From Robes to Riches

The Battle of The Billionaires and the Talk of the Town

This last Month the Vegas plays have been both interesting and profitable. On April 1st. MGM was at 2.33 a share. Today it is at 6.30. That's over a 250% return..not bad. So having played both MGM and LVS I of course began to research these plays and was so intrigued but what I was finding I thought I would share some of it with you.

The History of MGM is fascinating in itself and this is where the Billionaire and fascinating story of Kirk Kerkorian begins. Kirk Kerkorian is Las Vegas most influential and the longest operating casino owner who virtually changed the direction of Las Vegas numerous times through his arrival here after 1945.

The father of the Megaresort

Operating a charter airline, flying junkets to Las Vegas, Kerkorian gained a early position as being a key player in the growth of post-war Las Vegas. In 1962, he purchased the land across the street from the Flamingo, then leased it to Caesars for 2 years - until selling them the land. In 1967, he purchased the Flamingo Hotel, ran it and remodeled it and sold it. His next project was the construction of his world's largest International - in 1969. Kerkorian then purchased the land for the MGM Grand, on the SE corner of Flamingo Road and the Strip. After the sale of his International Hotel to the Hilton chain, Kerkorian set out to build a new, grand hotel on the Strip. His MGM Grand opened in 1973. Twenty years later he opened the second MGM Grand, on Tropicana. After the Millenium, MGM acquired the Mirage, Bellagio and Treasure Island. New York, New York and the Monte Carlo were part of the MGM's holdings. In 2003 MGM acquired the Excalibur, Luxor, Mandalay Bay & Circus Circus.. opened as the Strip's first super-resort in 1973.

Early Vegas

The story behind this man is truly fascinating having dropped out of school in the eighth grade to become a professional boxer who then flew suicide missions for the Royal Air Force, made a small fortune in surplus military airplanes, and a larger one in the airline business.

Early on Kerkorian had a commercial pilot's license, and a job as a flight instructor. But teaching bored him.

"I heard about the Royal Air Force flying out of Montreal, Canada, and I went up there and I got hired right away," he recalls. "They were paying money I couldn't believe, $1,000 a trip."

The mission of the RAF Air Transport Command was to fly Canadian-built Mosquito bombers from Labrador to Scotland. Only one in four made it.

Mosquito bomber

The Mosquito's fuel tanks carried it 1,400 miles. It was 2,200 miles to Scotland. Pilots had only two possible routes, each worse than the other.

The roundabout route was Montreal-Labrador-Greenland-Iceland-Scotland, but the planes' high-performance wings could be distorted by a paper-thin coating of ice, causing it to fall out of the sky. "The snowfields and forests around that frozen perimeter were strewn with downed Mosquitos crushed like matchboxes," wrote Dial Torgerson in the 1974 biography "Kerkorian, An American Success Story."

Or one could fly straight across the Atlantic, riding a west-to-east airflow called the "Iceland Wave." It blew Mosquitos toward Europe at jet speeds, but it wasn't constant. If it waned in midflight, plane and pilot were lost.

Kerkorian and his wing commander, J.D. Woolridge, rode the wave in May 1944, and broke the old crossing record. Woolridge got to Scotland in six hours, 46 minutes; Kerkorian, in seven hours, nine minutes. He came in second. He hated that.

The following month, the Iceland Wave died halfway across. The sun set. The reserve tank ran empty, and Kerkorian prepared to ditch. His navigator begged Kerkorian to drop low just once. As they broke through the cloud, the lights of Prestwick, Scotland, twinkled ahead.

Kerkorian made a perfect landing.

In 2 1/2 years with the RAF, Kerkorian delivered 33 planes, logged thousands of hours, traveled to four continents and flew his first four-engine plane. He also saved most of his generous salary.

Kerkorian clearly recalls his first visit to Las Vegas in July 1945. His RAF service completed, he paid $5,000 for a single-engine Cessna in which to train pilots. "And I used that same plane to fly charters. That's what got me into the transportation end of the business.

