Cigar Tobacco As A Troubled Investor’s Favorite - By: Garson Smart

If cigar magazines like Cigar Aficionado plus Smoke can be believed--and demographic studies indicate that, on this issue, they are able to--premium cigar smokers are the kinds of people who also make savvy investments.

But even the most dedicated cigar aficionado plus premium cigar smoker can not notice the unique plus interesting role which premium cigars play during the stock market, particularly throughout recessions like the 1 we are every one currently lamenting.

When the stock market crashes, or when stocks bear a longer-term, severe value contraction, investors request safe stocks to put their money in. Their reasoning is smart enough: once each one, in a very shaky economy, even a company with nice profits in its future may present a fairly unhealthy short-term investment. In troubled times, then, it is smart to place money in one thing that features a tendency to remain profitable even when the economy's bad. Plus, given which demand for tobacco is fairly inelastic--which means that the demand does not change even as households and firms request to shrink their budgets and tighten their belts--tobacco represents one of those fairly durable investments.
Every one this makes tobacco look prefer a good investment when times are bad. Investors also have a word for this sort of stock (the fairly certain bet that you simply turn to when nothing's a sure bet): they call it a defensive stock. As in, self-defensive. Self-defense of the monetary kind, which is.

Thus, for example, throughout the recent recession, a number of tobacco firms have found their stocks immensely saleable--plus immensely successful. Investors have enjoyed the additional security here stocks offer. And tobacco companies, including the premium cigar tobacco big Altadis S.A., that was recently acquired by a still larger tobacco company, have appreciated the vote of confidence, especially given the other challenges roiling the dedicated cigar aficionado and the overall cigar industry in recent months. Among alternative things, a new increase in the SCHIP kids's insurance program has been paid for in element by increased tobacco taxes, including a closing of the federal tax loophole that a premium cigar aficionado had secretly appreciated for decades. This loophole meant that cigars, cigar tobacco and premium cigars were taxed at a far lower rate than were cigarettes. It has been closed at the federal level together with a 10-time increase in taxes on cigars, plus extra plus additional states are moving to near similar loopholes in state tax policies so as to form up budget shortfalls. Also, with United States policy toward Cuba easing slightly--signaling, just presumably, that the longtime United States trade embargo against Cuba can not last forever, or maybe thru the four to eight years of the Obama administration--premium cigar makers are sweating somewhat the prospect of having to compete, for Yank dollars, against 1 of the best cigar companies during the world, the govt. -owned Cuban cigar monopolists at Habanos S.A.

So, it's an excellent time for cigar tobacco companies to be enjoying their new attract as defensive stocks. But not everyone agrees. A New York City Council member has recently argued, on moral grounds, that his town ought to divest itself of the more than just five million shares, valued at over a hundred million, that its various pension boards owns. Those stocks, if relinquished now, can end up a windfall for those pensioners.

On the other hand, perhaps not. With the economic signals still mixed, but many forecasters foreseeing an finish to the recession in late 2009 or early 2010, several investors have already switched over to recovery stocks--stocks which tend to carry out well during periods of economic recovery. A premium cigar aficionado, in any case, could desire to think about going beyond mere fandom to investment, the following time (let it be numerous, many years from currently!) the economy goes into decline.

If cigar magazines like Cigar Aficionado plus Smoke may be believed--and demographic studies indicate which, on this issue, they can--premium cigar smokers are the sorts of folk who additionally make savvy investments.

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