To those who look carefully enough, history is poetry. Most often the poem woven by the sands of time looks nebulous at first, only to become clarified later on in hindsight, when the fuller pattern emerges. It is perhaps fitting that Sheldon Adelson passed away just about one week before the fall of his largest political benefactor, U.S. President Donald Trump, from power. The Jewish mourning period of Shiva, literally “Seven” (it’s the same word in both languages actually), ended yesterday for the Adelson family, and Trump now has 24 hours to tie any loose ends and get out of Washington DC.
Coincidentally or not, depending on how you see history, his second most notorious political ally, Israeli Prime Minister Benjamin Netanyahu, has also fallen on the rocks at about the same time, again, as the Netanyahu government coalition has fallen and the fourth Israeli election in two years will take place in March. When three world titans all fall at the same time, while the entire global economy is so obviously being completely restructured in unprecedented ways, it is hard not to see Adelson’s passing at precisely this time as part of a wider historic transition into something else. What exactly, we do not yet know, but the old world order looks like it’s being swept away. It’s a heavy, dangerous gauntlet to pick up, and whoever raises it is going to have to be sharp, nimble, and most of all humble. None of us know how this is going to end, least of all the people on top.
The damage to Las Vegas Sands over the last three quarters has been absolutely immense. Lockdowns hurt everyone, even and especially the world’s most powerful. It may not seem like that from an individual consumer standpoint. The rich still have their yachts and mansions and all the rest, but consider this. Las Vegas Sands’ retained earnings since inception, representing the amount of value produced by the company in pure profit, has been obliterated by nearly two thirds over just the last three quarters. Two more quarters of this and the amount of money that Sands will have made over the course of its entire history will be less than zero. That’s how quickly the most powerful can fall. Perhaps Adelson has been mercifully spared the worst of it.
It is perhaps also fitting that Adelson, the arch enemy of online gambling, has left this world at precisely the time that online gambling is pretty much the only remaining functional outlet for the industry, while his casinos are being smashed like never before. This is now a world that Adelson perhaps, deep down, no longer really wanted to be a part of. It is very difficult for us to see him as simply an elderly man, the powerhouse that he was, but as most of us are not octogenarian billionaires and most of us never will be, we simply do not know what it’s like to see your empire under attack and your political allies get flushed out and your competitors rise in a world under paralysis.
Adelson was already preparing his retreat, looking to get out of Las Vegas entirely, which I see as an essential first step towards consolidating and strategically hibernating until the world decides it wants to live again. His successors need to move quickly and get that done, stem the bleeding wherever possible, and then try to convince political leaders around the world to just let business function again. Without that, without permission to do business, then it doesn’t matter who takes over Las Vegas Sands. Unless it’s Professor X or something and he goes into Cerebro and convinces all the world’s politicians to open up the world.
On that note, the virus appears to be up and about again in China now as 11 regions in 3 provinces have been put under lockdown in response to 109 total infections. This, of course, is what viruses do, it is what they have always done, and it is what they will continue to do forever. Whether you are pro lockdown or anti lockdown, the fact is that if the policy of reflexively locking down economies in response to a rise in infection rates continues, companies like Las Vegas Sands that are absolutely hemorrhaging money right now, will eventually fall. A year, maybe two, but not even an entrepreneurial genius like Sheldon Adelson can possibly keep a company afloat under these conditions. He may have been a genius, but he was not supernatural.
One of Adelson’s greatest accomplishments in my view was calmly steering his company successfully through the 2008 financial crisis. In just 15 months, Sands lost over 99% of its market cap, but that’s nothing qualitatively compared to what’s happening now. Back then, the inflated capital structure of the corporate world was contracting, but life in the real economy continued more or less as before. The contraction was mostly restricted to the capital/financial side of things, with the richest of the rich losing the most on paper. Revenues for Las Vegas Sands though actually grew from 2008 to 2009. It was difficult and required some maneuvering, but he was able to steer the ship well on rough seas. These are not rough seas. The seas are calm now, but the ship is anchored by force, not allowed to move, as supplies are starting to run low.
True, the stock has been relatively unaffected through all this, but don’t let the stock price fool you into thinking that everything is fine. The share price is simply a reflection of the inflated monetary system, not the health of Las Vegas Sands. It is not clear how much longer the global monetary system can continue to function under these conditions, but the shoe is going to drop at some point. When it does, we are going to see something more similar to 2008. Combined with lockdowns, if they are still in force, it could be a fatal combination for many firms. If Adelson’s legacy is going to survive this, Sands needs to cut loose as much dead weight as fast as possible, and use the proceeds to streamline its balance sheet, tighten its belt, and wait for – and preferably do its best to influence – business legalization once again.