So I read here a very tough guy being a boxer who wants to compete and hates to lose. A man who is unafraid to to great risks as he rides a wave of air that may or may not be there but yet makes perfect landings. In other words he seems to have a way of getting out of a jam. Couple all this with some reports that he may be the son of the famous mobster Meyer Lansky as one comment I found reads,

Kerkorian is an enigma. An FBI report noted that he met with a Meyer Lansky lieutenant (Lansky was the mafia financial godfather who paired with Lucky Luciano and Vito Genovese to take over the US mafia in the 1930’s).

Meyer Lansky

Stranger still, Kerkorian is the spitting image of Meyer Lansky–he looks like he could be Lansky’s son. And Kerkorian made his fortune running a gambling junket airline between LA and Las Vegas, where Lansky’s mob money was king.

Kirk Kerkorian

According to the Forbes 2008 list,
he is the world's 41st-richest person
with a net worth of $16.0 billion.

So, the question is raised: Is Kerkorian really Lansky’s son, the favored (shadow) repository of Lansky’s billions, rather than being a supposed Armenian immigrant’s son? A cover identity is easy to arrage, especially if you have millions to pay for it. And now, Kerkorian’s $$$ are endangered by a financial mafia’s debacle. Most ironic.

And if this were true, the question has to be asked, do we really think he will not get funding to complete his latest project?

Enter the the CityCenter Project - The most expensive privately funded construction project in U.S. History.

CityCenter

Mr. Kerkorian with his private investment corporation Tracinda owns about 55% of MGM which is in partnership with Dubai World to build this project on the Las Vegas Strip.

Dubai World is a major investment holding company representing the business and investment portfolio of the Arab government of Dubai. Dubai World will invest approximately $5 billion in the deal, with $2.7 billion being funneled directly into the CityCenter project. Another $2.4 billion will be invested into purchases of MGM Mirage common stock, purchasing up to 28.4 million shares, which will also give Dubai World an approximately 9.5 percent equity stake in MGM Mirage itself having bought 14 million shares at $86.... OUCH! So these guys are none to happy about it and have refused to pay any more towards the project until they can have assurances that MGM can remain viable.

The most expensive privately funded
construction project in U.S. History.

The Las Vegas gargantuan $7.4 billion, 68 acre project.

CityCenter is on schedule to open in late 2009. The “city-within-a-city”
concept will include over almost 5000 rooms in three hotels, with another
2700 condos/condo-hotel units, in multiple towers. These will be anchored together by 470,000 square-feet of retail and entertainment space and a
equally large casino area.

MGM instead of reporting its fourth-quarter earnings, filed two other SEC forms. The first one was to confess they had tapped out their $4.5 billion revolving credit line by withdrawing the last remaining $842 million. And the second filing confessed why it was late with its earnings announcement. It is about to be in breach of its senior debt covenants - and if that happens, MGM’s debt laden house of cards starts to collapse.

Just to be sure everyone got the message, MGM added, “it is likely that…the Registrant’s consolidated financial statements for the year ended December 31, 2008 will contain an explanatory paragraph with respect to the Registrant’s ability to continue as a going concern.” Translated, this means if MGM isn’t able to sweet talk its senior debt holders into revising their agreement, bankruptcy is the next stop down the line.

MGM is carrying a mountain of debt, primarily related to the $9 billion CityCenter project. And a lot of it is scheduled to come due in the next couple of years. They have about $1.2 billion due this year and about another $1.1 billion due next. So Dubai World has refused to make payments on the loans for the completion of the CityCenter.

On Friday came news that MGM MIRAGE Provides Funds to Ensure Construction Continues at CityCenter which sent shares of MGM as high as 6.82 from the low of the day in the 4.80's. It was a great ride as it was stated

The payment by MGM MIRAGE includes $35 million that should have been funded by Infinity World, a subsidiary of Dubai World.

