Why the tepid Macau recovery is over

TAGs: Editorial, Macau, Rafi Farber

2016 may end up being seen as the year of the Dead Macau Cat Bounce. (Dead Macat Bounce?) The recovery has been pretty blah so far, though the right stocks have seen some decent gains. We recognized a possible Macau bottom back in March, calling it temporary with growth prospects still quite low. Besides the initial strong bounce out of the January bottom, there hasn’t been much more of a run since March. With the exception of Las Vegas Sands, the only Macau stock in the model this year, and Galaxy Entertainment which was one of the hardest hit equities, the rally seems to have stalled. And it may be about to reverse. Here’s why.

I’m not sure if it’s because I’m getting older or if this US election actually is the most insane ever but the latest twist in the campaign with FBI director James Comey reopening a criminal investigation into Hillary Clinton’s email habits and finding a treasure trove of 650,000 emails one week before the election has me convinced that Donald Trump will win the Presidency, and this could have profound implications for Macau.

Why the Tepid Macau Recovery is OverNow I can’t resist this, but the fact that Anthony’s Weiner is back, yet again, in the news, and threatening the downfall of the Clinton dynasty, is hard proof not necessarily of God’s existence, but definitely of God’s sense of humor if He’s really out there. Huma Abedin and Anthony Weiner were set up by Hillary. Bill conducted the wedding. Little did they know the couple of the year would be the Clinton’s undoing. A common anti Semitic trope goes that the Jews control the White House, but I doubt whoever spread that missive had Anthony Weiner’s sexting habits in mind. If Weiner is a Mossad agent, he would be by far the most ingenious undercover operative the world has ever known.

As for Comey, he knows on which side his bread is buttered. If Hillary wins, he’s going to get fired and possibly even imprisoned for reopening the case last weekend. His life as he has known it will be over. I’m not saying the FBI rigs elections by faking votes or something. Maybe it does, but I have no idea. But just practically, the safest thing for Comey to do for his own sake so he doesn’t end up in prison for either refusing to indict Hillary under a Trump presidency or for reopening the case a week before the election under a Clinton presidency given the new Weiner information, is to try to ensure a Trump victory with him being the vehicle that tipped the election for Trump. That way his future is safe. Any other way, and his life would depend on an uncertain election. He’s no gambler. He counted the cards and this was the best he could do for himself under the circumstances.

So, given that, and the fact that “Phase 3” of Wikileaks’ election coverage will begin on Sunday according to a recent tweet, and that Julian Assange still supposedly has a surprise for Clinton running mate Tim Kaine that has yet to be revealed, it doesn’t look like Hillary will survive this onslaught. As crazy as it sounds, it looks like Donald Trump will actually be the next President of the United States of America, and that means a trade war with China is just around the corner.

Trump says a lot of crazy stuff, and it’s hard to figure out which parts he’s actually serious about. But one thing he repeats again and again and really does seem serious about is that he doesn’t like China. He will label them a “currency manipulator”. Will he put the same label on what would be his own Federal Reserve? Of course not. But he will slap tariffs on everything the Chinese sell to American consumers.

The Chinese will respond in kind, and things could get really ugly. American casinos operating in Macau could be harassed intensely, and considering the Chinese government is still technically a Maoist regime, we could start to see systematic arrests of Las Vegas Sands, Wynn, and MGM employees who may even end up being held hostage just like what is happening with Crown Resorts now, with no end in sight. In fact, Crown Resorts chairman Rob Rankin told shareholders at the latest shareholder meeting last week that he knows nothing about what’s going on with his people and that’s that. Typical Chinese government behavior.

This will give Trump even more of an opportunity to unleash toxic belligerent rhetoric and up the trade war another notch, which can only make the situation worse. And that’s only the long term case going out the next four years. Short term it doesn’t look good either. If Trump really is elected next week, markets could fall globally just on the pure realization traders will have that this is actually happening and we’re not on some kind of global LSD trip. Markets hate uncertainty and nothing screams more uncertainty than Donald Trump as the most powerful man on the face of the Earth.

If you have any Macau stocks, it’s time to get out of them now and go to cash. MGM can be held. US markets look OK, and there is no reason to expect Trump to be particularly hostile to the US gaming industry. He is of course a (failed) casino owner. At least there’s that. Any major dip in US stocks can be bought, and capital should be shifted from Macau to Las Vegas. You don’t want to be holding Macau stocks when Trump casts the first stone.

If by chance Clinton actually pulls off a victory, there will be a big relief rally in markets around the world. With a Clinton presidency though, there’s still a significant chance of a war with Russia, which could be even worse. Pick your poison. They’re both pretty deadly.


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