UPDATE: Las Vegas Sands: Macau Rejects Request For Cotai RightsFont size: A | A | A3:20 PM ET 12/2/10 | Dow Jones
(Adds analysts comments, and background; updates share price)

By Kate O'Keeffe

Of DOW JONES NEWSWIRES

HONG KONG (Dow Jones)--Las Vegas Sands Corp. (LVS) said Thursday the Macau government has rejected its unit's application for rights to a plot of land in the territory's lucrative Cotai area, presenting a fresh obstacle for its development plans and a reminder of the policy risks associated with investing in the booming market.

Sands China Ltd. (1928.HK) received a letter from the local government dated Dec. 2 stating that its application to acquire exclusive rights to land known as sites 7&8 had not been approved, Las Vegas Sands said in a filing with the Securities and Exchange Commission following an earlier Dow Jones Newswires report.

Sands China, whose shares were suspended from trade in Hong Kong on Thursday pending the release of this announcement, has already spent US$102.4 million on pre-construction costs on the sites as of Sept. 30.

Las Vegas Sands' shares were 3.5% lower at $49.56 in recent trading, recovering from a low of $47.20 hit earlier.

The company said that the government also offered it two avenues for appeal, which it was currently considering. Sands China has 15 days to apply to Macau's chief executive for a review of the decision; it also has 30 days to appeal to local courts, Las Vegas Sands said.

A representative of the Macau government's lands department told Dow Jones Newswires earlier Thursday that the application procedure for land rights for sites 7&8 "is not fully completed" and that the government would announce the result later. Macau legal experts said the government's statement likely referred to Sands China's right to appeal the decision.

The news comes as the company struggles to complete a long-delayed expansion project on another site in the Cotai area, and after rival operator SJM Holdings Ltd. (0880.HK) said it had sent the government a letter expressing its interest in sites 7&8.

Wells Fargo analyst Carlo Santarelli said in a report that the sharp share price fall in reaction to the news was overdone, noting that the bank hadn't been ascribing "much, if any" value to the project. But he added: "Today's announcement serves as yet another reminder of the unpredictable nature of policy decisions in Macau, something we believe will be a recurring theme in 2011."

Morgan Stanley analyst Mark Strawn wrote that the news shouldn't affect Las Vegas Sands's valuation given that this project was not likely to open until 2018 at the earliest but said that in the near term, the announcement could negatively impact Macau stocks "as it highlights a willingness to control growth through increased government intervention."

1. The Basics

One of the keys to successful investing is knowing when to admit you've bought a lemon.

A stock may seem perfect — with spectacular growth and a chart pattern that has shown good performance.

But if it nosedives soon after you buy it, you're much better off cutting your losses. Don't let hope rule your decisions — and don't allow your ego to trick you into holding on to a stock thinking it will rebound.

Instead, do what the best investors do when this happens: Trust what's actually happening, not what you believe should happen.

As a rule, if a stock you've purchased drops 8% below your purchase price, you should sell it immediately. No questions asked.

Don't sit and hope that the stock will come back. It might not. And then you could be hit with a larger loss than if you'd made a speedy exit.

Say you invest $1,000 in a stock, then discover you've made a bad buy. If you sell and cut your losses when the stock falls 8% below the price you paid for it, you're left with $920. You only need to make 9% on your next investment to get back to where you started.

But if you stick with your sliding stock, things could get ugly. You believe the stock will turn around, only it doesn't. Instead, it drops 15%, then 30%, then 50%. By the time you finally sell, you're left with just $500.

That means you're going to have to double your money on your next investment to get back to even — a 100% return. And even successful investors don't often double their money on a stock.

By religiously following the 8% loss rule, you'll keep your portfolio intact and have money left to invest the next time around.

Say you bought Applied Films on Jan. 5, 2004 as it broke out of a base. Its volume surged that day — a good sign.

You calculated the buy point by adding ten cents to the $34.54 middle peak in its double-bottom base and bought at $34.64.

The stock rallied during the next two weeks, but then began to lose its footing.

On Jan. 22, 2004, it slid back to its 50-day moving average line. Though Applied Films did find support at that benchmark line in the days that followed, the big drop would have triggered your 8% sell rule and you would have unloaded your shares at $31.86 — 8% below your $34.64 purchase price.

The stock bounced along its 50-day moving average line for a few weeks, but it never gained much traction. By late April, it had fallen below $25 a share.

2. Locking In Gains

Another way to preserve — and grow — your portfolio is to sell a stock once it climbs 20% to 25% above your purchase price. By setting these targets, in combination with cutting losses from any lemon at 8%, you can come out ahead by a good margin. That's how many of the great investors operate.

The reason for setting that 20% to 25% profit target is because studies show that during stock winners' price runs, most climbed about 20% from the breakout of their first base.

