Blog > US Stocks and Markets > The House always wins: Investors lose big with MGM Mirage (MGM), Las Vegas Sands Corp. (LVS), Wynn Resorts (WYNN)
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The House always wins: Investors lose big with MGM Mirage (MGM), Las Vegas Sands Corp. (LVS), Wynn Resorts (WYNN)

Today's Financial News - Posted August 19, 2008

“Vice stocks” like MGM Mirage (NYSE:MGM), Las Vegas Sands Corp. (NYSE:LVS), Wynn Resorts (NASDAQ:WYNN) are supposed to do well in tough economic times. Apparently, they’re not.

by J. Christoph Amberger

Baltimore — (TFN): Financial editors, by and large, are an uninspired lot. Give them a couple of years at their desks and sheer habit of repetition either turns them into incurable gold bugs or into dispensers of cyclical wisdom.

Lather. Rinse. Repeat.

The latter group tends to operate on simple stimulus-response. Call them stock reflexologists if you will. Have a 10-20% drop in U.S. stock prices, maybe with an increase in unemployment to, say, 5.7%, and they turn Dickensian. Only that they’re typically young and American enough never to have experienced what an actual economic downturn looks like. Accordingly, the ideas of how the Common Man reacts to economic adversity typically strike me as, well, quaintly suburban.

In their world, the masses plagued by unemployment turn to “vice”. Much like your average local NPR commentator will blame increased smuggling of cigarettes in Maryland on 4.7% unemployment and “people having to keep their money together,” the stock reflexologist automatically looks at “sin stocks”.

Alcohol. Tobacco. And Gambling.

Because that’s what them unemployed do…

If drifters, grifters, and the forced idle are indeed crowding into casinos, it’s news to MGM Mirage (NYSE:MGM). So far today, MGM has plunged over 10% since it opened. It’s still 7 bucks above its 52-week low of $21.65, but the stock chart indicates that this classic sample of a sin and gambling stock is following the overall course of the wider equity markets.

So, by the way, is Las Vegas Sands Corp. (NYSE:LVS) — down 11%, Wynn Resorts (NASDAQ:WYNN) — down 8%, and Boyd Gaming Corporation (NYSE:BYD) — down 8%.

Maybe investors should keep in mind that in real life, the economically depressed may not have the cash to fly to Vegas, either…

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Posted by J. Christoph Amberger · Filed Under US Stocks and Markets 

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