Nassim Taleb is the world’s most recognized expert on randomness. Gambling isn’t random, so the whole term “game of chance” is misleading. There are statistical probabilities with gambling that casinos insure against, and gamblers can insure against them too if they’re smart enough. If the house didn’t always win statistically, there would be no gaming sector.
Real randomness cannot be insured against. Taleb gives several examples in his book “The Black Swan” of uninsurable randomness hitting a casino and nearly bankrupting it. First, a tiger attacks Roy of Siegfried and Roy, destroying the casino’s main attraction. Second, a construction worker for the casino is injured on the job, and when he doesn’t get a good settlement he tries to blow up the entire building with explosives. Three, an accountant puts all the casino’s tax returns in a box under his desk for years instead of filing them with the IRS, and four, the CEO’s daughter is kidnapped so he steals company funds to ransom her.
When true randomness hits, it is a good tell of the company’s overall health in relation to its stock price. Wynn was just hit with a Black Swan when one of its junkets ran off with as much as $258M, about 35% of last year’s earnings. WYNN shares fell 10% in 3 days, but quickly recovered to pre-heist news levels. Yes, that quick recovery has evaporated as well, but the fact that it at least happened is evidence that bottom pickers are trying to time an entry here, and a bottom is getting closer. Wynn, after all, has lost a dizzying 75% of its value since March 2014 highs of $246 a share. If this heist had happened back in 2014, the stocks reaction to the heist would have been much more severe.
In fact, we can see all of Macau as hit by a random Black Swan, one that makes the Wynn theft look like a drop in the bucket. The Macau bull market until March last year was fueled by two things: Chinese money printing and a government looking the other way. The Chinese money printing stopped, or at least significantly slowed down bringing on the bust, though that is not random and can be seen as it happens with a decent buffer to prepare. The random event was that the Chinese government decided to choke off Macau at the same time. You cannot insure against overzealous government regulators. It is a random event.