What stocks to invest in = more casino gambling folly in New Jersey « PRACTICAL STOCK INVESTING



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Tax revenue from casino gambling in Atlantic City has been an important source of income for the state of New Jersey since its inception in the 1970s.  The Atlantic City gambling market peaked, however, in 2006 and has been cut in half since then.  The financial crisis accounts for maybe a fifth of the contraction.  The rest is due to the introduction or expansion of casino gambling in nearby states, notably Pennsylvania.

New Jersey’s response to this development has been a bit bizarre.

Its first idea was to increase casino space in Atlantic City by funding an upscale casino project which had been trying unsuccessfully to get private financing for years.  How that would address overcapacity in the market was never explained.  But luckily this plan never got off the ground.

Then there was internet gambling, introduced in late 2013, which the state predicted would soon be a billion-dollar industry.  2016 revenue from this source, year to date through August, is about $32 million.

The state has also attempted to institute sports gambling in the casinos, unsuccessfully so far.  The main stumbling block, as I understand it, is that doing so is expressly forbidden by federal statute.  Before that legislation was passed, state were polled to see if they wanted to be exempted–and New Jersey said no.


The latest idea, being pitched in advertising as a cure for unemployment, is again to open more casinos–only this time in northern New Jersey, within striking distance of New York City.

As a general rule, I think that–with the exception of resort locations like the Las Vegas Strip– consumers in general, and casino gamblers in particular, normally tend to patronize the closest venue to where they live.  If so, these proposed new casinos may draw some New Yorkers away from NYC-area casinos and keep some New Jerseyans from crossing the Hudson River.  But they will certainly make a huge dent in the gambling traffic that now goes from northern NJ to Atlantic City.

 

The new casinos need voter approval before the projects can go ahead.  Hence the commercials now airing to promote their advantages.  It’s not clear, however, that their opening will be a plus for the state.  The question is not whether they’ll do damage to Atlantic City–they certainly will, I think.  It’s how many more AC casinos will be forced to close their doors, and whether as a result their south Jersey/Pennsylvania patrons will opt to gamble in PA instead.

 

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