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May 18th, 2016:

Why I love cigarettes, even though I don’t smoke

Investing in companies that supply our bad habits has proven to be a winning theme

Have you ever thought about taking a punt on sin stocks? Perish the thought eh!

Not only are there ethical problems but also, surely, stocks like these are likely to be underperforming the market?

But what if they are doing the reverse? Take a look, for example, at tobacco shares. It is no exaggeration to say that investing in tobacco companies has been one of the most lucrative investments of recent times.

The FTSE All World Tobacco index rose 988 per cent from 2000 to last month. This compares with a rise of 131 per cent in the FTSE All World index for the same period.

This may be explained by the fact that contrary to some impressions, tobacco sales remain near their peak, mainly due to increased demand in developing countries.

If tobacco is not your thing what about another looking at Macau casino shares which peaked and crashed last year but are coming back strongly this year.

Brewery stocks are also out there on the sin list and represent quite a mystery, not least because in most developed countries beer sales have slumped while shares in breweries seem to be buoyant. So called craft beers have bucked the sales decline trend and help to explain the strength of these counters but the reality is that craft sales remain a niche within the portfolios of the big brewers.

Away from the heady world of gambling and booze but firmly among things that are bad for you would be fast food stocks. There are many listed companies in this sector and the share price picture is more mixed; however at the beginning of this year a survey of US brokers recommendations on US fast food stocks found that out of 46 companies in this sector 21 were rated as buys, while just two had a sell sticker.

Deeply unfashionable McDonalds is gaining shareholder interest again and while companies of this kind are talking a lot about their healthy options what really interests investors is their discounted offerings on many products that come under the category of well known, and um, well loved diet busters. It’s these good old greasy combos at low prices, not the so-called healthy options, which are adding impressively to the bottom line.

Stop reading right here if you have a moral objection to any of these sin stocks. Indeed a large number of institutional investors, not forgetting many individuals, have decided to avoid these counters like the plague. They have sound ethical reasons for reaching this decision, which often means that they are willingly forgoing potential profit.

That leaves the rest of us who are, to be blunt, less scrupulous. This gives rise to a reduced investor universe for some really big sin counters, which in turn means that opportunities abound.

What’s more all these sin stocks share some common big positives. For example: strong cash flow, then there’s very high profit margins (except for fast food which relies on volume), not forgetting rather remarkable brand loyalty that produces a solid customer base.

On the flip side of this coin is the knowledge that these stocks tend to be highly volatile; the gambling sector is particularly vulnerable. Then there are regulatory issues that have a strong impact on sales because there is nothing that politicians like doing more than tut-tutting over signs of sin.

So, in some ways, investing in sin is a risky old business but, as they say in the investment world, without risk there is little profit. Yet the risks here tend to be predictable.

Who does not know that tobacco consumption is injurious to health? Who can’t get their head around the idea that the world of gambling can be both risky and dangerous?

And so on. The fact is that precisely because these risks are very well known they are priced-in.

Heaven forbid that any of the above can be taken as a exhortation to dash out and buy sin stocks because not only is this column an advice-free zone, but more fundamentally, I can clearly understand why some people view this kind of investment as highly objectionable.

However this subject gives rise to hypocrisy which is also pretty unsavoury, as seen when the well-healed sneer at “common folk” for woofing down Big Macs, while saying nothing about the considerable health dangers of foie gras. It is hard to avoid the impression that snobbery is at play here. This also applies to things like betting where a visit to the horses is considered to be just fine and dandy while a night spent in a Macau casino is just too vulgar for words. Yet what’s the bottom line at both these places?

Sin will not disappear anytime soon nor are so called sin stocks going away, so…

Stephen Vines is a Hong Kong broadcaster, writer and entrepreneur

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Source URL: http://www.scmp.com/business/article/1946658/why-i-love-cigarettes-even-though-i-dont-smoke

Chinese, Vietnamese eye projects in tobacco industry

TALKS are underway between the government and investors from Vietnam and China to put up investment projects in tobacco processing and cigarette manufacturing.

http://dailynews.co.tz/index.php/home-news/49907-chinese-vietnamese-eye-projects-in-tobacco-industry

Trade, Industry and Investment minister Charles Mwijage told the National Assembly yesterday that the government is on the right course to bring such investors to engage in production of cigarettes and also to set up tobacco processing factories in regions where the crop is grown.

