Vegas Baby

With all of the hoopla surrounding the Fed’s rate cut decision, I nearly forgot to write about my weekend in Las Vegas. I know it may sound crazy that a financial professional would celebrate her birthday in “sin city”, but I considered it research for human behavior and as an extension, investor decision-making.

I had not been to Las Vegas in over ten years and it sure has changed—at least superficially. The hotels are beautiful, the strip has been sanitized, but thankfully, things were pretty much the same in the casinos, where irrational exuberance was on parade. There is probably only one other industry where greed stomps on common sense and forces normally sane people to make terrible decisions—can you guess which one?

Before continuing, let me fully disclose one important fact: I am a terrible loser, which means that I am not a great candidate to enter a casino in the first place. But there I was, with half an hour to kill before dinner and a $10 minimum blackjack table a mere ten feet away. I joined two other guys and bought a whopping $60 worth of chips. We played a couple of hands and I was even, but then something magical occurred: the pit boss hovered over the dealer and asked him, “How have you allocated your 401(k)?” I burst out laughing, noting the irony.

Here is what the dealer said to the pit boss: “You need to diversify---I have some stock funds and also some bonds, which are safer. You know, I don’t need to be a pig with all of this. I just need to make a decent return, not beat the house.” At the same time this conversation was transpiring, the three people at the table, including yours truly, were losing six hands in a row. My $60 vanished in about twenty minutes, while the two other gents were in the hole for far more. One guy looked at me and said, “You know, I was up $600 before they started talking about their retirement accounts! Talk about a buzz kill---I’m out of here!”

Then I thought who better than the gaming industry professionals to understand the concept of long term investing? After all, they are forced to watch people learn the painful lessons of greed every day. The dealer must laugh as we dopes walk up to the table, thinking that we can actually beat the house. Only a sucker believes that the odds are in his favor---that’s why the folks, who actually work for the house, are talking about their retirement accounts, not the latest method of card counting. Vegas baby---you just gotta’ love it!