"MGM MIRAGE remains dedicated to supporting the completion of CityCenter, recognizing the significant long-term value this development will provide to Las Vegas and the state of Nevada," said Jim Murren, Chairman and CEO of MGM MIRAGE. "MGM is determined to make CityCenter a success and we continue to review with our partners all options to keep CityCenter fully funded. We are continuing to engage in constructive discussions with our senior lenders and the CityCenter lending group and we appreciate the support of the involved parties.

But the story just keeps getting better and better...enter Corporate raider Carl Icahn. You remeber him from the Yahoo Microsoft debacle right.... right.

Corporate raider Carl Icahn

So the CityCenter drama just keeps getting more fun after it was reported that corporate raider Carl Icahn and private equity firm Oaktree Capital management were buying up millions of dollars in MGM Mirage bonds in an effort to force the casino operator into a bankruptcy filing to restructure the company.

MGM Mirage is facing a May 15 deadline to come up with a restructuring plan for its $13.5 billion in long-term corporate debt.

These events are giving long tern MGM Mirage investors a front row seat at a high-paced action thriller.

“MGM Mirage continues in a high-stakes poker game,” KDP Investment Advisors gaming analyst Barbara Cappaert wrote in a research note Friday.

But MGM’s current debt holders are at a catch 22 themselves. Banks don’t want big debt going into default -as it does bad thinsg to those already shaky balance sheets. So MGM might be able to work out a deal with its current lenders. So I'll be watching what has to be the greatest soap opra of all tim eto hit Las Vegas play it self out in the comming weeks. There should be lots of volitility here which means if you like to play the tables at vegas, youre gonna love trading MGM!

GLTA

DEO

Weekly Update

Update 4-13th thru 17th
C - $3885
MGM - $3292
BEE - $160
DRYS - $30
Tues - $79
GRO - $172
LVS - $377
ABK -$220
Total Gain - $6459

This week was a roller coaster ride to say the least. Nitro pills anyone? :-) I tried some new strategies that try to maximize gains. I'll be working this new strategy to see how viable it is. So stay tuned. Right now I'm spending time looking at all the stories behind MGM. This stock has so many power players involved - Kirk Kerkorian, Carl Icahn, Dubai World and Bank of America. WOW...what a group! And as I research into this play more the stories just get better and better. So much so I hope to blog on this tonight if I have time because there are some very intriguing highlights they are all blog worthy.

Friday saw a wild ride up as news was announced that $70 million was infused to secure the loans for the Vegas City Center casino resort with estranged partner Dubai World.

The City Center project is a luxury residential, resort and retail complex with an estimated cost of $8.7 billion and is owned by City Center Holdings LLC, a joint venture equally owned by MGM and Infinity World. The project is being developed on 67 acres between the Bellagio and Monte Carlo resorts on the Las Vegas Strip. The project includes construction plans for several casinos, hotels, a retail strip and other office and residential buildings.

Dubai World has been withholding up to $135 million payments for the project and filed a lawsuit alleging a breach of contract and cost overruns due to mismanagement, following MGM's statement on its 10-k filing that "there is substantial doubt about our ability to continue as a going concern."

MGM
One of the biggest soap opera's to hit Vegas!

So I rode this wild ride and 'should have' lol doubled my gains but I was away from my computer and at work only to receive an email that the MGM was running. I hurriedly went to a computer signed on and sent in a blind sell order right as it was correcting momentarily. Oh had I been at my trading desk with charts and level 2! Oh well, one day we will do this F/T. Till then it's a P/T gig that both fun and profitable.

Here's a little history of what has been happening with MGM that was relaesed back in March


I'm not offering a buy or sell on this stock, but just pointing out there is alot going on here that will be fun to watch<>

GLTA

NEWS - Calpers Seeks to Buy TARP Holdings, Citigroup Assets

Calpers Seeks to Buy TARP Holdings, Citigroup Assets
April 15 (Bloomberg) -- The California Public Employees’ Retirement System said it’s seeking opportunities to buy assets of Citigroup Inc. and other financial companies tied to the U.S. government’s $700 billion Troubled Asset Relief Program.

