A Chaparral Morning

We’ve been going for a walk most mornings — Debbie, myself, and our three field spaniels. The weather has been just gorgeous; the mornings are cool and crisp. In the photo at right, if you click to look at the large version, you can make out the “cage” that my beautiful wife is wearing around her broken ring finger on her left hand. She’s smiling anyway! The dogs are of course their usual happy selves; there is nothing they like better than a walk. From left to right, it’s Miki (our puppy), Lea (the princess), and Mo’i (at the moment, the number one agility field spaniel). You might have noticed the strap across the muzzle of Miki and Lea — that’s a kind of harness called a “Halti”. They’re wearing that harness because they’re BBDs (bad brown dogs) when we’re walking — every time they spot a quail, hear a rabbit, or smell a coyote, they completely lose their minds (and being spaniel owners, we know very well that there’s not a lot of mind to lose!). The result is that we get towed all over the County, through the chaparral and whatever else was in the way. The Halti stops that, without causing any pain to the dog. It’s a clever device — if the dog tries to pull at the leash while wearing it, it pulls the dogs head back toward you. Mo’i is the only GBD (good brown dog) we have on a walk. He rarely strains at the leash; he just plods happily along with us…

One of our favorite local flowering plants — ceanothus — has just popped into bloom. It’s several weeks earlier than usual this year, most likely due to the combination of a drenching rain a couple of weeks ago, and a week of warm weather afterwards.

We have four species of ceanothus that are common locally; two with blue flowers and two with white. Both blue species and one of the white are in bloom right now. One of the blue species' flowers are highly variable in color, ranging from intense, saturated dark blues to much lighter shades; this species has particularly nice foliage as well, with dark green leaves and dark gray bark that both have an interesting texture to them. The other blue species (seen at right) has a much more consistent color, large, smooth lighter green leaves, and a very light, smooth bark. These are often so full of bloom that there is no foliage visible. The white species that’s in bloom now has flower clusters that lie close to larger branches, making an interesting spiky effect.

I’ll leave you with a selection of photos from our walk this morning…

Word of the Day

Cashtration: The act of buying a house, which renders the subject financially impotent for an indefinite period.

Casino Update

This morning, Lakes Entertainment (the company backing the Jamul Indian Village’s attempts to build a casino) released their financial results for fiscal 2006. The press release announcing the results contained this nugget:

Based on recent meetings between the Jamul Indian Village (“Jamul Tribe”) and the State of California, Lakes and the Jamul Tribe are currently re-evaluating the Jamul Tribe’s alternatives for its casino project. Depending on which direction Lakes and the Jamul Tribe decide to take, the proposed gaming facility will be reduced in size and scope. As a result, during the fourth quarter of 2006, Lakes recorded unrealized losses on notes receivable related to the Jamul project of approximately $6.3 million, which reduced the overall 2006 net unrealized gain on notes receivable related to this project to approximately $2.0 million.

I’m no expert on corporate finance, and certainly not on the financial ins-and-outs of gaming companies — but here’s my stab at translating that into plain English:

First, the Jamul Indian Village has borrowed some amount of money from Lakes Entertainment, in one or more loans, which at some point in the future they will have to repay. My presumption would be that this money is to be used to promote, get clearance for, build, and operate the casino. My further presumption would be that the use of this money is essentially controlled by Lakes; I can’t imagine they would simply hand it over to the Jamul Indian Village. But — key point — repayment of this money will depend on the existence and profitability of the casino. The more profitable the casino, the more likely (and the faster) this note would be repaid.

For the purposes of their financial statement (which is the public disclosure of their financial condition), Lakes can’t simply record the loans (the “notes receivable") as if they are certain to be repaid. Obviously there is considerable risk to these loans, and that must somehow be disclosed. The conventional way to do that is for the firm’s financial officer (and auditor) to make a judgment about the probability that the note will be repaid, and to record current profits or losses based on that judgment. In most companies there would be a bias toward overstating the positives in such judgments, so when you look at numbers like this — pure judgments on someone’s part — generally it’s smart not to think of them as having been objectively arrived at. These judgments are what we’re seeing here with the recording of a $6.3 million loss. Since I don’t know the size of the entire loan, I don’t what percentage of it has been written off now as a loss — but it would have to be a huge loan for this to be an insignificant portion of it. I can’t quantify it precisely, but it sure looks to me like this was a significant write-down.

In other words, it looks to me like Lakes Entertainment isn’t very optimistic about their investment in the Jamul Indian Village Casino. If you’re a typical Jamulian, that’s very good news indeed — for who would know better than Lakes what the actual situation is?

Also interesting in that press release is the statement about reduced size and scope of the casino. Part of that, surely, is the recent announcement by the Jamul Indian Village that they’ve dropped out of the negotiations with the state, and that they’re going to switch to games not covered by the compact. This statement in the press release implies that the size of the casino may also be reduced. I don’t want to see the casino at all — but if the casino does get built, the smaller, the better. So I’ll take that as good news, too.

We certainly don’t see in this year’s statement of Lakes Entertainment financial results the same buoyant, upbeat assessment of the Jamul Indian Village Casino that we saw last year. Another difference you can see is that Lakes is making good money in other areas now — especially the televised poker tournament — and I would bet that leads the management team to focus more on those profitable areas, and less on the risky or unprofitable areas. That would also be good news…

Patrick Webb (attorney for Walter Rosales and Karen Toggery) made a statement the other day about things coming down to the wire from the perspective of the Jamul Indian Village. This financial report from Lakes Entertainment looks like validation of his musings…