The Big Short are US Casino Operators

US Casinos stocks are about to make 2008 look like a correction. Let me explain:

US culture is not European culture, nor is it Asian culture. This is why I don't want to touch casino operators that derive most of their revenue from Macau, like Las Vegas Sands (70% of revenue is generated in Macau). Asians are comfortable wearing masks and do not have high rates of obesity, which is one of the worst things if you're infected with the COVID-19 virus.

• I am American, originally from NYC. I currently live in Spain. There are major differences in how rules are followed, and how policy is established. I won't get into my opinion on how Americans don't like being told what they can and cannot do, particularly rules established by the government, but there is a huge contrast when compared to countries in Europe or Asia. I am confident masks will not be the norm anytime soon, particularly in the "red states" where US casinos established their properties.
  
  
• Red states have incredibly high rates of obesity. If the virus plagues these states in waves over the next 6 - 12+ months (like experts believe it will), I think death rates will likely be higher in these regions. As death rates start rising, more local casino visitors will be a lot more careful on the type of entertainment they decide to seek out. This is the year where gambling is crossed off the entertainment list for everyone.
  
  
• Could you imagine being dumb enough to be older than 60 years old and going to a casino right now to play slots? Who plays slots? THE MAJORITY OF SLOT PLAYERS ARE OLDER THAN 55 YEARS OLD (according to a study done at Harvard) & slot machine revenue accounts for approximately 50% OF ALL GAMING REVENUES ON THE LAS VEGAS STRIP and 75% of ALL REVENUE in metropolitan and regional casinos. Ask yourself this question - if you were older than 60 years old, would you risk being infected to probably lose money at the slot machines?
  
  
• The economy has absolutely ZERO chance of bouncing back quickly, especially in states where technology is not their strong suit.
  
  
• Let's talk about farmers for a bit. Grain prices are getting crushed. In my opinion, we are on the verge of a deflationary spiral. US producers are in trouble if prices continue to break down. We are traders. We know the prices of agricultural commodities. Look. Out. Below. I don't know what percentage of farmers are gambling at any of the properties owned by Boyd Gaming, but I do know all of their properties are in states where agricultural farming is one of the most important industries in the state. Older farmers with thin margins are not likely to be their customers.
  
  

Let's take a deeper dive into the geographic diversification of Boyd Gaming. Here are the properties they own:

Properties:

LAS VEGAS >30% obesity rate

Aliante
The Orleans
Gold Coast
Suncoast
Sam's Town
Eastside Cannery
Cannery
California
Fremont
Main Street Station
Jokers Wild
Eldorado

ILLINOIS >30% obesity rate
Par-A-Dice
INDIANA
Blue Chip
Belterra

IOWA >35% obesity rate
Diamond Jo Dubuque
Diamond Jo Worth

KANSAS >30% obesity rate
Kansas Star

LOUISIANA >35% obesity rate
Amelia Belle
Delta Downs
Evangeline Downs
Sam's Town Shreveport
Treasure Chest

MISSISSIPPI >35% obesity rate
Sam's Town Tunica
IP Biloxi

MISSOURI >35% obesity rate
Ameristar St. Charles
Ameristar Kansas City

OHIO >30% obesity rate
Belterra Park

PENNSYLVANIA >30% obesity rate
Valley Forge

Now that I've given my basic economic argument on why I think US casino operators are in danger, let's confirm that with some charts:

Finally, here is my analysis on BYD 3 years ago. I was a bull. Timing is everything.

I am a technical trader, so no matter how logical this whole story is, the foundation of my strategy rests on the price action working in my favor. Know your stops based on the charts, not the story. Till next time.

Comment:

Huge run in the stock yesterday - I will watch it on until there is a bearish formation on the 4hr chart. Trade not active until I indicate it is.

Trade active:

1st layer is active

Comment:

I was far too early on this idea and got stopped out a long time ago (should have updated) but I do not think this thesis is incorrect as we move closer to Q3/Q4. My levels were incorrect as I simply did not expect such a huge rally from the lows. I continue to believe when the market loses steam the casino stocks will be some of the weakest, particularly Boyd Gaming.

Comment:

Seems I was dead wrong on this idea. Logic =! making money in the market! I am throwing in the towel. I lost about 20 basis points in total taking jabs at the short, mostly because I set stops near break even every time I went short. One of my better executed trades even if it was a loser. Losing as little as possible on a high conviction trade is always great work.