A Bad Bet?

What’s wrong with gambling?

I don’t mean morally, although many folks object an industry built on betting. I’m asking about the business: by the end of September four of Atlantic City’s 11 casinos will have closed or gone bankrupt. Gambling revenues in New Jersey have fallen to $2.8 billion from almost $5 billion. In Mississippi, revenues have fallen from $2.9 billion to $2.1 billion. Takings have even tumbled in Nevada, though not by as much.

Part of the problem has been the proliferation of casinos. 39 states now have casino gambling, up from 2 states—Nevada and New Jersey—25 years ago. Why should New Yorkers drive 2 ½ hours to Atlantic City when they can play the slots just a few minutes away in Queens? Also, many consumers are still skittish after the financial crisis. In spite of its high-roller image, more gambling earnings come from middle and low-income customers, and that segment of the economy is still stagnant.

But a big disrupter has been online gambling. If you don’t want to drive hours, why even drive minutes to get the buzz that comes from winning a wager? Internet sites and mobile apps provide immediate access. The same forces that are disrupting entertainment, publishing, banking, and many other industries are killing centralized gaming. It’s just more convenient to play online than to go to a casino.

Gambling is an industry with low barriers to entry and lots of internal competition. Margins are under continuous downward pressure. Sometimes the most successful investment in an industry is no investment. As the 1978 Kenny Rogers song says, you need to know when to walk away and when to run.

Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
Leave a comment if you have any questions—I read them all!

Follow me on Twitter @GlobalMarketUpd

www.chartertrust.com • www.moneybasicsradio.com www.globalmarketupdate.net
By |2017-07-17T12:34:15+00:00August 19th, 2014|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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