Historically, so-called "sin stocks" have held up exceptionally well in bear markets. Demand for alcohol, sex, gambling, cigarettes and firearms tends not to ebb and flow as much as the broader economy. Historically. But over the past year, the USA Mutuals Vice Fund (VICEX) is off about 42% -- slightly worse than the S&P 500. The fund's manager Charles Norton told BusinessWeek that while casinos have been weak, many of the firm's other vice-oriented holdings have been beaten down unfairly: "The fundamentals don't really matter in this current market."
That would certainly seem to be the case so far: When the market's down 42%, any long-only fund will be getting its stuff handed to it. With Las Vegas at the epicenter of the foreclosure mess, it's not surprising that heavily leveraged casino companies are underperfoming. And casinos are not really as recession-proof as other forms of gambling because the upscale ones especially are as much about tourism as gambling. The more affordable state lotteries have seen their sales decline but not by that much.
As for sin stocks, it might be too late for investors to start buying them: If the stock market is poised to rebound, recession-resistant companies will tend to be the laggards.
But if the stock market goes down another 40% in 2009, it'd probably be good for investors to stock up on Jack Daniels: the drink, not the stock.
Tesla Roadster sets a record -- travels 313 miles on a single charge
Cramer on BloggingStocks: China's industrial focus helps lots of U.S. names 
Why do we have a weak dollar?
Reader Comments (Page 1 of 1)
1-05-2009 @ 4:11PM
BHarrison said...
And there are projections of the stock market coming donw another 20% . . . and this article mentions 40% . . . so we are still a long ways from "the bottom".
There still hasn't been any effective legistlation and actions to implement more meaningful and effective regulation and implementation of "oversight" of the FIs, the markets, the corporatins, etc. So, ONLY A FOOL would be investing their monies at this point, irhgt?
Congress is the key componenet of all of this; and Congress can't even get an accounting of how the FIs have spent the bailout monies so far? Is there something wrong with this picture? It appears that we need to "clean house" in congress and get rid of the vast majority of the either INCOMPENTENT and/or CORRUPT Congressmen . . . Congress is the MAIN CULPRIT in having let this economic debacle occur.
As for "Sin City" Las Vegas, they have simply overbuilt too much and have too much debt to work their way through all of this. Couple this with the over expansion in over priced homes (I remember that a short time ago they were completing something like 3,000 to 6,000 homes per month), and the skyrocketing bankruptcy rate in Vegas . . . well, Vegas is in for a BIG HIT for quite a while.
Those that I feel sorry for are the investors, the contractors, and the suppliers who are going to be devastated by the bankruptcies that are going to flow out of all of this. This is going to remake the economics of it all.
The odds in Vegas might now be as good as the odds on the stock market investing.