Ever since Gordon Gekko told us that “Greed was good,” Americans have justified their love affair with their stock market investments.  This year they have embraced a new mantra: “SIN IS IN.”   Believe it or not, “socially irresponsible,” or “vice” stocks – which include, drinking, smoking and gambling stocks – seem to be paying off for investors beyond their obvious “mood enhancement” effects.
While Santa would surely disapprove, shares of tobacco companies Lorillard, Philip Morris and Altria are up 34%, 29% and 15% respectively this year — better than the 1% year-to-date gain by the Standard & Poor’s 500.  Alcoholic beverage stocks aren’t falling off the wagon either.  Diageo and Brown-Forman are up 14% and 13%.  And gaming stocks such as Wynn Resorts and Churchill Downs are each up 14% — a welcome offset to what’s shaping up to be a disappointing year for stocks at large.  Morningstar has reported that the Vice Fund (yes, an actual mutual fund) has returned 10.3% so far this year.
The S&P 500 broad index of stocks has taken wild swings this year.   Concerns such as political bickering over  our economic management, to fears Europe will be unable to contain the debt crisis there and prevent the eurozone from unraveling, have spooked investors time and time again.  Those fears aren’t going away any time soon, especially in Europe, where the Standard & Poor’s rating agency says the winds of recession are blowing.
It appears that the value of these sin stocks is directly correlated to the Misery Index.  This is an economic measure of the degree of financial distress in American households. In simple terms, the measure is the sum of the unemployment and inflation rates. The Index was created by Arthur Okun, an economics adviser to President Lyndon Johnson.  Over the last year, the Misery Index has been steadily rising.  Some economists claimed the misery rate is at its highest level in 15 years.

 

 

So, maybe the lesson here is:  When the going gets tough, the tough drink, smoke and gamble???

 

 

 

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