After that 20% rise, they tended to fall into a second-stage base. Breakouts from those patterns produced gains of about 25% to 30% before the stock fell into yet another base.

For instance, if you bought Ceradyne as it broke out of a double-bottom base April 26, 2007, you would have purchased it at its $61.40 buy point.

Though it stumbled a bit in the days that followed, it didn't fall 8% below its buy point, so you would not have been forced to sell.

And the stock quickly recovered. By early July, Ceradyne was trading around $76.75 . That was 25% above its original buy point.

Selling at this price would have allowed you to lock in a solid profit.

That would have been a smart move, too. Sure, you would have left some profits on the table by selling at that point. But Ceradyne hit its peak shortly afterward and then began to break down.

3. Extras For Experts

Earlier in this chapter we discussed the prudence of locking in your gains once a stock has climbed 20% to 25%.

But there's one exception to that rule: If a leading stock surges 20% or more in just three weeks after its breakout, you may have found a true winner. In that case you should hold it for at least eight more weeks.

A stock will often stage a powerful breakout, run up for a bit, then pull back.

By using this buy-and-hold rule, you eliminate any doubts you might have about a stock and whether or not you should take a quick profit.

Futures exchange Chicago Mercantile Exchange spent the Winter and Spring of 2005 forming a double-bottom base.

The stock leapt out of that pattern on June 2, 2005, then surged 20% during the three weeks that followed, hitting a high of $265.80. But it wasn't done yet. The stock then added another 16% as July rolled in.

Then the stock began to run into trouble and a few weeks later it dipped below its 10-week moving average line. If you sold your shares, you might have locked in your gains.

But you also would have missed out on its future winnings. That's where the 20%-in-three-weeks rule can help. Following it would have kept you in the stock.

The Audacity Of Economic Ignorance

Economy: Why do we seem so helpless in solving our current mess? A big reason is the shocking lack of basic economic literacy among many of our political leaders. Case in point: Ohio Democratic Sen. Sherrod Brown.

Brown ripped into GOP Rep. Eric Cantor, saying he "either failed English class or failed logic class or failed history class because these tax cuts for the rich that Bush did twice ... resulted in very little economic growth. We saw only 1 million jobs created in the Bush years, 22 million created in the Clinton years, when we reached a balanced budget with a fairer tax system."

This is false. From 2002, the last year before the cuts, to 2007, the last year before the financial meltdown, the real economy expanded by $1.77 trillion, or 15.2%. "Very little" growth? Jobs increased by 7.77 million, business investment surged 38%, and personal net worth soared 56%. Brown is wrong on every point.

Yes, gross domestic product did fall sharply in 2008 as the financial meltdown hit. But no reputable economist maintains the financial panic was a result of the Bush tax cuts.

Laughably, Brown talks about how "we" reached a balanced budget during the Clinton years. What do you mean "we," senator? Since budgets are written and passed by Congress, and only approved by the president, Brown must know that it was Republicans who balanced the budget — not Democrats.

That's right, a GOP-led Congress controlled the spending that led to the surpluses of the late 1990s. It also proposed welfare reform and pushed through cap-gains tax cuts that helped the economy boom. To his credit, President Clinton signed these initiatives into law — but only after much political arm-twisting.

Brown's idea of "fair" when it comes to taxes is strange. Since when is unequal treatment under the law, which our skewed tax code promotes, considered fair? Talk about failing Logic 101.

He went on to say: "There is no real history illustrating that these tax cuts for the rich result in jobs. It's extending unemployment benefits that creates economic activity that creates jobs, not giving a millionaire an extra ... $30,000 in tax cuts they likely won't spend."

"No real history"? Taxes were cut on high-income earners in the 1920s (Coolidge), 1960s (Kennedy), 1980s (Reagan) and again in the 2000s (Bush). These cuts benefited the rich and everyone else. In all these cases, jobs boomed after tax cuts. In fact, history shows that the best way to boost jobs is to cut taxes on the rich.

"Extending unemployment benefits" stimulates nothing. It merely takes money from one person's hand and puts it into another. How do Brown et al. get it so wrong? Maybe they don't know any better. They come from a generation schooled on a now-discredited Keynesian model that assumes the economy is driven by consumer spending, and that when consumers falter, it's the government's job to step in and "boost aggregate demand" by spending more.

This, too, is exactly backward. Consumer spending doesn't drive growth; it results from growth. Economies grow mainly because of business investment. The chart above shows how consumer spending barely budged in the last two recessions while business investment plunged. Today we're still 14% below our peak on business investment, while consumer spending has bounced all the way back.

If we want a strong expansion, business investment must grow. It won't as long as Brown and his colleagues continue to believe that extending jobless benefits to boost consumption, and raising taxes on the "rich" would create economic activity.