Conference nyoss1::market_investing

   615  CSCMA::BALICH        12-NOV-1993     7  Philip Morris 

    I think that Philip Morris is a great stock to have in one's
    portfolio. It has plenty of cash and can fight the
    big uncle. I would even consider RJR Nabisco at this point
    as well. It too has a good dividend.
    

    
>    What are your thoughts with Philip Morris ...  I'm thinking of getting
>    in ... I know there is alot of pressure from FDA, Pres, etc on teen
>    smoking ... but who should care since MO gets 70% of its profits from
>    cigarettes from overseas.  Revenues and profits growing at 15%/year.

    Well I care, and I will not actively invest in firms involved in what
    are in my opinion in "bad" or "exploitive" industries; and the tobacco
    industry qualifies in a big way on that account.  

    I know that some of my mutual funds have investments that I do not like
    and I try to keep those in mind.  I also know that I am forgoing an
    opportunity for some pretty big returns and in reality my actions are
    making tobacco stocks even more profitable for those who invest in
    them.
                        
>    Also one very important fact most folks don't realize ... If cig. where
>    banned/regulated, the government would LOSE all its taxes from
>    cigarette revenue, this alone I hear would bankrupt the country.  
>    ALOT of $'s from cigarette revenues that government would surely miss.
 
    IMO that's crazy.  I can't imagine that cigarette taxes could be more
    than 1-2% of federal revenue (personal income taxes, corporate income
    taxes, Social security taxes, gas tax, etc). 
    
    Greg
     
        
    

    IMO, the politicians won't cut off cigarettes.  People don't want it. 
    What MAY close it down is the lawsuits.  We'll have to wait and see
    what juries award and if the judges permit it...
    
    Mark

>>    Also one very important fact most folks don't realize ... If cig. where
>>    banned/regulated, the government would LOSE all its taxes from
>>    cigarette revenue, this alone I hear would bankrupt the country.  
>>    ALOT of $'s from cigarette revenues that government would surely miss.
>     IMO that's crazy.  I can't imagine that cigarette taxes could be more
>     than 1-2% of federal revenue (personal income taxes, corporate income
>     taxes, Social security taxes, gas tax, etc). 

	What would go backrupt would be the coffers of those polititions
	that accept the tabacco industries blood money!  Interestingly
	from what I heard the tabacco industry used to contribute pretty
	evenly between the war chests of both Democrats and Republicans.
	But Clinton is the first President to take a public anti-smoking
	stance, and right now the Democrats are getting little of that
	blood money (and I don't recall if I heard if the Republicans were
	getting the same as before or more).

	Also interesting is that this newest lawsuit (which is actually
	a re-trial after the 1st one ended w/a hung jury) I heard is only
	the 20th one to actually make it to trial (the tabacco lawyers,
	with the help of all that blood money, are pretty good at settleing
	or squashing the cases before it gets that far).

	And what the tabacco analysts are saying right now is that this
	weeks news about Clinton hinting at accepting FDA recommendations
	to help keep tabacco out of the hands of minors (which is when
	most smokers start) is only a very minor concern (after all,
	preventing new customers from getting addicted won't hurt
	near term sales/profits, only long term, especially after the
	existing customer base continues to die off).  The main concern
	is the existing tabacco lawsuit re-trial, which is in light of
	the other recent lawsuit which resulted in the industries first
	lost.  I don't know much about the details of that other lawsuit,
	but it's been said that one did *not* set a new legal precedence.
	However it's likely this current one could.

	Plus there was another negative development for the industry when
	a 13th State has gotton on the band-wagon and is suiing the makers
	for the Medicare costs attributal to smoking.

	And FWIW, I've seen a couple of different tabacco analysts
	recommending buying these stocks on this weakness.  However one
	analyst only recommended "American Brands" (I don't know the
	trading symbol, anyone?) which had already sold off the domestic
	part of it's tabacco business to another maker, but has been
	been down in sympathy with the group.  And if I were to invest
	(w/out doing any research) in one of MO or RN, my guess is RN
	would be better in that they do have more non-tabacco holdings
	(though that's only relatively speaking, my understanding is that
	you might as well count them as a pure tabacco play like the rest).

	If one really wants to invest in tabacco, the really hot market
	right now is cigars.  Recent IPOs in such companies are doing great
	as are the existing public cigar related companies.  Go figure!

> IMO, the politicians won't cut off cigarettes.  People don't want it. 

	People don't want to cut off cigarettes???  Me thinks you are
	out of touch :-)  The last number I heard is that 25% of the
	adult population are smokers.  And of that number, the majority
	wish they had never started, and know it's an addiction (both
	physical and mental).

	And more and more people are realizing that it's not just the
	smokers themselves that are paying, but all of us as a society
	and as indivduals, in the form of lower productivity, health
	care costs & insurance, etc.

	Not only that, I still believe the Federal Government subsidizes
	tabacco growers!?  Why?  Because it's no secret polititions
	like being polititions and because human nature finds it hard
	to turn away those $'s that help them stay in office.  The money
	given to the growers would of been better spent paying the growers
	to switch to crops that can feed people instead of killing them.

	Even Bob Dole has backed away from the statement(s) he made when
	he was campaining in tabacco country (something about there being
	no evidence that nicotine is addictive) ....

