When A License To Print Money Doesn’t Make You Rich

Imagine you lived in St. Louis, Missouri, had a $100 in your pocket, and wanted to go spend $100 at a casino one weekend. Where should you go? As far as payouts, your worst bet is the Harrah’s in Maryland Heights. There, the slot machines only pay out $0.89 for every dollar that is spent gambling. Your best bet is the Casino Queen in East St. Louis if you want the higher payouts, as you stand to collect $0.93 on every dollar.

If you look at the structure of casino payouts, and use that as a proxy for the business model as a whole, you would think that casino stocks would be a goldmine. And yet, it is the most disastrously performing sector of the sin stock category, with only 5.8% annual returns since 1992. What gives?

Sometimes, the casino itself does not even own the slot machine software. They … Read the rest of this article!