The minister was responding to a basic question from Tabora Urban Member of Parliament Emanuel Mwakasaka (CCM) who wanted to know government’s plans to set up a tobacco processing factory in Tabora region.

The MP argued that despite being a leading tobacco producer, Tabora Region has for many years lacked a factory to process the cash crop. In response, the minister said that it is the commitment of the Fifth Phase Government to ensure that every region has a factory depending on crops produced in that particular area or other economic activity.

He said last year Tabora Region produced 39,502 tons of tobacco which were all ferried to Morogoro Region for processing and value addition. Tobacco produced in Tabora and other regions of the country is being processed at the Morogoro-based two factories of Tanzania Tobacco Processing Limited (TTPL) and Alliance One Tobacco (AOTT).

Mwijage said that this Sunday a team of investors from China will visit the Tabora Region to study the environment before deciding to set up a factory.

“Our aim is to have serious investors who will be manufacturing cigarettes which conform to international standards using the locally-produced raw material,” he said. He said the move will help farmers have a reliable market and to create more employment opportunities for Tanzanians.

He also said that he has already tasked his Permanent Secretary responsible for Investment to meet with his counterparts in the ministries of agriculture and labour to chart out areas where social security funds can invest.

He was responding to Mwakasaka’s supplementary question on efforts to engage pension funds in building and developing factories in the country. The minister’s directive to his PS came few days after President John Magufuli advised pension funds to change their mindsets and start investing in building factories.

The President had hinted that by eyeing the setting up of factories, the pension funds will register benefits in a short period of time while creating more employment opportunities.

The minister also said that his ministry has already surveyed key areas in Kigoma which government wants investors to focus as the region has good infrastructure to facilitate investment activities. According to Mwijage, areas of investment include palm tree growing, cement and sugar industries.

New standardised tobacco packaging laws welcomed in Cumbria

http://www.cumbriacrack.com/2016/05/18/new-standardised-tobacco-packaging-laws-welcomed-cumbria/

Public health experts at Cumbria County Council have welcomed laws that will come into force from 20 May 2016, which mean cigarettes made for sale in the UK will have to be sold in drab green packaging with dramatic visual health warnings.

Standardised packaging

Standardised packaging, also known as plain packaging, refers to packaging that has had the attractive promotional branding removed. In March 2015 MPs voted for standardised tobacco packaging regulations which will be implemented from 20 May 2016 across the UK. The new packs are required under the Standardised Packaging Regulations, secondary legislation under the Children and Families Act 2014.

This means that the appearance of all cigarettes and hand rolling packs will be standardised, including:

The material, size, shape and opening mechanism of packaging;
The colour of packaging and cigarettes;
The font, colour, size, case and alignment of text.
Transitional period

Whilst all cigarettes and hand rolling tobacco products manufactured for sale in the UK must comply with these regulations from 20 May 2016, there is a one year transitional period for the sell-through of old stock. From 21 May 2017 all tobacco products on sale in the UK must comply with these regulations.

Local trading standards officers will be responsible for ensuring compliance with the law.

Cllr Ian Stewart, the county council’s Cabinet member for Public Health, said: “We’ve long had concerns that cigarette packs can be attractive and misleading, especially to children. These new laws are a vital step forward in ensuring future generations are protected from the dangers of smoking.”

Colin Cox, Cumbria County Council’s Director of Public Health, said: “This is a proud moment for public health in the fight to reduce smoking prevalence. Many of us have worked on this for a number of years.

“The percentage of young people smoking in Cumbria has steadily and dramatically decreased since 2003, which is a trend that we are delighted about. These new laws can only help contribute to this decline and ultimately cut the risks associated with smoking, saving more lives.”

Rada fails to criminalize alcohol and tobacco smuggling

http://en.interfax.com.ua/news/general/343973.html

The Verkhovna Rada has failed at first reading to adopt a bill providing criminal responsibility for tobacco and alcohol smuggling.

The parliament did not collect the required number of votes (226). As a result, MPs sent the bill on amendments to Article 201 of the Criminal Code, related to criminalization of alcohol and tobacco smuggling through the customs border without customs control or with concealment from customs control (bill No. 3254), to the relevant committee for revision.

