Casino IPOs: A new sin index

For many years, analysts have run sin indexes. Some had to do with the consumption of liquor, and others with cigarettes. It was always hard to tell if sin was a leading indicator of bad times or good. Some people drink their troubles away during a recession. Others drink champagne when a recession ends. Of course, a drop-off in drinking may be due to the fact that people cannot afford booze at all during hard times. Put another way, sin indexes are complicated.

But sin is almost always a means of tax revenue. Sin taxes on liquor and cigarettes bring governments a lot of money. An increase in sin is a positive for tax receipts, no matter why the sinning is rising. A jump in sinning may be critical to closing budget deficits in states and the federal government.

The latest way to track sin is through casino IPOs. Gambling has been in rough shape during the recession. Casinos in Las Vegas have lost a large part of their sales. Among sins, gambling is one of the most expensive, so an increase in gambling is probably a sign of an improving economy.

It is encouraging that casino companies can raise money. The initial public offerings of the Macau units of Wynn (WYNN) and Las Vegas Sands (LVS) are expected to do particularly well. According to Reuters, "They will be among only a handful of "pure plays" in the lucrative Macau gaming sector."

The Chinese economy is clearly doing better than the economy in the U.S. That may make sin more affordable on the mainland. But, the IPO money will come to American casino companies, so the wages of sin will once again accrue to American businesses.

Douglas A. McIntyre is an editor at 24/7 Wall St.


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