tocacco plant Native American Tobaccoo flower, leaves, and buds

tocacco Tobacco is an annual or bi-annual growing 1-3 meters tall with large sticky leaves that contain nicotine. Native to the Americas, tobacco has a long history of use as a shamanic inebriant and stimulant. It is extremely popular and well-known for its addictive potential.

tocacco nicotina Nicotiana tabacum

tocacco Nicotiana rustica leaves. Nicotiana rustica leaves have a nicotine content as high as 9%, whereas Nicotiana tabacum (common tobacco) leaves contain about 1 to 3%

tocacco cigar A cigar is a tightly rolled bundle of dried and fermented tobacco which is ignited so that its smoke may be drawn into the mouth. Cigar tobacco is grown in significant quantities in Brazil, Cameroon, Cuba, Dominican Republic, Honduras, Indonesia, Mexico, Nicaragua, Sumatra, Philippines, and the Eastern United States.

tocacco Tobacco is an agricultural product processed from the fresh leaves of plants in the genus Nicotiana. It can be consumed, used as an organic pesticide, and in the form of nicotine tartrate it is used in some medicines. In consumption it may be in the form of cigarettes smoking, snuffing, chewing, dipping tobacco, or snus.

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A Silver Lining Clings to Tobacco

The Marlboro Man may not look so tough anymore, but investors shouldn’t write him off. Altria, which makes Marlboros, announced on Wednesday that it had shipped sharply fewer cigarettes in the third quarter than a year earlier. The looming health care reform, meanwhile, could further burden smokers and manufacturers.


But the investor Warren Buffett has said that some apparently drooping businesses can deliver more puff than expected. He called such stocks cigar butts, and Altria could be one of them.

Most of Altria’s profit comes from its cigarette subsidiary, Philip Morris USA, which in turn relies heavily on Marlboro. So it’s somewhat alarming that Altria shipped 16 percent fewer cigarettes in the third quarter than a year earlier — even though Marlboro’s share of the United States market actually edged up to 41.9 percent in the quarter.

With health care reform top of the agenda in Washington, the tobacco business is also still an obvious target. From 2000 to 2004, smoking was responsible for $193 billion in annual health-related economic losses, according to estimates from the Centers for Disease Control and Prevention. If the government tries to cut health care costs by discouraging smoking, there could be more taxes imposed like the April increase in the federal excise tax on cigarettes.

Yet it wasn’t all bad at Altria in the third quarter. Net revenue excluding excise taxes fell 11.3 percent in the cigarette segment — less than the decline in volume, suggesting the company managed to raise average prices. Add in other businesses including UST, the chewing tobacco and snuff maker acquired by Altria this year, and the group managed to eke out a 1.7 percent overall increase in profit as net revenue excluding taxes slid just 0.5 percent in the quarter. Cost cutting helped, too.

Altria’s stock currently trades at just under 10 times consensus estimates of 2010 earnings, slightly below Reynolds American’s multiple, despite what some analysts view as a more powerful stable of products. Pricing power, especially at Marlboro, could surprise — as could cost cutting and contributions by the smaller business units. It would be oddly fitting if the tobacco-dominated company did turn out to be one of Mr. Buffett’s cigar butts.

Overvalued Euro?

How times have changed for the euro. It was once widely seen as an experiment bound to fail. Now, as the dollar wanes, the common European currency is the star, riding high at $1.50. But does the euro deserve it? The answer is probably not.

Back in October 2000, the single currency was at $0.84. Then, commentators wrote about how it was at a “critical stage.” The obituaries were ready to run.

But the euro didn’t die. Over the next nine years, it strengthened by 79 percent. Buying the euro when all looked dark would have been a good idea.

Now, investors are writing obituaries for the dollar. It seems to have nothing going for it. The Federal Reserve’s target overnight interest rate is virtually zero. The Obama administration’s fiscal deficit is stratospheric. And even good news about United States economic growth provokes dollar selling.

But the euro really isn’t worthy of its current star status. The strains in the region where it is used weren’t serious in 2000, but they are now. Germany and Italy are on course for 5 percent declines in their economies — twice the pullback seen in the supposedly hopeless United States. The German unemployment rate, at 8.2 percent, is healthy compared with Belgium’s or Ireland’s, at over 12 percent. Spain’s is a horrific 19 percent.

To aid recovery, the euro zone needs an active economic policy and a competitive currency. But estimates of the euro’s purchasing power against other currencies suggest it is close to 30 percent overvalued. For countries like Spain, Greece, Italy and Ireland, where wages raced ahead in the good years, the effective level of overvaluation is even higher.

What can be done? Jean-Claude Trichet, the president of the European Central Bank, can try to talk the euro down. But more effective would be recognition that reports of the dollar’s demise are exaggerated. That will come when the Fed hints that growth has returned and that interest rates will soon be rising.

October 21, 2009

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