Calpers, as the largest U.S. public pension manager is known, said today it’s setting aside “billions of dollars” amid the credit crunch and is ready to deploy capital. It added that there’s a “glimmer of hope” in the stock market.

The pension fund is seeking to buy “some of the assets of these financial companies such as Citi and the others, assets that they’re trying to get off their balance sheets,” Henry Jones, a Calpers board of administration member, said in an interview after a speech in Seoul.

Closing the Deal

Citi - Very Rewarding

Citi
The "Very Rewarding” Campaign

April 12 Update
Sold for Gain
FEED - $950
Total Gain - $950
Holding C and up $4086

A few years ago Citi Bank ran an ad campaign called Citi - "Very Rewarding.” At the time, Citi was trading at around $50 a share. With the fall of the financial's Citi has just recently come off it's low of .97. Now Citi is again living up to it's old campaign as those who were buying were definitely flying as others blindly looked on. All last week there were those who were writing Citi as done and a are still surprised even as it printed an AH high of 4.30.

Because of the R/R factor on this one I went in on Thursday in PM as I wrote in the last blog at $3.00. I dont think many realize all that's at play with Citi this week so I'll share some of the highlights and interesting sub plots to this developing play.

Number one, is the obvious, we have Earnings reporting this Friday BEFORE the bell which generally means good news. This after WFC blew the doors off of their earnings report in an early suprise Thursday before the bell.

C

So the FINS are setting up for some good numbers as M/M and fuzzy math with derivatives combined with help from the Fed all sync to build consumer confidence that the economy is turning. Now there is no doubt this is very much a CONfidence game, but if you know what they are doing, then play along and reap the reward. No need to be cynical and blind.

So a few intersting points that led me to believe this was in play other then earnings.

First, In a letter to his employees the CEO of Citi states,

"In fact, we are profitable through the first two months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007."


Second - The arb story that could lead to a VW type short squeeze.A Graphic Representation Of the Citi Arb Carnage

Three because Citi is the number one shorted stock on the NYSE short interest at 22.28 % of the float or 1,209,885,200 shares.

Third - Cramer posted a video of a BUY for Citi here April 7th.

Fourth - The Stock was at $3 and lagging behind and giving ht e above, the upside out weighed the Risk.

Today my account gained $6900 thanks to FEED. As I've written before I've had to average down on this one and have been very patient for 5 months. Yes, 5 Months! Sometimes patience pays. So today I went green enough for me to sell and release $16K in capital that was dead money. The China AG plays look to be a sector that is heating up. Apparently Jim Rodgers made some positive comments and the stock soared. So seeing GRO as a possible play in the coming days I bought some.

FEED

GRO

Another buy today was MGM. I've been liking the story behind the both Vegas plays MGM and LVS. So today I bought on the dip at $5.75 and am looking to add here with the news just out.

MGM Mirage gets bank funding for CityCenter construction

8:22p ET April 13, 2009 (MarketWatch) LOS ANGELES (MarketWatch) -- MGM Mirage said late Monday that it has received an amendment of its senior credit facility from banks lending to it. This will allow it to fund the entire current construction cost of its CityCenter project, regardless of whether Dubai World goes ahead with a $35 million investment in the project. The costs total $70 million, due no later than April 17, MGM Mirage said in a statement. The casino operator said it "remains committed to finding a long-term solution to the financing of CityCenter to ensure the completion of this important project."

MGM

And finally I took a position in TUES and BEE on that dip at the end of the day. I won't be staying in this one long, but that dip was attractive, so we'll see where this goes. The REIT's have been hammered but we might gets some positive movement here in the short term.

Great Series on Wall Street