Vice Industries

One time, post-2008 market crash, I was in a grocery store checkout and the guy in front of me was buying a 6-pack of beer. He looked at the cashier and said “Man, I can’t believe how expensive beer has gotten.”

He still bought the beer.

That memory came to mind when I learned about VICEX, a fund invested in vice industries: alcohol, tobacco, gambling, and aerospace/defense.

Why invest in vice industries, or as noted in this article, “sin stocks”?

Vice firms normally require little outside capital and pay sizable dividends. Vice products do not need to be reinvented continually. Thus, growth is profitable and cash flow, rather than being forced back into R&D spending, is paid out to shareholders. Vice industries have consolidated and continue to do so: they operate as oligopolies. Competition is more subdued and they are able to “manage” prices.

And what about aerospace/defense?

These companies have the taint of Vice in that many investors do not want to own companies that produce missiles or fighter planes. However, they produce enormous cash flows and have been actively acquiring other companies and pay above average dividends.

And here’s the fund’s performance:


Like many things, it bombed late 2008/early 2009, but it’s now outperforming the Dow Jones Industrial Average.

In the recent election in NY they’ve started the groundwork for gambling upstate. The state is also supporting businesses like craft breweries, vineyards, and farms that produce greek yogurt. I’ve previously thought of this stuff as the “Yuppie Industry,” but “Vice Industry” sounds a little sexier.

I suppose other states are looking at similar initiatives. Makes you wonder how VICEX will do in the coming years. There’s big money in vice. Why? Listen to this guy talking about his Colorado marijuana business (~4:30). Why did he start it? “I was looking for, essentially, a recession proof job, that I would never go through another lay off.”1

  1. What I love about this video is that the guy who says this is trying his hardest to be viewed as a legitimate businessman in a legitimate industry. Then they show you the guy who grows the product and he’s pretty much what you expect. Then they show the guy who does the pot soda who works hard to distance himself from the word “pot.” “I don’t believe I manufacture a “pot” soda. I manufacture a “medical elixer.” 

What It Means to Be ‘Wealthy’ in America Today

A new report from UBS surveyed investors who on the surface all appear to be pretty well off. Of the survey’s 4,450 participants, half had $1 million or more in investable assets, and all had at least $250,000 in investments. Compared with the huge portion of the population that barely has any savings — about half of Americans don’t have an emergency fund that’d cover three months of expenses — it sure seems like the people in the survey are doing quite well financially. But do these people think they’re rich? For the most part, the answer is no.

That’s a UBS poll. If there was a poll of people who invested with Fidelity or Vanguard I bet the results would be different.

The Money Game

This Forbes article provides 10 things you could do to provide a financial safety net for your kids.

I don’t have kids, but I bet that if you’re in your 20s you’ll find some of this advice helpful, particularly starting a Roth IRA and not spending so much on a college education.

My conspiracy theory is that finance and investing is intentionally complex to keep those who don’t understand it from participating and to help those who do participate profit off of those who don’t understand it. If there isn’t some kind of book for teens and 20-somethings about how to best save and spend money there really should be.

Edit: Jen thinks this is a good start.