The bill proposes defining as a crime movement of alcoholic drinks and tobacco products through the customs border without customs control or with concealment from customs control on a large scale

In particular, such smuggling is punishable by imprisonment for a term of three to seven years with confiscation of contraband, as well as goods, vehicles with specially arranged hiding places used for transfer through the customs border of Ukraine avoiding customs control.

The smuggling of these products in large amounts is punishable by imprisonment for a term of five to ten years with confiscation of contraband, as well as goods vehicles with specially arranged hiding places used for transfer through the customs border of Ukraine avoiding customs control.

The smuggling of these products in a very large scale is punishable by imprisonment for a term of eight to 20 years with confiscation of contraband, as well as goods, vehicles with specially arranged hiding places used for transfer through the customs border of Ukraine avoiding customs control.

New law raises tobacco purchase age

http://www.wkbw.com/news/new-law-raises-tobacco-purchase-age

CHAUTAUQUA COUNTY, N.Y. (WKBW) – Beginning October 1st, you must be at least 21-years old to purchase of tobacco products in Chautauqua County.

Lawmakers passed the legislation in April and Chautauqua County Executive Vince Horrigan signed the law on Tuesday.

The County Executive is appreciative of so many members of the community and small businesses that offered their perspective on this legislation.

Over 60 comments were received through public commentary, emails, letters, and phone calls.

He especially wants to thank over 20 young high school students who took the time to engage him on this legislation.

Again, the law takes effect October 1, 2016.

Exploding e-cigs will soon be subject to regulatory oversight

The booming e-cig market has been largely unregulated

http://www.local10.com/consumer/call-christina/exploding-e-cigs-will-soon-be-subject-to-regulatory-oversight

PEMBROKE PARK, Fla. – As the e-cigarette market grew in popularity, so did calls for oversight and regulation following reports from across the country of e-cigs exploding or catching fire.

From January 2015 to January 2016, scientists from the FDA’s Center for Tobacco Products have identified 66 reports of e-cigs overheating, catching fire or exploding.

Dr. Carl Schulman of the University of Miami/Jackson Memorial Burn Center said those numbers are probably only scratching the surface of what has become a new phenomenon.

“Locally we’ve seen several patients in the last couple of months who have had burns from electronic cigarettes, particularly exploding and catching fire in their clothing,” said Shulman. “If it is just in their clothing, and they are not using it, then their clothing is catching fire and they are get a bad flame burn where that is, and our two patients actually needed surgery for their burns and if they are actually using it at the time it explodes there have been some reports of actual explosions so they get a blast injury and they catch fire.”

The stories are harrowing. There’s a woman in New York who suffered third-degree burns to her leg after an e-cig caught fire in her pocket while driving; and dramatic surveillance video at a Kentucky gas station caught the moment an e-cig sparked and burst into flames in a customer’s pocket.

In the case of Florida resident Evan Spahlinger, the e-cig he was using exploded. His Fort Lauderdale-based attorney, John Uustal said it burst “into flames in his face, causing him to inhale flames, smoke, and scorching hot air,” and forced him into a medically-induced coma, Uustal filed a product liability lawsuit against Vaping American Made Products LLC, a foreign limited liability company; and Naples, Florida-based Vaping Station LLC.

Company owners and representatives never responded to repeated requests from Local 10 News for a statement about the pending lawsuit.

Uustal said for his client, the explosion and subsequent injuries were like “a nightmare”.

Spahlinger suffered from severe burns on his face and neck with severe internal injuries to his lungs, esophagus and mouth. Luckily Spahlinger survived and is now recovering from his injuries. “I was shocked knowing how burned he was, how good he looks,” said Uustal. “It is a miracle.”

He believes manufacturers and retailers have failed to adequately warn consumers of the potential safety risks and product design defects, “when you buy an e-cigarette nobody says you might be blowing your face off so you must be very careful.”

What is causing e-cig batteries to explode?

According to a 2014 U.S. Fire Administration report most incidents of e-cigs exploding or catching fire occurred while the battery was charging.

