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I Just Saw the Greatest Gambling Spectacle in History

By Frank Curzio, editor, Phase 1 Investor
Friday, August 27, 2010

"The only thing Macau needs to create is a way for gamblers to go to the bathroom without getting up from the tables."
I thought my friend Leung was joking. Leung is one of my contacts I met with in Hong Kong. Hong Kong is my first stop in a six-city, 10-day China trip with my Phase 1 colleague Larsen Kusick. Our goal is to find small companies with huge growth potential.
We'll keep Growth Stock Wire up to date as we travel to Shenzhen, Shanghai, Xi'an, Beijing, and Macau, our second stop...
Leung is an executive for one of America's largest financial companies (he asked me not to disclose the name). He knows a lot about China and buys distressed debt all over the country. But as he pointed out, there are no signs of distress in Macau.
Macau is a tiny island on the southern coast of China. And it's the gaming capital of the world. It brings in more revenue per year than Las Vegas. Last month, gaming revenue totaled $2 billion, a new record.
Macau is the only area in China where gambling is legal. For 40 years, Macau's casino industry was a monopoly controlled by Stanley Ho, the richest person in Asia. This changed in 2002, when Macau granted licenses to three American gaming companies...
Today, Las Vegas Sands, Wynn Resorts, and MGM Resorts are operating Macau casinos. Most of MGM's properties are located in the states. But Wynn and Las Vegas Sands are benefiting from the massive Macau trend, which is showing no signs of slowing down. I think that's a big part of the reason these stocks have held up so well in an otherwise depressed market.
To get to Macau from Hong Kong, you must take a one-hour ferry. They leave every 15 minutes. I counted at least 10 boats at the port before boarding my ferry. Each boat can carry 250 to 300 passengers. I got a late start, leaving at 7:30 on a Monday. The boat was packed.
So was the Venetian Macau, which is owned and operated by Las Vegas Sands. At over 10 million square feet, it's the fifth-largest building in the world based on floor space. When you walk inside, it seems even larger.
The ambiance was similar to most Las Vegas hotels – large chandeliers, fountains, and such. But there was one major difference... I've been to nearly every major casino in Atlantic City and Las Vegas. The Venetian's casino space was about three times the size of anything I've seen. And nearly every table was full. Leung later told me the hotel had to close some restaurants to make more space for gamblers.
The area across the street from the Venetian is also owned by Las Vegas Sands. The company is building three more hotels to accommodate the huge demand. Based on the construction site in the picture below, it's clear Las Vegas Sands is betting big on Macau.
Our next stop was the Wynn Macau resort, which caters to high-end clients. The casino floor was smaller, more like a Las Vegas casino. And while it wasn't as packed as the Venetian, it was still crowded. There was a line of two-dozen cabs picking up tourists from the hotel. Most were dressed for a night on the town.
The Venetian and Wynn also have high-end malls. Store names include Louis Vuitton, Gucci, Chanel, Dior, and Prada. At both casinos, the stores were crowded. Many people were carrying bags, not just sightseeing.
Based on what I saw, the growth in Macau is real. It's no wonder Las Vegas Sands and Wynn Resorts have trounced the market this year.
If these stocks do pull back, I'd use the opportunity to buy.
Good investing,
Frank Curzio

In The Daily Crux
Market Notes
Gold and silver stocks continue to march higher... new highs for Eldorado Gold, Fronteer Gold, Great Basin Gold, Silver Wheaton, and Alexco Resources.
Massive Columbian oil company Ecopetrol reaches new 52-week high.
Big Tech bleeding... mega network firm Cisco hits new 52-week low.
World's largest insurance company, China Life, strikes new 52-week low.
Market Watch
Symbol Price
S&P 500 1064.59 +1.7% +3.3%
Oil 33.57 +2.9% -11.0%
Gold 121.01 +0.0% +29.9%
Silver 18.70 +0.6% +32.8%
US-Dollar 82.76 -0.2% +5.9%
Euro 1.28 +0.4% -11.0%
Volatility 24.45 -10.7% -0.9%
Gold Stocks 486.52 +1.6% +35.3%
10-Year Yield 2.65 +6.0% -23.4%

World ETFs
Symbol Price
USA 106.86 +1.6% +3.4%
Canada 26.32 +2.7% +8.8%
Russia 18.09 +1.1% -2.2%
India 33.21 +1.3% +23.2%
Israel 14.56 +0.0% +7.2%
Japan 9.52 +1.3% -7.1%
Singapore 12.20 +1.6% +16.5%
Taiwan 12.36 +1.4% +14.6%
S. Korea 48.00 +1.4% +13.4%
S. Africa 58.48 +1.5% +11.3%
China 39.97 +1.9% -0.8%
Lat.America 45.43 +2.9% +14.8%

Sector ETFs
Symbol Price
Oil Service 100.21 +3.5% -7.2%
Big Pharma 60.97 +0.9% -6.3%
Internet 56.28 +1.5% +21.4%
Semis 11.92 +2.1% -2.9%
Utilities 31.14 +1.9% +5.4%
Defense 16.12 +2.0% +3.0%
Nanotech 8.04 +2.3% -23.4%
Alt. Energy 8.67 +3.1% -12.9%
Water 15.04 +2.4% -7.3%
Insurance 14.37 +0.7% +5.4%
Biotech 17.95 +1.6% +6.0%
Retail 15.91 +1.0% +2.8%
Software 20.82 +2.4% +12.1%
Big Tech 44.07 +1.2% +9.1%
Construction 11.33 +3.1% -7.8%
Media 11.21 +1.6% +12.9%
Consumer Svcs 55.91 +1.3% +10.7%
Financials 49.67 +2.1% -4.4%
Health Care 58.99 +1.3% +0.1%
Industrials 53.16 +2.1% +10.0%
Basic Mat 58.94 +3.3% +15.4%
Real Estate 50.98 +1.6% +24.9%
Transportation 75.81 +2.2% +13.7%
Telecom 20.11 +1.0% +11.5%

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