I’ve always enjoyed looking at online gaming and Full-Tilte Poker: I used to follow Gaming Supplies industry because I always thought there might be an investment opportunity there. I saw this on casino 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 Gaming 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. AGEM in its monthly report on casino suppliesand game room products said the stock market, due to reasons they do not understand, had depressed the value of the industry by, on average, 7%.2%. The bench-mark index they use ended the month of September at 105. Since August, the index has fallen 18 points by the end of September.

The Full-Tilte Poker fiasco has important consequences for players and investors alike.

This video presents my findings and it is a shortened version of what I think

I have also submitted the video on casino supplies for easy reference.

In brief, the company had $400 million on deposit–this includes players’ money–while management paid themselves $440 million. 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 casino 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 Gaming 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 person I met suggested that I look into this. 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 Gaming 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).

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.

A lot of people who used to play online are no longer playing online anymore and instead are opting for local games. Poker nights are now coming back in vague and they are dropping a lot of cash on the Gaming 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). 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.

When things go hay-wire in an industry, I start to follow it; and, Gaming Supplies is a part of that pattern.

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 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 Gaming Supplies and Game Tables For Sale are going anywhere soon. Once again, it is worthwhile to take a look at this Gaming Supplies and Game Tables For Sale industry.

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.