US stocks look set for another leg up starting tomorrow when the Fed will almost definitely balk yet again at raising interest rates. If it doesn’t and by some miracle raises interest rates by a measly quarter of a point, stocks will tank and it will present a great buying opportunity. Unfortunately for the US gaming sector, it’s slim pickings right now even with stocks likely about to move higher.

The big names like Penn National Gaming and Pinnacle Entertainment have already spun off their real estate holdings into respective REITs in order to unburden themselves of considerable debt, but it hasn’t done much to help their respective situations. It’s like when Jerry Seinfeld made his national debut in 1981 on Johnny Carson with his routine on the 1,400lb man. Let’ say he loses 200lbs. “If you’re a friend of his, what are you gonna say to him? ‘You know you look great Bob! What are you down to, 1,200 now? You’re a rail baby, look at you!’ And what can he possibly say in response? ‘You know, I feel terrific!’?”

If we look at Penn, interest expense is already at $115 million quarterly and leverage is still at 470% despite the 2013 REIT spinoff. Even a small uptick in interest rates will crush any growth they currently have. Core inflation in the US is already passed the Fed’s official target of 2%, and has been above target since December 2015!

Does anybody talk about this? Not really. And why is the target 2%? Because that rate of inflation is not very noticeable. People don’t kick up protests over it. But when it is 3%, which could be any month now, the Fed will start have to start chasing with interest rate hikes, but they won’t help. In order to tackle inflation with interest rate hikes, the hikes have to step in front of the inflation rate, which would push the Fed Funds rate to 4%, for a move 350 basis points. Let’s see how Penn and Pinnacle deal with something like that.