“The shape and construction of e-cigarettes can make them more likely than other products with lithium-ion batteries to behave like “flaming rockets” when a battery fails,” explained the report. “Using power sources not approved by the manufacturer to recharge a lithium-ion battery can result in an explosion and fire.”

“It is a relatively new phenomenon. I guess it is in the same trend as all the lithium-ion battery-type devices that are sometimes catching fire and exploding and we are seeing that with e-cigarettes as well,” said Dr. Schulman. “Don’t interchange the devices. Some of these injuries have occurred because people are using different batteries and different chargers and that is causing electrical problems and they are catching fire and exploding.”

“The device has no ventilation,” explained Uustal. “You think about a hoverboard catching fire that’s not great, it is a bad situation, but if you put that in a small cylinder that has only two weak ends, one of those ends is going to blow off if the battery explodes and one of those ends is pointed at someone’s face.”

The 2014 U.S. Fire Administration report goes on to say the devices’ lithium-ion batteries can fail, and noted a need for continued improvements in battery safety designs.

“If the person designing this e-cigarette cared at all for the safety of the user,” said Uustal; “there would be ventilation in the battery compartment, there would be a weak spot on the end that’s facing away from the user so that if something went wrong it would explode out.”

The 2014 report also noted that, “no regulation, code or law applies to the safety of the electronics or batteries in e-cigarettes. While many consumer products are required to be tested by a nationally recognized test laboratory, such as UL, there are no requirements that e-cigarettes be subjected to product safety testing.”

In the vacuum of that regulatory oversight, sales of e-cigs soared.

NEW FEDERAL OVERSIGHT:

In May of 2016, the FDA finalized a rule to extend its regulatory power over e-cigs.

They will be looking at the ingredients, marketing and product design.

A recent FDA/CDC survey found e-cig use by high school kids is up a whopping 900% since 2011.

FDA/CDC Recent Survey

E-cig use amount high school students up 900% since 2011.

2015: 16%
2011: 1.5%

Before this month’s move by the FDA, there was no federal law prohibiting retailers from selling e-cigs to minors.

Now you will have to be 18 years old and prove it with a photo ID in order to buy an e-cigarette.

An FDA spokesman tells Local 10 News that new rule takes effect this August.

“We have more to do to help protect Americans from the dangers of tobacco and nicotine, especially our youth. As cigarette smoking among those under 18 has fallen, the use of other nicotine products, including e-cigarettes, has taken a drastic leap. All of this is creating a new generation of Americans who are at risk of addiction,” said HHS Secretary Sylvia Burwell.

While Uustal thinks the new regulations are a step in the right direction, he believes those who make and sell e-cigs should have done more to warn consumers of the potential safety risks and should be held accountable for failures in product safety testing.

“These devices are prone to explode even if the user does everything right,” Uustal told the Call Christina team. “If you are designing a device that with a lithium-ion battery that might explode; and create a flaming rocket right into someone’s face you have a certain responsibility when you are making money off these products, to include safety measures. It is not a question of if they are going to get burned, and the day is coming when the first person is going to die and we can prevent that and so we should.”

The Department of Transportation recently banned the devices from carry-on luggage due to the potential safety risk.

“We know from recent incidents that e-cigarettes in checked bags can catch fire during transport,” said Transportation Secretary Anthony Foxx. “Fire hazards in flight are particularly dangerous. Banning e-cigarettes from checked bags is a prudent safety measure.”

The U.S. Department of Transportation banned e-cigarettes from checked baggage Thursday.

Passengers and crewmembers will also be prohibited “from charging these devices and their batteries on board the aircraft. However, these devices may continue to be carried in carry-on baggage.”

“Fire hazards in flight are particularly dangerous, and a number of recent incidents have shown that e-cigarettes in checked bags can catch fire during transport,” said U.S. Transportation Secretary Anthony Foxx. “Banning e-cigarettes from checked bags is a prudent and important safety measure.”

One industry trade publication states it has created a list of media reported e-cigarette explosions. To date eCig One states it has found 173 e-cig explosion reports.

According to their analysis: Of the 173 e-cigarette explosions:
•47 e-cigarette explosions happened during use.
•73 e-cigarette explosions happened during charging.
•30 e-cigarette explosions happened during transport, storage or unknown circumstances.
•23 e-cigarette explosions involved spare batteries for removable battery mods.