Vice Industry Thriving Despite Recession

It's 8:30 p.m., the stock market is down 700 points, and Rick's Cabaret in Manhattan is packed. Drinks are flowing, women in electric-blue gowns are peeling off layers onstage, and if the Wall Street clientele is stressed, the guys aren't pinching pennies. Sabrina, who offers $20 neck rubs at the bar, is making a killing. "I'm happy," she says, "but I'm sorry it's for this reason." Margo, a stripper, tells NEWSWEEK she just wired $1,000 to her dad, a plumber who recently got sacked. Claudia, another dancer, says her tips are "consistent," but she's losing clients in her day job as a fitness trainer. This stability isn't news to Rick's CEO, Eric Langen, who has seen stock in his chain of gentlemen's clubs nose-dive even as his revenues nearly double. "I wouldn't say we're recession-proof," he says, "but we're recession-resistant."

Even in tough times, people don't give up their guilty pleasures. Analysts tout industries such as alcohol, tobacco and gambling—known as "vice" or "sin" stocks—as "defensive": they're beacons of hope in grim financial times. "Not only do people drink and smoke regardless of the economy, but they do it around the world," says Charles Norton, manager of the Dallas-based Vice Fund (VICEX). The fund is down 27 percent this year—"We're in a hundred-year storm," Norton admits—but he's one in a choir of analysts who maintain that while all industries are suffering, the business fundamentals of vice remain strong and will rebound faster.

With the word "depression" on some people's lips, says Caroline Waxler, author of "Stocking Up on Sin," "the more lowbrow the vice, the better it will do." Condom sales will rise, she predicts. (Indeed, Durex sales have soared in Europe.) Local casinos will do better than travel destinations such as Las Vegas. And we'll all become Joe Six-Pack. "People have their routines—a beer at the end of the day, a pitcher after the softball league," says California beer distributor Terence Fox. "Remember, a bad year for the beer industry means we're down 4 percent; a bad year for high-tech means losses of 30 percent." As other industries flail, the company that makes Camel and Salem cigarettes just posted better-than-expected quarterly profits. At Rick's, where happy hours have been extended, the current mantra is affordability and escape. "Just look!" says one customer, a tax accountant, surveying a packed room. "I don't see any recession here."