April, 2009


All the major hotels In Las Vegas are now on the brink of bankruptcy. There has been relatively little in the news about this. MGM-Mirage, which owns many of the best known hotels on the Las Vegas Strip says they may soon default on their bonds. The upscale Wynn Resorts is losing $50 million a month; and Las Vegas Sands, which owns the Venetian in Las Vegas and several gigantic hotel-casinos in Macau is selling assets to avoid bankruptcy.

For decades, stock brokers and Wall Street "gurus" claimed that the casino business was "recession proof," but I never believed that. Some businesses do seem to be recession proof. Many inexpensive luxuries sell well in recessions. During the Great Depression, sales of lipstick, beer, Coca Cola, and chocolate bars actually rose. However, a trip to Las Vegas or Atlantic City is not an inexpensive luxury. Besides, there was no way to know how Las Vegas would hold up in a recession based on past performance. During the Great Depression, the population of Las Vegas was only 3,000 people, and there was no gambling industry. In 1973, when the U.S. had its last serious recession, the population of the Las Vegas metro area was a little over 100,000. Today, it is almost 2 million, and like Atlantic City, Las Vegas is still pretty much a one-industry town.

And now, Las Vegas has another problem. Recent public anger over executive compensation and Wall Street bonuses has led to massive cancellations of conferences and conventions. These days, corporate executives don't want to be photographed or seen in resort hotels or casinos.

As a result of the casino industry meltdown, you can now stay at top-quality Las Vegas hotels for nothing, nada, zero! The price of some airline-hotel packages is now less than the price of an airplane ticket alone. For example, U.S. Airways is advertising a package that includes round trip from San Francisco to Las Vegas and 2 nights at the MGM Grand for $135 per person, double occupancy. was recently advertising a round trip from Oakland to Las Vegas plus 2 nights at a 3-star hotel on the Strip for $111. That's less than the price of a round trip airline ticket from the Bay Area to Las Vegas by itself, which is $138. Las Vegas hotels bundle their free rooms with airplane tickets to insure that these rooms go to out-of-town visitors and not down-on-their-luck locals just looking for free housing. Why are they doing this? For the obvious reason - They are hoping that you will gamble while you are at the hotel.


Jim Cramer is the host of CNBC's "Mad Money" TV show. A couple of weeks ago, Cramer made the mistake of appearing on Jon Stewart's "Daily Show." Stewart tore Cramer to shreds. If that had been a prize fight, Cramer's manager would have thrown in the towel during the first round.

Stocks vs. Toasters. Jim Cramer would flop as a toaster salesman. Suppose you walked into a store, told a salesman that you wanted to buy a toaster, and the guy went nuts. He rolled up his sleeves and began pacing back and forth nervously. Then he started shouting at you while waving his arms in the air. Then he stared at you with bulging eyes, pointed to a specific toaster, and said: "You have to buy this toaster! And right now!" What would you do? You would walk out of that store and never return! Well, that is precisely the way Jim Cramer acts when he tells people how to invest their money! No foolin'. Just watch his show if you don't believe me. Do people actually buy stocks based solely on this guy's advice? You bet! Millions do.

I used to be a Registered Financial Advisor, and I know from experience that most people know more about their toasters than they know about the stocks and mutual funds they own. I still get phone calls every once in a while from people seeking financial advice. The question that I am asked most frequently is: "Is my mutual fund safe?" I always answer: "What is the name of your mutual fund?" About half the time, people tell me: "I don't know." Even worse, some people say: "Aren't they all the same?" Isn't that pathetic?

My father used to sell toasters at his store. Even though those toasters only cost $9.99, nobody bought one without asking one or two questions and examining the toaster first. I haven't conducted a survey about this, but I'm pretty sure that more people can tell you what brand of toaster they own than the name of the mutual fund where they've plopped their life savings. I sometimes think about the toasters at my father's store when people tell me that they know absolutely nothing about the stocks or mutual funds they own.


Last month, OctoberFeast Bavarian bakery opened up for business in downtown Berkeley. If you like great German rye bread, this is the place to go. They also sell soft pretzels and pastries. The walls of the bakery are covered with pictures of King Ludwig II of Bavaria, better known as "Mad King Ludwig." While there are some historians who argue that Ludwig wasn't actually insane, his behavior was undeniably bizarre. For example, during cabinet meetings, Ludwig sometimes had lengthy arguments with people who weren't there. In 1886, Ludwig was declared insane by his cabinet and deposed. The following day, Ludwig drowned in a shallow lake under suspicious circumstances. Nevertheless, most Bavarians accepted the verdict that Ludwig really was insane because it was common knowledge that insanity ran in his family.

Princess Alexandra of Bavaria. Of all of Ludwig's insane relatives, Princess Alexandra has always been my favorite. She was Ludwig's aunt. Princess Alexandra was pretty, intelligent, well educated, and fluent in several languages. However, she suffered from a peculiar delusion. When she was a child, Alexandra became convinced that she had swallowed a glass grand piano. She thought about this continuously for the rest of her life. When Alexandra was a teenager, she began walking with an awkward lumbering gait. Alexandra explained to her relatives and court doctors that her peculiar movement was due to the inconvenience of having to walk around with a grand piano inside her. Alexandra wrote letters to doctors around Europe looking for someone with experience in surgically removing a piano from a patient, but predictably, she received few replies.

