Who Is to Blame, Anyway?


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Las Vegas Sands opened the Venetian Macao, the largest resort in the world, in 2007, and had planned to build several more resorts on the Cotai Strip before credit markets collapsed.

We hardly get a day when one group of people is not blaming another group for the state of affairs.  Yesterday the governor of New Jersey blamed the city officials in At antic City for the decline of the casinos in AC.  For the last few weeks we have heard the Democrats blame the Republicans for the oil spill in the Gulf. Since the first Gulf war, the party out-of-power has blamed the party-in-power over the lack of an end to the presence of American soldiers in Afghanistan or Iraq.  And in the recent debate over the legislation to reform the finance industry, the current administration and its adherents are blaming the past administration, its adherents and the greedy bankers for the economic crisis.

It would be nice if every crisis had one guilty party, one set of circumstances that caused it, one simple solution to be followed by a trial, conviction and punishment of the wrong-doers, the wrong-thinkers – the bad guys.  Unfortunately nothing is quite so simple; hardly any serious problem lends itself to one simple diagnosis of cause, one simple causing agent and one simple solution – regardless of how badly we may want it.  And when we have been hurt by an event, we do want someone to blame, someone to suffer for their deeds and a correction and redress of our wrongs, pain and suffering.

The current economic crisis has hurt almost everyone; the stock market is down – at one point by nearly 50 percent, unemployment has dramatically increased, houses are worth what they worth 10, or in some cases, 20 years ago, construction driven by housing market has the highest unemployment, nothing is being build and there is no money to help buyers or business owners cope with today’s problems – no one has been immune to the after effects of the booming economy that lead up to this, the Great Recession. But all of us are also, at least partially, to blame; we bought houses and stocks at inflated prices, we bought extra cars, televisions and other toys, mostly on credit, just because it was possible and rarely from need.  We wanted everything and we wanted it to be newer, bigger and more expensive – until the bubble burst.  Now we want to pretend it was just the greedy Wall Street bankers, the anything-goes Republican administration, a war or someone else’s greed and less-than-moral behavior that lead to the crash.  But that is not the truth – it may be a part of the truth, but so was our spending, our debt and our desire for more and so were the years of growth and expansion and dozens of other major and minor contributing factors.

And why, you might ask, am I bringing this up?  Because today a second law suit was filed against the Las Vegas Sands and Sheldon Adeleson for fraud by shareholders.  It accuses the company of deliberately misleading stockholders to drive the price of the stock up and up it did go all the way to $150 a share from its initial price of $42.  In the immediate aftermath of the crash it fell to $2 a share.  The fundamentals of the company are pretty much the same or improved since the days of $150 a share.  Now the Sands has gaming operations in Pennsylvania and Singapore besides the ones in Macau and Las Vegas. But the key is the fundamentals, how much money does a company generate, how much does it spend to generate its revenue, how much debt does it have and after all of the accounting what is left over as profit?  When you buy stock if you buy based fundamentals it isn’t possible to be defrauded, although it is still possible to lose money on the best operated companies.  However, it is only when you buy thinking you will sell to another sucker soon and get rich in the process that you might feel a sense of fraud.  But what you actually feel is the cold hand of truth squeezing at your own greedy heart.  If you buy stocks, don’t speculate, don’t gamble but rather buy solid companies based on their financial results and then you will be fine. Sheldon may not be the finest human being on the planet, he may indeed be litigious and difficult to get along with, but he did not make those people buy any stock at the top of bubble and he did not cause the Great Recession; he and his company are trying to fight through it just like the rest of us.

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