DailyWealth: Would You Like a Lamborghini for $40?

Would You Like a Lamborghini
for $40?
By Dr. Steve Sjuggerud
September 14, 2007

"S'cuse me, sir, would you fancy a Lamborghini for 20 quid?"

I was stopped yesterday by a young Englishman with messy hair and a tie. Right behind him, you couldn't miss it… he had a brand new, bright yellow Lamborghini sports car.

"If you don't like it, you can have a Porsche or an Aston Martin instead… just 20 pounds," he tells me.

I wasn't anywhere you'd expect to see a Lamborghini... I was stuck in London's Gatwick Airport.

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"Is this some kind of car dealership promotion?" I asked. He said no. "Then what's the deal?"

"It's a raffle."

"Oh, so you sell more tickets than the car costs?" He says I've got it right.

He's got all the answers… and he's not giving up on me.

I tell him I'm American, to blow him off politely. He tells me they'll buy me a left-hand drive car. And they'll ship the car to me in the States, or wherever I want, no charge. I tell him I wouldn't want to pay the insurance on one of those things. He tells me they give the winner an additional $12,000 with the car to cover that.

"Look, sir, our company trades on the London Stock Exchange. We've given away 150 cars so far. Just 20 quid." He then points me to the pictures of the previous winners… mostly males… mostly with huge smiles on their faces. "BestOfTheBest.co.uk" he tells me.

This is one good racket, I think to myself. Gatwick has only one waiting area. And this guy has his Lamborghini on it. I can't politely get out of here. I take a brochure and tell him I'll be passing back through soon.

I get on my plane to Guernsey. I open the newspaper on my short flight, and the first thing I open to is an ad for El Gordo – The Big One. This is a lottery for $3 billion. No joke. It's run by the Spanish government. And this "come-on" is stronger than the Lamborghini sales pitch. "One in seven are winners," it says. Of course, the numbers are ridiculous.

How can any ordinary person resist?

Apparently, they can't…

August was a horrendous month in the investment world, as fear and volatility forced investors into deer-in-headlights mode. But casinos were rolling in money. The best-performing stock market sector in August, you may be surprised to learn, was Casinos & Gambling, up more than 8%.

Bally (BYI), for example, was up 35% in August on strong earnings, and the industry is optimistic about growth prospects – Chinese gamblers are pouring into Macau to roll the dice. While investors of every sort got hurt, gambling companies are making a mint.

I am not a gambler. August notwithstanding, I believe my odds are better in my investments than they are in the casinos. But the casinos and gaming companies come up with endless promotions to suck in those who are willing to take a flyer.

Apparently, lots of scams are related to El Gordo… "Just send your bank details to us and [we] will wire you your prize money," one of the scams says. People excitedly send their bank details to perfect strangers. (For more on El Gordo, click here: http://www.madrid-guide-spain.com/el-gordo.html)

Best of the Best, it turns out, is not a "raffle" after all, even though that's what the salesperson told me. It is a "skill-based game." After you pay your money, you must play a game called "Spot the Ball." I assume they do this for some legal reason, so it's not considered gambling.

A fool and his money are soon parted, they say. These gambling operations make mountains of money by speeding that process along.

My take is, if you want to make money from gambling, don't be the fool… Be the other side of the trade. As I've written before, I prefer investing in Macau, where the growth is. I've recommended my favorite Macau play to subscribers of Sjuggerud Confidential. The stock is a direct play on Macau, and trades for less than $2 a share. If you want to double your money in gambling, consider stocks like this instead of slot machines in Vegas, or El Gordo…

Good investing,

Steve

Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.

Sign up today to read more investment ideas from Steve Sjuggerud.

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THE BIGGER THE CHINA STORY, THE BIGGER THE GAINS

In 1999, one could buy equity in even the most hopeless business and still make hundreds of percent returns. The only requirements were A) a good Silicon Valley story and B) a suffix that resembled "tech," "com," or "soft."

Fast forward eight years and move 7,000 miles, and you have the same situation in Chinese stocks. Try these numbers on for size: The Shanghai Composite is up 200% in the past year. China Mobile has doubled in the same time. As China's largest wireless carrier, the story doesn't get much better.

Or maybe it does. Today, we present China's leading player in all things security related, China Security & Surveillance Technology. As the communist Chinese government grows richer and more powerful by the day, it's extremely interested in helping its citizens behave. That, of course, requires millions upon millions in surveillance spending.

Please do not consider this a buy recommendation (the stock is up 260% in the past year)… simply an illustration that the China mania is on… it's a "buy whatever" environment. Stories trump rational thinking. The bigger the story, the bigger the gains.

Gold

-Brian Hunt

Oil prices hit a new record above $80 a barrel on Thursday as concerns about storm activity in Texas followed news of a huge fall in U.S. crude stocks announced in the previous session.

Nymex October West Texas Intermediate hit a record $80.20 a barrel before moving into reverse and declining 20 cents to $79.71.

"We thought Opec could help, but it was too little, too late, and commodity inflation paints the Fed into a corner and leaves it between the devil and the deep blue sea," said analysts at Cameron Hanover.

"What really helped push oil prices higher was the sudden reaction of the dollar to lower U.S. interest rates in the open markets. The Fed does not act until next Tuesday, but markets have been anticipating a rate cut of 25 to 50 basis points for more than two weeks. That has pressed bond yields lower, which has kicked the U.S. dollar in the teeth, which has sent traders to the long side in commodities."

-Financial Times

Over the last year, American hedge funds have put more than $150 million into Chinese surveillance companies.

The Chinese government trade association for surveillance companies, which also regulates the industry, predicts that the surveillance market here will expand to more than $43.1 billion by 2010, compared with less than $500 million in 2003. Under the Safe Cities program adopted by the government last winter, 660 cities are starting work on high-tech surveillance systems.

-New York Times

In China, a group of workers who make toys for Disney say they are forced to work 28 days a month, and up to 15 hours a day. A spokesman for the Chinese factory said, "Look - these toys aren't going to lead paint themselves."

-Conan O'Brien

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