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Vice Shares Like Gambling Help to Stimulate the Economy

Written by:
C Costigan
Published on:
Sep/25/2008
Gambling

The portfolio of "unethical" shares which we picked on this week last year has unsurprisingly lost value in the past 12 months, but has beaten the general market, as well as the FTSE For Good index, which measures performance of companies around the world which meet specific criteria in terms of ethical behaviour, according to the Guardian out of London.

One of the so-called "vice shares" is actually trading on the FTSE For Good index, that being PartyGaming, which got listed just a few weeks ago. That firm is the 4th largest online poker firm.

While our basket of nine "sinful" shares has fallen by around 16pc in value, this compares to a 19pc fall in the FTSE 100 index, a fall of 22pc in the FTSE 250, and a fall of 21pc in the FTSE For Good.

One reason that our shares have not completely bombed, is that companies in sectors such as alcohol and cigarettes, gambling and defence tend to continue to perform well even in times of economic downturn - perhaps even because of it, human nature being as it is.

Gambling, in particular, has long been classified as a "recession proof" industry. Nonetheless, Las Vegas has felt the impact, mainly a result of high fuel prices, flights being cut in and out of the city and US citizens reluctance to vacation in the shadow of uncertain economic times, especially when they can play poker and casino games right from their home computer.

From the Windsor Star:

Vegas barrelled through previous U.S. economic recessions with no problem, but the current slowdown -- marked by home foreclosures and then high gasoline prices -- has had a much bigger impact on the gambling mecca than economists expected.

And while free rooms and room discounts have kept hotels relatively full -- occupancy is down just one per cent in the year to July -- gambling revenue is down 6.5 per cent.

"People still have Las Vegas as their destination of choice, but their budget is less," Jan Jones, senior vice president at Harrah's Entertainment, told the Windsor Star.

Harrah's and MGM, which operates 10 properties on the Strip including Bellagio and Circus Circus, have each cut about 1,500 Las Vegas jobs over the past year.

Still, the Vegas strip isn't exactly hurting either, according to the Motley Fool:

The gaming industry also tends to spike during economic low points. People feel desperate at times like these, and they grasp at straws. The gaming industry reportedly saw revenue rise some 3.7% in 2007, to more than $93 billion. That's about $300 per American! And although the slowing economy has hurt revenues in gambling centers like the Vegas Strip, lottery sales are still jumping, setting records in more than 20 states. In North Carolina, over the past year or so, lottery sales surged 25%. Maryland revenues have recently risen 6%, and Colorado is up 8%, Massachusetts 7%, and Minnesota 9%.

Much of Europe still sees the US as one of the most affordable travel destinations thanks to a weak dollar compared with the euro and pound. As such, The Nevada Commission on Tourism has expanded its representation worldwide and now is marketing the state and its array of shopping, dining, skiing, golf and outdoor adventures to 42 countries and millions of potential travelers, Lt. Gov. Brian K. Krolicki announced today.

And it's not just Europe, one of the fastest growing economies in the world is China.

The state tourism agency signed marketing and sales contracts with five new representatives, signed a new contract with its existing representative in that country along with Japan.


"International tourism is critical to Nevada as we expand our economic base," Krolicki, tourism commission chair, said. "The rest of the world isn't necessarily affected by our economic ups and downs, and this is proving to be a very lucrative time to travel to America. TIA's designation of World Tourism Day reinforces what many U.S. destinations already know: We must work together to attract visitors to explore America and boost our economy."

In the commonwealth of Kentucky, Democratic Governor Steve Beshear has taken even more drastic steps to protect that state's most lucrative economic event - the world famous Kentucky Derby. He's going after 141 Internet gambling domain names, looking to seize each one of them in an effort to cut off the competition within his home state.

"Unlike casinos that operate on land or on riverboats in the United States, these operations pay no tax revenues, provide no jobs and yield no tourism benefits," Beshear said at a Monday afternoon Capitol press conference. "They are leeches on our communities."

Beshear is being met with tough opposition at a Thursday hearing in his home state where the online gambling sector has sent a team of lawyers to stop such seizures.

----

Christopher Costigan, Gambling911.com Publisher

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