Who Needs Confidence When You’ve Got Greed?
by Graham Summers
September 6, 2006
Joe America is getting worried…
The Consumer Confidence levels for August were published last Tuesday. And they weren’t looking good. General consumer confidence decreased from 107 to 99 month-over-month. The percentage of American consumers feeling that economic conditions are “good” dropped while the percentage of consumers forecasting a worsening of conditions increased.
But don’t confuse a lack of confidence in the economy for the inability to spend more than you make.
Consumer spending rose to its highest 2006 levels last month, with the personal spending growth rate of July doubling that of June. If there’s one thing the U.S. consumer has proven time and time again in the last 16 months, it’s his ability to buy things when he’s worried, depressed, and broke: July’s increase in spending outpaced the gain in incomes. Thus, U.S. consumer savings rates remained negative for the 16th month straight.
Insiders at gaming stocks are certainly forecasting a continuation of consumer spending. In fact, they’re betting millions upon millions of dollars of their own money on it.
First, it was director Neil Barsky at International Game Technology (IGT). In June, Barsky bought more than $33 million worth of IGT stock for Alson Capital Partners, an investing firm he runs.
The following month, it was Michael Gaughan, CEO of Boyd Gaming (BYD). Gaughan bought $35 million worth of BYD stock in late July.
The in August, Jack Binion, chairman of the International branch of Wynn Resorts (WYNN) bought $19 million worth of his company’s stock just weeks before Wynn opened its new casino resort in Macau China, the Monte Carlo of Asia.
And now, Craig Nielson, CEO of Ameristar Casinos (ASCA) just bought $2.8 million worth of his company’s stock.
Consumer discretionary and gaming/casino stocks have been at the top of insider bull lists for weeks now. And while Wall Street and the Government may be expressing concerns of a potential economic slowdown, it is clear corporate insiders are betting that the Herculean spending efforts of the U.S. consumer will continue for the remainder of 2006.
Too bad Bernanke’s not a betting man.
Good trading
Graham
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