Friday, July 22, 2011

What a Business

Frederick J. Sheehan is the author of Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession (McGraw-Hill, 2009) and "The Coming Collapse of the Municipal Bond Market" (, 2009)

Steve Wynn, chairman and CEO of Wynn Resorts, is a man who knows how to build and grow casinos. His father ran bingo parlors. Over the years, Wynn has built (and sometimes sold) and owned (or owns) The Golden Nugget, The Mirage, Treasure Island, The Bellagio, The Wynn, Encore; all in Las Vegas; and The Wynn in Macau, a territory re-acquired by the People's Republic of China in 1999. The CEO "considered moving the company's global headquarters to Macau" in 2010. 'Til now, he has stayed put, but his July 18, 2011, Wynn Resorts investor conference call implied Wynn remains restless.

He told investors the Obama "administration is the greatest wet blanket to business and progress and job creation in my lifetime. And I could prove it and I could spend the next three hours giving you examples of all of us in this marketplace that are frightened to death about all the new regulations,[as] our healthcare costs escalate, regulations coming from left and right, [with a] President that... keeps using that word redistribution."

His was not a partisan pitch: "I am a Democratic businessman.... I support Harry Reid [the Democratic senator from Nevada], I support Democrats and Republicans, and I am telling you that the business community in this country is frightened to death of the weird political philosophy of the President of the United States. And until he is gone, everybody is going to be sitting on their thumbs."

Wynn claimed you're damned if you do and damned if you don't: "[I]t is Obama that is responsible for this fear in America. The guy keeps making speeches about redistribution and maybe we ought to do something to businesses that don't invest, they are holding too much money. You know, we haven't heard that kind of talk except from pure socialists. Everybody is afraid of the government and there is no need soft-pedaling it. It is the truth. It is the truth."

Wynn has been investing, but is at odds with the current rhetoric. "The administration in Washington... [is] attacking China where, in the case of my Company, the vitality of capital to improve Las Vegas has come from [building The Wynn casino in Macau]. You know, it is the double whammy. American companies that have ventured abroad to broaden their markets are bringing money - have reinvested much of that in America." Here, Wynn in referring to administration threats aimed at U.S. companies that invest profits abroad.

The [Chinese] State Administration of Foreign Exchange, only a high-speed train ride from Macau (or, soon to be), stated on July 20, 2011: "We hope the U.S. government will earnestly adopt responsible policies to strengthen international market confidence, and to respect and protect the interest of investors." Steve Wynn might have written that himself.

The tendencies during a period of deleveraging are to hibernate rather than spend, to cut costs. Salaries and benefits are the largest costs at most companies. Without question, additional reasons for job stagnation are regulation and the health-care bill. This week, Lockheed Martin announced it is cutting 6,500 more jobs (in addition to 2,000 earlier this year), Cisco reported it is axing 6,500 now and another 4,000 later. Borders, which still has 10,000 employees, announced it is being liquidated. A potential buyer could not come to terms over this past weekend. Its bid to buy Borders failed. The price offered was undoubtedly discounted for the reasons stated by Wynn.

Steve Wynn came to mind in 2008 and has remained under consideration since. Knowing nothing about the man, the question was purely hypothetical: What does he think of the Too-Big-Too-Fail CEOs whining "I couldn't see it coming" in Washington? Again, not knowing Wynn, it was easy to imagine him punching his fist through the television set as he watched these welfare cheats testify.

Wynn is a study in contrast to the government-salvaged banks. A casino operator would not last one day if he employed the same so-called "risk controls," VaR models, and out-of-control leverage that drowned Goldman and Citigroup. He knows Washington will not bail out a casino. Therefore, he runs Wynn Resorts as a business while Jamie Dimon runs J.P. Morgan like a speculator at The Golden Nugget.