> Title: American Brands = AMB

	Thanks!  Looks like this stock has had a relatively small
	trading range over the last 52 weeks!  Relatively low volume
	too for a listed stock.  Nice dividend though!

Symbol: AMB (AMER BRANDS INC) [NYSE]
Last Trade: 41 1/2, no change at Aug 22  2:36:28
Low & High: 41 1/4 & 41 3/4 (spread 1/2)
52 Week Low & High: 39 7/8 & 47 7/8 (spread 8)
Volume/# of Trades: 283000 / 162 (1746 shares/trade)
P/E: 13.60, EPS: 3.05, Annual Dividend: 2.00 (yield 4.82%)
Market Cap: 7999.00, Beta: 1.15, EPS Growth: -5.90

    MO is a perennial Dow Dog with it's rich dividend yield.
    It probably will stay in my DD portfolio for a long, long time.
    
    MO has some nice product lines: Miller Beer, Kraft Foods, Post
    Cereals.  Talk about cash flow!

With Ralston selling its cereal brands to General Mills
there are two big players (GMills and Kellog), Post (which
has been agressively lowering prices) and bit players.

Miller and Kraft look like better assets than Post right now.

    Jeff,
    
    "Methinks" that people pay lip service to the medical facts, then go
    out and buy a pack.  Politicians aren't going to risk losing 25% of the
    adult population over a PROHIBITION and non-smokers aren't clamoring
    for one.  Most people will be happy if kids aren't enticed to start the
    habit.
    
    Mark

> "Methinks" that people pay lip service to the medical facts, then go
> out and buy a pack.

	Yup, it's true.  Yesterdays news is old news.  Information overload :-)

> Politicians aren't going to risk losing 25% of the
> adult population over a PROHIBITION ...

	The Politicians aren't worried about losing 25% of the adult
	population (and I'm not aware of any data which indicates which
	% of those who actually vote are smokers, especially seeing
	the demographics of smokers ....), the Politicians would be
	worried about losing the blood money for their war chests first ...

	But better than a ban, the best idea may to just keep increasing
	the taxes on the products as part of deficit reduction ....

> ... and non-smokers aren't clamoring for one.

	Since when do Politicians listen to the voters :-)  While non-smokers
	aren't clamoring for one, that doesn't mean they would be opposed.
	I'm just thinking back to the not so distint pass when smoking
	was prohibited from domestic airline flights.  I don't remember much
	of a clamor for that prohibition, and I also don't remember much
	of a protest when they did.  In fact just the opposite, while a few
	smokers were crying foul, alot of smokers appeared to like the idea.

> Most people will be happy if kids aren't enticed to start the habit.

	It's a good start :-)  Also promising are better treatments to
	help people break the addiction(s)... that way the only one who
	will be smoking are the ones that truely want to (which likely
	would be better than prohibition which ends up costing big $ in the
	form of enforcement)

	And in case anyone hasn't heard, last Friday (after the market
	closed) the Jury in that trial that was the major reason for
	the slide in tabacco stocks returned a verdict.  They ruled in
	favor of the tabacco companies.  And the [tabacco] stocks rallied.

	Also FWIW, as was already known, the Clinton annoucement
	thing as I already said did not scare investors.  Another
	reason why I heard from an analyst is that 85% of what
	was proposed to put into law was already being done under
	a gentlemans agreement with the industry.

    	Another factor that comes into play, that I believe no one
    	has commented on yet, is the growth of cigarette consumption
    	outside of the United States.  All the big tabacco companies
    	are in the international market.  Just recently, many have 
    	either bought or opened up factories in the former communist
    	countries.  Cigarette comsumption and sales in the States is
    	flat or falling.  The big money is in developing or third 
    	world countries where there is practically no legislation
    	controlling the consumption of tabacco.  Also, in those countries,
    	there is no stigma associated with smoking or concern about the 
    	health risks. Easy money.
    
    	IMHO, I don't think the tabacco companies are terribly worried
    	about the US market anymore.

> Another factor that comes into play, that I believe no one
> has commented on yet....

	Forgot your reading glasses? :-)) (ie. even the base note
	mentions MO's sales are 70% overseas, and other notes
	also touch on that factor)

	In any case, some more news.  Some anti-smoking person/group
	has lobbied some congress person to propose legislation
	that would limit the industries liability to a max of 15
	years, in exchange for several billion $'s/year to help
	pay healthcare costs (which BTW I just read cost us taxpayers
	$50 billion/year).

	Also good for the stocks (or at least MO) this week is that
	MO's board meets later this weeks and some feel MO will
	either raise their dividend, or announce a stock buy back.

	I believe I also forgot to mention this last week, but from
	what I've heard, the industry is self-insured.  I guess it's
	been this way for 15 (or 25?) years after insurance companies
	have declined coverage (for product liability insurance that is).

	And one more note, CNN HN reports there are four (4) more
	lawsuits pending that are scheduled for trial by year end.

Having been very successful in combatting infectious diseases
over the past 30 years or so, China is watching its cancer wards
overflow.  The government is beholden to tobacco, but eventually
something's got to give.  Give it ten or fifteen years (it's a
problem on the order of the British opium of the past & that got
fixed).