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Wednesday, February 27, 2013

Report: Indian Casinos Revenue up Slightly in 2011 - ABC News

Report: Indian Casinos Revenue up Slightly in 2011 - ABC News


Report: Indian Casinos Revenue up Slightly in 2011


Indian casinos brushed off weak consumer spending in a sluggish U.S. economic recovery to post a modest increase in revenue in 2011, an industry study reported Wednesday.
Not only did revenue rise 3 percent, to $27.4 billion, but Indian casinos are holding on to their share of total casino gambling revenue, competing closely with commercial casinos, according to the report, "Casino City's Indian Gaming Industry Report."
The revenue increase is the second in as many years following a first-ever drop in Indian casino revenue in 2009 as the worst recession in decades took its toll on consumer spending. The back-to-back increases in revenue are encouraging, the report said.
"The question is how much further can Indian gaming grow?" author Alan Meister said.
Indian gambling was slowing before the start of the recession in late 2007 due to legislation, regulations and court decisions that restricted the types of games offered by Indian casinos, the number of states where gambling is permitted and other limits, he said.
The outlook for Indian gambling now appears healthy because the economy is expected to continue improving, restoring consumer spending, Meister said. In addition, many tribes are upgrading, expanding and replacing casinos.
Indian-run casinos such as those in Alabama and Nebraska, he said, enjoy the advantage of being closer to consumers than many commercial casinos. "They're a good alternative to Vegas that's closer to home," he said.
But the long-term outlook for Indian gambling is uncertain, Meister said. Potential threats include continuing legal challenges — such as a land dispute court case in Michigan that Meister said increases the likelihood of other legal challenges to gambling projects — and state regulations that restrict Indian casinos and limit expansion. Indian casinos face "a lot more" restrictions than their commercial counterparts, he said.
"That, in some ways, holds back Indian gaming from what it could potentially be," Meister said.
Other potential challenges include increasingly saturated markets, rising competition and Internet gambling.
Indian gambling generated about 43 percent of U.S. casino gambling revenue in 2011, the report said. Revenue at commercial casinos was 45 percent and revenue from racinos — casinos that operate at race tracks — accounted for the remaining 12 percent. That's unchanged from 2010, but represents a huge gain from the Indian casino share of less than 20 percent in 1993.
Both Indian and commercial casinos could lose business to racinos, he said. State approval of gambling is easier at race tracks where betting already occurs than establishing new casinos, Meister said.
Revenue growth varied from as much as 26 percent in Alabama to minus 3 percent in New York. After Alabama, the fastest-growing states were Mississippi, Montana, North Carolina and Oklahoma.
Following New York, the steepest decline in revenue was in Oregon, North Dakota, Connecticut and Idaho.
Revenue at Indian casinos continued to be concentrated in certain states. California generated more revenue at Indian casinos than did any other state, producing $6.9 billion in 2011. Casinos in California accounted for more than 25 percent of Indian casino gambling revenue nationwide.
The top five states — Washington, Florida, Connecticut, California and Oklahoma — accounted for about 61 percent of total gambling revenue. The top 10 states, which include Arizona, Michigan, Minnesota, Wisconsin and New York, account for 86 percent of total Indian casino revenue.
Ironically, the weak economy has helped spur casino growth among states seeking more revenue, Meister said.

Tuesday, February 26, 2013

New Jersey Passes Online Gambling Law | GamePolitics

New Jersey Passes Online Gambling Law | GamePolitics


New Jersey Passes Online Gambling Law

February 26, 2013
New Jersey lawmakers have approved a bill that will make online gambling in the state legal, opening the door for companies in the space -- including game companies like Zynga -- to operate online games that provide real-money gambling. Of course, you won't be able to play these games unless you reside in a state where it is legal to do so. Currently there are three: Nevada, Delaware, and now New Jersey. Nevada passed its online gambling bill last week.
Governor Chris Christie (R) has already signed the bill into law. The one caveat is that the bill will not take effect until the state's Division of Gaming Enforcement sets an official start date which could be somewhere between three and nine months after the law is signed.
One a related note, the Poker Players Alliance (PPA) issued a statement today applauding the move by lawmakers and the Governor:
"New Jersey has gone ‘all in.’ Residents now will have access to a safe and regulated online gaming market, and the state will have a new source for revenue and job creation -- something the federal government has failed to do thus far," said John Pappas, executive director of the PPA. "The U.S. represents the largest percentage of Internet poker players worldwide, so there is clearly a want and a need for a legal and regulated onlinegambling market. New Jersey will now serve as a leader in this thriving industry."
"Two dice" illustration © 2012 Sergey Mironov, provided by Shutterstock.

