world began to pay more attention to Asia. The bidding for Macau drew some interest, but nothing like Singapore has done. Singapore is riding on the reputation of the revenues from Macau, but appears to be on a level of its own. Even the first days of euphoria in England caused by impending changes in regulations did not draw the interest that Singapore is creating. The major American companies have submitted a proposal, as have the major Australian gaming companies. Add to that list South African, Chinese and Malaysian companies and you have a Who's Who in the world of gaming lining up to play in Singapore. The legislation has not been passed, nor have regulations been drafted, so everyone is flying blind, but flying they are.

Singapore's first proposed casino has drawn strong international interest, with at least 15 groups hailing from the United States, Australia, Macau, Malaysia and even South Africa expected to put in their proposals by today's noon-time deadline. Jostling for a piece of the action in the controversial mega-resort are the big names in the gambling world, names like Las Vegas' MGM-Mirage and Harrah's Entertainment. …The latest among them is South African casino and resort operator Sun International, which until now, has kept a low profile. …Other gambling companies which have made proposals include American entrepreneur Steve Wynn's Wynn Resorts and Australian media mogul Kerry Packer's Publishing and Broadcasting Limited, which owns the Crown Casino in Melbourne. Also joining the fray may be the joint venture between Mr Packer and Macau gambling king Stanley Ho's Melco International Development, as well as Mr Ho's own Sociedade de Jogos de Macao, The Straits Times understands. So, too, Sydney's Star City casino owner Tabcorp and Macau's Greek Mythology Entertainment Group. The US' Las Vegas Sands and Malaysia's Star Cruises will be putting in bids as well, sources said. Industry players are not ruling out entries from New Zealand's Skycity Entertainment Group, Britain's Stanley Leisure, and European operators Casinos Austria International and Accor Casinos. Among the local companies which have tied up with the foreign giants are Keppel Land, which is partnering with Harrah's Entertainment. CapitaLand has two separate partnerships, with MGM-Mirage and Kerzner International. Other local property developers such as City Developments, Hotel Properties and Far East Organisation, are also believed to be thick in the action as the main parties in the construction of the resort. Glenys Sim, Hotels, 2-28-05

The gaming results for January by jurisdiction primarily reveal improvements over the year before. In most cases, nothing to write home about, but enough to understand why legislators and governors are thinking about increasing taxes and enough to understand why Harrah's, MGM-Mirage, Boyd and others want to own a piece of every jurisdiction.

Iowa casinos January gaming revenue rose 3.6% to $82.9 million. Gaming Industry Weekly Report, 2-14-05

Illinois January casino win rose 3.2% to $139.6 million. …Chicago area was up 6.5% while the St. Louis market was up 2.9%. Gaming Industry Weekly Report, 2-14-05

The gaming industry [New Jersey] was down fractionally [0.6%] in January to $364.1 million… Press of Atlantic City, 2-11-05

Detroit casinos in January 2005 ran 7.7 percent ahead of 2004 in revenue, taking in more than $100.6 million compared to $93.4 million a year earlier. Crain's Detroit Business, 2-11-5

Nevada win was up 11 percent in December, totaling $852.5 million. More than half of that total came from the Las Vegas Strip, which showed a 15.5 percent spike from December 2003. Reno Gazette-Journal, 2-11-05

Revenues statewide at Missouri's 11 casinos were up 4.1 percent for the month, to $124.2 million. Rick Alm. Kansas City Star, 2-16-05

Louisiana January casino revenues rose 0.8% to $184.5 million. Gaming Industry Weekly Report, 2-28-05

Indiana January casino win fell 5.7% to $179 million as nasty winter weather dealt yet another state a blow to their casino revenues. Gaming Industry Weekly Report, 2-28-05

Mississippi January casino win jumped 10.1% to $263.6 million. Gaming Industry Weekly Report, 2-28-05

Colorado January casino win rose 3.5% to $60 million. Gaming Industry Weekly Report, 2-28-05

Two months into 2005 and a few things seem clear. We have not seen the end of the trend of the big getting bigger; competition between jurisdictions will increase and competition within each jurisdiction will become more intense and expensive; there will be long and sometimes ugly political battles over new gaming legislation, as in Maryland, and the regulation of new jurisdictions, such as Pennsylvania and possibly Florida; the willingness by all of the major gaming companies to move to any country that promises to enable gaming; and a gaming industry that the bigger it gets the more it will resemble other industries and responds to the same forces that effect the broader economy.

Ken Adams

Ken Adams is the principal in the gaming consulting firm, Ken Adams and Associates. Formed in 1990, Ken Adams and Associates specializes in information, analysis, and strategic planning for Indian tribes, casino operations and gaming manufacturers.

Ken spent over 20 years in the hotel-casino industry, prior to founding Ken Adams and Associates. He held the positions of: Director of Casino Operations, Casino Manager, and Keno Department Manager. During this time, he developed numerous innovative marketing and customer development programs and systems for evaluating casino performance. Some of those programs, such as slot clubs and tournaments, have become industry standards.

Ken is also actively involved in gathering and disseminating information that is important to the gaming industry. He is editor and publisher of and the Adams' Report, a monthly newsletter specializing in identifying trends in casino gaming, regulation and manufacturing, the Adams Daily Report, an electronic newsletter that provides electronic links to the key gaming stories of the day, and the Adams Review, a special report distributed by Compton Dancer Consulting that provides editorial commentary on gaming trends.
Ken Adams
Ken Adams is the principal in the gaming consulting firm, Ken Adams and Associates. Formed in 1990, Ken Adams and Associates specializes in information, analysis, and strategic planning for Indian tribes, casino operations and gaming manufacturers.

Ken spent over 20 years in the hotel-casino industry, prior to founding Ken Adams and Associates. He held the positions of: Director of Casino Operations, Casino Manager, and Keno Department Manager. During this time, he developed numerous innovative marketing and customer development programs and systems for evaluating casino performance. Some of those programs, such as slot clubs and tournaments, have become industry standards.

Ken is also actively involved in gathering and disseminating information that is important to the gaming industry. He is editor and publisher of and the Adams' Report, a monthly newsletter specializing in identifying trends in casino gaming, regulation and manufacturing, the Adams Daily Report, an electronic newsletter that provides electronic links to the key gaming stories of the day, and the Adams Review, a special report distributed by Compton Dancer Consulting that provides editorial commentary on gaming trends.