Online Gaming: the Consequences of Full-Tilt’s meltdown from an Investment Standpoint

Game Room Supplies have recently taken a hit for investors. I read about this on gaming supplies originally. AGEM, The Association of Gaming Equipment Manufacturers has been complaing that Game Room Supplies is being mistreated by the stock market. 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. 18 points, it was the largest one month fall for the AGEM Index, in 2011.

The question for investors and players alike is how the performance of these companies is going to be impacted by Full-Tilt Poker’s meltdown.

This video describes and presents an short overview of this article

To make sure I don’t lose the video, I asked for it to be posted on gaming supplies.

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 gaming supplies, they have been talking about this for awhile.

The purpose of this essay is to examine how this will impact the Game Room Supplies 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 Game Room 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.

A former co-worker approached me about this story and asked for my thoughts. For a long-time, I had heard people question what was being done with the money put into and won in their Full-Tilt Poker accounts. Many analyst who were promoting online Game Room 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.

I don’t believe this and I think they missed something.

Most of the analysts following this industry have MBAs, but apparently they didn’t cover math and research in their education. 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).

There are always winners and losers in any situation, and even though what happened to Full-Title is a disaster for every player, there will still be some companies and industries that come out ahead.

Anecdotal evidence indicates that more people are moving away from playing online and instead investing in Game Room Supplies and their Game Tables For Sale. Poker nights are now coming back in vague and they are dropping a lot of cash on the Game Room Supplies and their Game Tables For Sale industries. 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.

Even for hard-core gambling addicts, the idea that they could win money and not be able to collect it has scared them away from online gambling, according to a gambling therapist I know (we are friends; I’m not a patient). The most disturbed people gambling therapist treat are the people who don’t care if they win or lose, only if they get a rush, so thinking that they might lose their money if another Full-Tilt Poker happens only makes them excited. 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.

From an investment standpoint, I’m going to start following the Game Room Supplies industry a little more carefully to see if private players, homes, casinos, bars, and poker halls start to purchase more goods as people start to shy away from risking their investment.

I always liked people who bet against the market, so maybe it is time to see if online gaming is a good investment. I’m cautious by nature and cheap by experience, so I’m going to go for a wait and see what happens to the Game Room Supplies industry before I make a decision.

I like being able to know what a company’s assets are. Software and marketing efforts are not tangible assets, in my opinion, so I always liked manufacturing companies because I could read a balance sheet or drive by the factory to get an idea of value; but I’m bitter and jaded about this because I once worked in distressed debt. 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 Game Room 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.