Ruchir Sharma: China Has Its Own Debt Bomb - WSJ.com

Ruchir Sharma: China Has Its Own Debt Bomb - WSJ.com


China Has Its Own Debt Bomb

Not unlike the U.S. in 2008, China is at the end of a credit binge that won't end well.

Six years ago, Chinese Premier Wen Jiabao cautioned that China's economy is "unstable, unbalanced, uncoordinated and unsustainable." China has since doubled down on the economic model that prompted his concern.
Mr. Wen spoke out in an attempt to change the course of an economy dangerously dependent on one lever to generate growth: heavy investment in the roads, factories and other infrastructure that have helped make China a manufacturing superpower. Then along came the 2008 global financial crisis. To keep China's economy growing, panicked officials launched a half-trillion-dollar stimulus and ordered banks to fund a new wave of investment. Investment has risen as a share of gross domestic product to 48%—a record for any large country—from 43%.
Even more staggering is the amount of credit that China unleashed to finance this investment boom. Since 2007, the amount of new credit generated annually has more than quadrupled to $2.75 trillion in the 12 months through January this year. Last year, roughly half of the new loans came from the "shadow banking system," private lenders and credit suppliers outside formal lending channels. These outfits lend to borrowers—often local governments pushing increasingly low-quality infrastructure projects—who have run into trouble paying their bank loans.
Since 2008, China's total public and private debt has exploded to more than 200% of GDP—an unprecedented level for any developing country. Yet the overwhelming consensus still sees little risk to the financial system or to economic growth in China.
That view ignores the strong evidence of studies launched since 2008 in a belated attempt by the major global financial institutions to understand the origin of financial crises. The key, more than the level of debt, is the rate of increase in debt—particularly private debt. (Private debt in China includes all kinds of quasi-state borrowers, such as local governments and state-owned corporations.)
On the most important measures of this rate, China is now in the flashing-red zone. The first measure comes from the Bank of International Settlements, which found that if private debt as a share of GDP accelerates to a level 6% higher than its trend over the previous decade, the acceleration is an early warning of serious financial distress. In China, private debt as a share of GDP is now 12% above its previous trend, and above the peak levels seen before credit crises hit Japan in 1989, Korea in 1997, the U.S. in 2007 and Spain in 2008.
The second measure comes from the International Monetary Fund, which found that if private credit grows faster than the economy for three to five years, the increasing ratio of private credit to GDP usually signals financial distress. In China, private credit has been growing much faster than the economy since 2008, and the ratio of private credit to GDP has risen by 50 percentage points to 180%, an increase similar to what the U.S. and Japan witnessed before their most recent financial woes.
The bullish consensus seems to think these laws of financial gravity don't apply to China. The bulls say that bank crises typically begin when foreign creditors start to demand their money, and China owes very little to foreigners. Yet in an August 2012 National Bureau of Economic Research paper titled "The Great Leveraging," University of Virginia economist Alan Taylor examined the 79 major financial crises in advanced economies over the past 140 years and found that they are just as likely in countries that rely on domestic savings and owe little to foreign creditors.
The bulls also argue that China can afford to write off bad debts because it sits on more than $3 trillion in foreign-exchange reserves as well as huge domestic savings. However, while some other Asian nations with high savings and few foreign liabilities did avoid bank crises following credit booms, they nonetheless saw economic growth slow sharply.
Following credit booms in the early 1970s and the late 1980s, Japan used its vast financial resources to put troubled lenders on life support. Debt clogged the system and productivity declined. Once the increase in credit peaked, growth fell sharply over the next five years: to 3% from 8% in the 1970s and to 1% from 4% in the 1980s. In Taiwan, following a similar cycle in the early 1990s, the average annual growth rate fell to 6%.
Even if China dodges a financial crisis, then, it is not likely to dodge a slowdown in its increasingly debt-clogged economy. Through 2007, creating a dollar of economic growth in China required just over a dollar of debt. Since then it has taken three dollars of debt to generate a dollar of growth. This is what you normally see in the late stages of a credit binge, as more debt goes to increasingly less productive investments. In China, exports and manufacturing are slowing as more money flows into real-estate speculation. About a third of the bank loans in China are now for real estate, or are backed by real estate, roughly similar to U.S. levels in 2007.
For China to find a more stable growth model, most experts agree that the country needs to balance its investments by promoting greater consumption. The catch is that consumption has been growing at 8% a year for the past decade—faster than in previous miracle economies like Japan's and as fast as it can grow without triggering inflation. Yet consumption is still falling as a share of GDP because investment has been growing even faster.
So rebalancing requires China to cut back on investment and on the rate of increase in debt, which would mean accepting a rate of growth as low as 5% to 6%, well below the current official rate of 8%. In other investment-led, high-growth nations, from Brazil in the 1970s to Malaysia in the 1990s, economic growth typically fell by half in the decade after investment peaked. The alternative is that China tries to sustain an unrealistic growth target, by piling more debt on an already powerful debt bomb.
Mr. Sharma is head of emerging markets at Morgan Stanley Investment Management and author of "Breakout Nations: In Pursuit of the Next Economic Miracles" (Norton, 2012).

