The IGT-GTECH merger may have been the best move IGT could have made considering circumstances at the time, but it hasn’t rescued International Game Technology from its current straits, nor does it look like it will. With IGT, the same issues keep replaying themselves and there doesn’t seem to be a good way out of the mess. Bankruptcy and a restructuring may eventually follow by the end of the decade in a situation similar to Caesars, unless the company has a miraculously spectacular next two years, which does not look all that likely.

The problems are mainly two. The first is debt, and the second is Italy. Total leverage is now 200%, and this despite paying off a respectable amount of debt last quarter. The clock is still ticking to big repayments in 2018, 2019, and 2020 totaling $4 billion in principle, which IGT will not be able to do without refinancing. 2018 is only $600 million which will be difficult to pay off or refinance at reasonable rates but doable. 2019 and 2020 is a different question and could lead to a restructuring which would tear shares down.

As for Italy, doing business with a very indebted and unstable government is a double-edged sword. Once you get in you get crony benefits and exclusivity and that’s nice and all, but your fate becomes inextricably tied. Since governments generally have monopolies on lotteries that they grant themselves (gambling is a sin unless the government manages it as we all know) once you get in bed with the State to manage its lotteries, you become very dependent on the single government client, which cannot have any competitors. If the government then gets into financial trouble or decides to tax you more for doing business with it, you can’t shift your weight to a competitor. You do down with the ship.

Same with the military-industrial complex, drug prices, and universities dependent on ever-increasing tuitions fueled by higher and looser student loans. Imagine if the United States adopted a Swiss neutrality foreign policy, what would happen to defense stocks the next day. They’d collapse. Or if the federal government stopped giving out student loans, how many tax-fattened universities would go out of business. Or if the FDA were abolished what would happen to drug prices and consequently the shares of Specialty Pharma, dependent on spiraling drug costs.