Full-Tilt Poker: an Opportunity
Online Gaming: the Consequences of Full-Tilt’s meltdown from an Investment Standpoint
Gambling Supplies have recently taken a hit for investors. I saw this on game room supplies and decided to follow-up on it. The stock market can be a cruel place (I think we all have learned this over the past several years), and the Gambling Supplies industry, according to The Association of Gaming Equipment Manufacturers (AGEM), hasn’t done a firm foundation analysis of the industry to truly reflect its fair value. The Nevada-based, AGEM,who represents casino suppliesand decorate your game roomin the global market, released Monday its monthly 2011 index report and concluded that the market pushed the stocks price down by 7.2%. The bench-mark index they use ended the month of September at 105. This meant the index was down 18 points: the largest fall in 2011.
The Full-Tilte Poker fiasco has important consequences for players and investors alike.
I summarized this article in this video
For conveniene sake, I asked the good people at game room supplies to post the video.
To go over in a brief, but painful, memory of what happened to Full-Tilt Poker, basically it was a Ponzi scheme where senior management, including such poker legends like Chris “Jesus” Ferguson, raided the company for over $440 million while the company only held $400 million in player deposits. You do not have to be a financial wizard, a clever accountant, or understand any math beyond addition and subtraction to see that these numbers don’t add up. If you had ten-thousand dollars on account with Full-Tilt, you will probably recover nothing: that’s right: nothing. The money is gone.
All of the parties involved, including the big names in poker as well as management, should go to jail and lose everything because of this. At game room supplies, they have been talking about this for awhile.
We don’t know what will happen yet, but its clear this will have substantial consequences for the KEYWORDCAP1% and the Game Tables For Sale industry. And, in short, the conclusion of this essay is that the Full-Tilt poker meltdown will only help investors who buy into companies that manufacturer Gambling Supplies and Game Tables For Sale because, frankly speaking, I don’t know a rational human who will risk their money by playing online anymore.
I was recently approached by an old-friend to take a look at the industry. Rumours where rampant for years about what was going on with the money people deposited and won on online gaming. Many analyst who were promoting online Gambling Supplies assumed that the money was being kept on deposit under the care of an escrow account and administered by a in-partial third party. They thought, basically, they could earn interest on the money that the players’ had on deposit and that would be good enough for them. The problem is, and was, is that nobody really had access to the books and they couldn’t do a thorough analysis.
This isn’t correct in a strict sense of the word .
They had enough information, but a twenty-something analyst doesn’t have the experience to recognize what is going on with a company and when the number don’t make sense. What happened to players’ money has always been a question for players. But, they assumed that the people in charge, the founders and investors, were too smart to fall into this trap (see Chris Ferguson’s much lauded Phd in Computer Science).
The question I looked at isn’t so much as who the losers (everybody) but who the winners of this situation will be.
Anecdotal evidence indicates that more people are moving away from playing online and instead investing in Gambling Supplies and their Game Tables For Sale. Thursday night poker seems to be making a comeback as sales for Gambling Supplies and Game Tables For Sale are increasing. The most trusted people you can play with are your friends: they bring the cash and buy their way in. As long as the currency has value, you can settle up at the end of the evening: end of story.
I spoke to a psychologist who treats gambling addiction and she said that rational players won’t trust their money with online gaming sites anymore. But, there is always that subset of people who will not only continue to play online, but will their gambling fix increased knowing that their money will be in danger. The important thing to remember is that these people don’t gamble to win money, but they gamble for the excitement. However, these are the minority.
The reason I’m following Gambling Supplies is motivated by curiosity to see how the industry responds.
I always liked people who bet against the market, so maybe it is time to see if online gaming is a good investment. As someone who once sold their soul to an investment banking firm for years and only, at the end, concluded I just learned some fancy tricks in Excel (I was one of those characters who didn’t have to take their hands off the keyboard to work; that is, until Microsoft 2007 came along and, magically, none of them worked anymore. I think this is one of Bill Gates’ practical jokes on the world. He is also gambler who is insanely good at poker.
I never liked technology as an investment, which is essentially what the online gambling websites are. I like real assets, a conclusion which is due to my background in bankruptcy. Another reason I don’t trust those companies is that for years it was said that certain programs could be written that could take advantage of certain patterns in the way hands are dealt. For instance, getting a pair of Aces seemed to happen more than it should under a random game. This has been counter-acted with significant investments in software for the online gaming companies. But, generating random numbers is impossible and people will dedicate a significant amount of time to beating the system. I don’t see this problem going away.
Online gaming is subject to the laws of the internet—their aren’t any—and the laws of a particular country, which are real, so it’s hard to predict what might happen to an online vice-industry (who would have thought prohibition would become a law of our land). But, people always host parties, bars, casinos, and other businesses will always buy gambling equipment, so I don’t think that anybody involved in the Gambling Supplies and Game Tables For Sale are going anywhere soon. But, you never know, which is why I’m keeping an eye on these industries.
Or, you can follow what I do and just invest in index funds and not worry about individual companies. My investments are bet on the future well-being and prosperity of the economy, not on whether I trust a companies’ management to do what I hope they do.