Nevada roused into online gambling action by New Jersey | Meadowlands Matters | NorthJersey.com

Nevada roused into online gambling action by New Jersey | Meadowlands Matters | NorthJersey.com

Monday, February 25, 2013

Why Should Taxpayers Give Big Banks $83 Billion a Year? - Bloomberg

Why Should Taxpayers Give Big Banks $83 Billion a Year? - Bloomberg

Zynga's Valuation Amid Changing Online Gambling Markets - Seeking Alpha

Zynga's Valuation Amid Changing Online Gambling Markets - Seeking Alpha


Disclosure: I am long ZNGA(More...)
I published an article last week on Zynga (ZNGA) that focused on the progression of online gambling legislation. After receiving feedback asking what ZNGA has already done in preparing for online gambling and wondering which states had legislation on track to be passed, I decided to get the information and links together and answer questions regarding all aspects of ZNGA and its journey to the online gambling market.
Federal Gambling Laws and Limitations
On Oct. 13, 2006, President George Bush signed the Unlawful Internet Gambling Enforcement Act into law. This law banned internet gambling and created a task force to stop and punish violators of the law. For instance, BWIN Party Digital Entertainment -- which recently teamed up with ZNGA -- had its poker platform PartyPoker.com shut down in the U.S. in 2006, causing its stock to trade 60% lower.
The excitement to get back in the game has been halted, however, as federal as well as state legislation pending approval prohibits former sites from operating for five years minimum. This leaves new faces like ZNGA, previously an online social gaming site partnered with Facebook (FB), to point their future efforts toward Internet gambling in an effort to snatch up the available U.S. online gambling market.
Zynga Gambling U.K. Partnership
The U.K. is currently the largest online gambling market in the world. At the forefront of this market is BWIN Party Digital Entertainment, which is a company consisting of a BWIN and Party Gaming (PartyPoker.com owner) merger. It teamed up with ZNGA to further pursue online gambling in the U.K. In 2012, online gambling in the U.K. raked in $2.5 billion andgambling in Europe overall is predicted to reach $42 billion in 2015. This, however, is not even the most staggering statistic. In 2010, there was a 30% growth in online users from the 2009 numbers (which was already 5.6% of the adult population). If this growth trend continues across Europe, the market could size could double in the next five years.
ZNGA, while pursuing everything from real money poker and blackjack to virtual slot machines, has seen a future that has a vast market for growth and innovation. On this subject, Mark Pincus said in January that the "amount of innovation you're going to see around gambling as an entertainment mechanic is going to be mind blowing."
The foundation for this innovation is an exploding gambling market. When poker was legal in the U.S. from 2001-05, revenue grew from $82.7 million to $2.4 billion. Internationally, online gambling generated $117.6 billion in 2011 and is predicted to grow annually at 9% to reach $182 billion in 2015. According to MSN Money, online poker alone could generate $6 billion to $8 billion a year.
State Gambling Legislation
Legal gambling in New Jersey and Pennsilvania was $3.05 and $3.16 billion, respectively, and they are just No. 2 and No. 3 on the U.S. gambling list. No. 1 last year was Nevada, making a whopping $10.8 billion. Nevada believed gambling was moving to an online venue in the future and wanted to ensure its place in the emerging market. Below are states considering legislation concerning online gambling and a timetable for completion of the legislation:
  • California -- Reintroduced a bill, and expected to vote between March and April.
  • Deleware -- Fully passed Online Gambling Bill and are currently putting infrastructure into place to get it up and running by September.
  • Florida -- Considering a bill, but could be next year before approval. They estimate online gambling will produce $10 million in tax revenue starting out.
  • Hawaii -- Proposed a bill, but are still waiting for support and have no real timetable, but would like to move quickly as they see possible revenue from Asian markets as well.
  • Illinois -- State Rep. Bobby Moak, D-Bogue Chitto, is rolling the dice again in the 2013 legislative session on online gaming legislation that could have a profound impact on the future of legal gaming in the state. The bill would have a 5% tax and limit licenses to companies already with land licenses in the state.