After Ludwig. Ludwig was succeeded by his younger brother Otto, who was also insane. In fact, Otto was so crazy that that he didn't know that he was the King of Bavaria. A number of people tried explaining that to him, but without success. (There was a lot of inbreeding in this family.) King Otto lived under medical supervision at Fuerstenried Palace near Munich until his death in 1913. The palace was modified to serve as a royal insane asylum. Despite all this, Ludwig is remembered fondly in Bavaria today for the magnificent palaces he built, all of which survived World War II intact. Today, his homes are the most popular tourist attractions in southern Germany. (I have always been fascinated by insane European monarchs.)


Caffeine and Chocolate. Most people believe that there is a lot of caffeine in chocolate. Many parents won't let their kids eat chocolate because they are afraid that the kids will run amok from the caffeine. In fact, there is very little caffeine in chocolate, far too little to make kids run amok. A standard size (1.55 ounce) Hershey bar contains 9mg (milligrams) of caffeine. By comparison, a can of Coke contains 35mg of caffeine, and a cup of coffee at McDonald's contains 110mg. Unfortunately, a growing number of companies are adding caffeine to chocolate. Mar's Snickers Charged bars contain 60mg of caffeine. That's not very much, but some candy companies are adding dangerously high levels of caffeine. A small box of Crackheads chocolate candy contains 600mg of caffeine. That's equal to drinking 6 cups of black coffee all at once. Sales of caffeinated candy are skyrocketing. Frankly, I don't like this trend. I also don't like the idea of giving candy names that sound like addictive drugs.


During the peak of of the real estate construction boom, between 2003 and 2007, some homebuilders imported drywall from China because U.S. suppliers were unable to keep up with demand. Unfortunately, no one was testing this stuff. Beginning in 2004, people living in new tract houses in Florida started complaining about similar problems: the copper pipes and wiring in their houses had turned black and was badly corroded even though the houses were only 1 or 2 years old. Their televisions and computers stopped working. Something had eaten away the electronic components inside them. Their houses smelled like rotten eggs. Many of the people living in these houses had similar medical problems as well, including respiratory diseases, headaches, nose bleeds, and skin rashes.

It took 2 years to identify the source of the problem, which turned out to be high levels of sulfur in the Chinese drywall in these houses. The sulfur was gasifying and leaching out of the walls. It seems that several factories in China made drywall out of power plant waste. Recent tests have shown that Chinese drywall sold across the U.S. contains a long list of dangerous chemicals, heavy metals, and even radioactive waste. As a result, a lot of recently built houses may have to be partially or totally demolished. In Florida alone, 30,000 houses were built with Chinese drywall. Thousands of houses were also built here in California with Chinese drywall, but nobody knows just how many. The lawsuits have already begun. This is another big story that has gotten very little press coverage.

About sulfuric gas. Sulfuric gas is very dangerous, especially in a confined space like a house. During World War I, tens of thousands of soldiers were killed with mustard gas, a sulfuric gas compound. In the 1980s, thousands of Iranians and Kurds were killed by Saddam Hussein with sulfuric gas bombs. The use of sulfuric gas as a weapon is a War Crime under the Geneva Convention. So, how would you like to live in one of the houses in this story? You can buy them cheap! They rent cheap too. I know this story sounds unbelievable, but it's true! I only buy U.S.-made drywall. A 4' x 8' sheet of top quality, brand name, U.S.-made drywall only costs $5 at Home Depot.


I Have a Small Dog. I once had a studio apartment for rent. A woman called me on the phone and said: "I saw your ad. It says you allow dogs. I'd like to see your apartment." I said: "What kind of dog do you have?" She said: "A German Shepherd." I said: "I'm sorry, but this is a very small apartment, and it has no yard. You know, my ad says that I will consider a cat or small dog." She said: "But I have a small dog!" I said: "I thought you said you have a German Shepherd?" She said: "Yes, that's right." I said: "Well, a German Shepherd isn't a small dog." She said: "Mine is. He only weighs 15 pounds" That left me confused. German Shepherds normally weigh 70 to 80 pounds. I said: "How could a German Shepherd only weigh 15 pounds?" She said: " He's a puppy." I wasn't quite sure how to respond to that. I thought about asking her: "How long were you planning on staying in this apartment?," but I didn't. I just rented the place to somebody else.

This apartment was unusually small, only 350 square feet. Normally, when deciding on whether to allow a dog at a property, my main consideration is the dog's breed, not its weight. A lot of small dogs, like Chihuahuas, are habitual barkers, bringing complaints from the neighbors. Other breeds, like Chows, are notorious for biting people without provocation. On the other hand, Golden Retrievers, which are fairly large dogs, make much better apartment pets. They rarely bark and spend most of their time lying around and sleeping.


Surge Suppressors. I have 6 surge suppressors that were left behind by a tenant when he moved out. The guy planned to start a dot-com business in his apartment even though he had minimal computer skills. He also left behind a number of get-rich-quick DVDs with titles like "Cracking the Internet Millionaire Code" and my favorite - "My Mom Spat In My Face When I Told Her I'd Become an Internet Millionaire!" (Why would a mother do that?) These surge suppressors are all brand new and still in the box. They have one feature that I especially like: a right angle wall plug. Most surge suppressors have straight plugs that prevent you from pushing furniture up to the wall. That can be very frustrating.

Pocket Knives. Did you ever wonder what happens to all those pocket knives, scissors, butane lighters, and other stuff that get confiscated at the airport? The valuable items, like samurai swords, are sold at government auctions. (Yes, believe or not, some people have tried walking onto airplanes carrying samurai swords! What were they thinking?) The confiscated items that have little or no resale value get tossed out. I've got a bag of 30 Swiss army style pocket knives from the Oakland Airport. Most have 4 to 6 blades or tools in them. They are all used and all different. Come and help yourself if you want one or two.

Mark Tarses

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