  • Iowa -- Are looking to move quickly on a gambling bill as they estimate 150,000 people in their state already illegally online gamble on offshore sites.
  • Maine -- Having been discussed for over a year now and not gone anywhere, it does not seem important on the agenda even though the idea is frequently thrown around in committee.
  • Massachusettes -- Proposed by State Treasurer, would allow online Social card games, fantasy sports, and the lottery.
  • Mississippi -- Failed to get bill out of committee so far.
  • Native American Tribes -- Have proposed and discussed bills, but need federal legislation to allow population to gamble on a Native American land-based gaming server.
  • Nevada -- Signed into law a bill that legalizes online gambling and sets up framework for interstate online gambling.
  • Pennsilvania -- Will introduce their online gambling bill this week and is expected to pass within the week.
  • Texas -- Proposed Poker Gambling Act of 2013 but does not have a timetable and has considerable resistance.
  • Washington -- Proposed bill legalizing in home online gambling, has yet to be voted on. Should be resolved in the next few weeks.
Why Zynga Has an Advantage in Future Markets
According to The New York Timesonline gambling from mobile devices will be $100 billion by 2017. Coincidentally, ZNGA has set its primary focus in social gaming at increasing its mobile usage in an effort to transition its 300 million monthly users away from PCs and toward mobile applications (a transition that was 25% complete according to Q4 2012 data released in February).
Currently there are many online poker sites internationally that will compete with ZNGA in current markets and future markets if the U.S. continues to open up to online gambling. What sets ZNGA apart from other gambling sites is its connection to the growth of social media sites such as Facebook, LinkedIn (LNKD), and Twitter (which is yet to go public). If the market continues moving in this direction, then ZNGA, which is the No. 1 social gaming site in the world, will be poised to take a dominate roll in the future of online gambling. Its 89 patents -- mostly from Walker Digital -- based on online social gaming will create a new unique platform that is protected by its patent portfolio. In addition, the legalization of online poker in the U.S. according to a Goldman Sachs could create $12 billion in revenue alone, an estimate nearly twice as much as previously thought possible.
According to a research report by KPMP titled "Online Gaming: A Gamble Or A Sure Bet?," one of the four key drivers that will shape the industry over the coming years is:
Combining online gaming and social networking: social networking will be a key driver of activity and growth in the online gaming world, as it represents a natural extension to users of digital and mobile technology. Social networking's role in driving online gaming is especially significant because of its high levels and ease of remote access.
Conclusion
ZNGA has been priced as a terminal company until recently. Its share price reflected only a 50-cent above cash valuation that was due to many analysts believing ZNGA would never become profitable and soon fail. With its partnership with BWIN Party Digital Entertainment and its hire of key executives, ZNGA has made a determined effort to become a serious player in the international and U.S. real money gambling market. With the move from traditional web-based gambling to interactive social media style gambling inevitable, ZNGA appears to be at the right place at the right time to become a dominant force in the near future. If ZNGA can even manage to take 1/1000th of the current global online gambling market, it would generate enough revenue from gambling alone to justify its current market price.
If you can see ZNGA gaining any more than 1/1000th share of the global gambling market, or having any profit from its current games, then it seems imperative that the stock valuation will be increased. As ridiculous as this scenario seems, the downplay of the importance of its move to real money gambling has been worse. Starting with the Morgan Stanley Conference that ZNGA is presenting at on Monday, I think that there will be a huge course correction by institutions raising price targets to between $7 and $11, which I believe is still a conservative valuation.

Friday, February 22, 2013

Jury Finds Farmers Insurance Guilty of Fraud | Reuters

Jury Finds Farmers Insurance Guilty of Fraud | Reuters


Jury Finds Farmers Insurance Guilty of Fraud

* Reuters is not responsible for the content in this press release.
Mon Feb 11, 2013 3:29pm EST
For best results when printing this announcement, please click on the link
below:

http://pdf.reuters.com/pdfnews/pdfnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20130211:nPnCL58217


MOBILE, Ala.,  Feb. 11, 2013  /PRNewswire/ -- On  February 8, 2013, a  Mobile
County, Alabama, jury returned a  $2.4 million  verdict in favor of a local
insurance agent in a fraud case brought against 11 companies, all affiliated
with Farmers Insurance Group.  The plaintiff in this case, Robert "Kyle" Morris,
was a licensed insurance agent at the Morris Insurance Agency, owned and
operated by his father.  

In late 2006, Kyle learned that Farmers was recruiting agents to sell their
products.  He contacted Farmers about the potential opportunity and made it
clear from the beginning that he was not interested in becoming a Farmers agent
if it meant having to leave his father's agency.  Farmers assured Kyle that it
was not a problem for him to remain with the Morris Insurance Agency, and that
his association did not violate any of Farmers' policies or procedures.  In
fact, they told Kyle his association with the Morris Insurance Agency would be a
benefit to his customers and Farmers.  

However, that representation was false when it was made.  Farmers had a written
internal policy since at least 2003 that prohibited any Farmers agent from
associating with an independent insurance agency.  The internal policy also
stated that ownership by an agent's immediate family member in a competitor of
Farmers would be considered an unacceptable conflict-of-interest.  

Kyle worked diligently for Farmers over the course of two and a half years,
building a book of business, establishing relationships with clients, and
quadrupling the premiums he earned for Farmers.  In  September 2009, Farmers
terminated Kyle without warning.  Farmers' confidential internal documents
proved that Farmers terminated Kyle because of his relationship with his father
and the Morris Insurance Agency - the very thing they assured him would be no
problem when he started.  At trial, Farmers executives admitted that the
representations made to Kyle had been false.  

Based on his employment agreements, Farmers took all of Kyle's customers and
prohibited him from contacting them for a year.  Kyle lost all of his investment
in his Farmers agency, over 200 customers, and the renewal premiums from the
more than 300 policies he sold as a Farmers agent.   

"Kyle's customers received a letter from Farmers informing them that Kyle had
been terminated from Farmers and their insurance policies were being assigned to
a new agent.  Under the agreements, Kyle was prohibited from even calling his
customers to explain the reason for his termination.  Kyle's customers were left
with the impression that Kyle had done something wrong," said  J. Brian Duncan,
Jr., of  Mobile's Cunningham Bounds, LLC who tried the case with his partner, 
Lucy E. Tufts.  "In this case, the evidence that Farmers intentionally made
false statements to Kyle to induce him into becoming a Farmers agent was
overwhelming.  After hearing all the evidence, a jury of twelve intelligent,
hardworking, and honest citizens made the unanimous decision to hold Farmers
accountable for its false representations and all the harm that was caused to
Kyle as a result," Duncan concluded.  

The law firm of Cunningham Bounds, LLC, founded in 1958, is based in  Mobile,
Alabama  and has been representing plaintiffs for over 50 years.  Today the firm
continues its tradition of representing victims in cases involving catastrophic
personal injury, industrial accidents, defective products, truck and automobile
accidents, and medical malpractice.  The firm also has expertise in business
litigation, complex litigation, and national and state class action litigation
involving defective products and consumer fraud.   

For more information, contact:
Joan Cumbie
251-471-6191

SOURCE  Cunningham Bounds, LLC