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Big Tobacco's future as Big Marijuana

You may like technology (who doesn’t these days) or the energy sector (where would we be without it) — but if you’re making a long-term bet as an investor, there’s a lot going for Big Tobacco. It’s not just that tobacco boasts the best historical performance of all U.S. industries. The industry’s future seems especially bright. As marijuana gradually becomes a legal drug, Big Tobacco is poised to dominate the market.

According to the 2015 edition of Credit Suisse’s Global Investment Returns Yearbook, a dollar invested in tobacco in 1900 would have turned into $6.3 million by the end of 2014, by far the best performance of all the industries that existed at the start of the 20th century.

That, of course, reflects the decline of some old industries, like coal, railroads and shipbuilding, and fails to account for the emergence of new ones. (A small investment in “some kind of fruit company,” called Apple Inc., is how Forrest Gump earned his fortune.) So perhaps the last ten years are a better indicator of tobacco’s resilience.

Since the beginning of 2005, the MSCI Global Tobacco Index has risen 196.4 percent, providing an 11 percent annual return. It far outperformed the catch-all MSCI World Index, which went up 50.6 percent in the same period. It even did better than the MSCI World Information Technology Index, which rose 94.4 percent in the past decade.

Despite governments’ efforts to get people to quit smoking, a lot of them still do, and they represent a stable core market for Big Tobacco. In the U.S., for example, 20.9 percent of adults smoked in 2004 and 19 percent still had the habit in 2011. Markets for addictive products are less susceptible to economic crises than any others, and — in part because they’re so politically toxic — they are less bubbly. So investors tend to get a steady return.

Right now, the industry is undergoing a vaping revolution. A Bloomberg Intelligence analytical report from last December predicted sales of vapor products in the U.S. could climb 44 percent to $2.6 billion this year. So far, much of that market has been in vaping liquids and the e-cigarettes that use them, but that technology is growing obsolete. The new cutting edge is in “heat not burn” devices, which, according to the Bloomberg Intelligence report, “may be highly disruptive to the existing tobacco industry” because they use real tobacco.

A “heat not burn” vaporizer heats ground tobacco leaves and delivers a nicotine hit to the user without producing much smoke or ashes. This still amounts to using an addictive substance in a slightly different way, but it’s not hard to imagine why smokers might find it appealing to inhale less smoke, none of which contains burned paper. Such “heat not burn” devices are already available from a host of smaller companies, but the bigger tobacco companies, such as Philip Morris and Reynolds, have made it clear they’re intent on catching up.

A sign is pictured near police tape, which was used as a prop for a ribbon cutting ceremony, at Cannabis City, a retail marijuana store, on July 8, 2014 in Seattle, Washington.

David Ryder/Getty Images/AFP

It may seem that Big Tobacco is merely cannibalizing its existing sales by putting out such products. Yet it may be something of a bet on the future, too. “Heat not burn” vaporizers can just as easily be used to smoke marijuana as tobacco. And they are already gaining popularity among cannabis users.

Tobacco companies have never said publicly that they’d like to get in on the marijuana business. That’s understandable. Selling marijuana is still largely illegal in Europe and in the U.S., and it would be politically suicidal for companies that face as many regulatory barriers as tobacco companies do to suggest that they want to go into soft drug dealing. But they have long watched marijuana as a potential market.

In a 2014 paper entitled “Waiting for the Opportune Moment: The Tobacco Industry and Marijuana Legalization”, the political scientist Rachel Ann Barry and her colleagues quoted internal documents from Philip Morris expressing an interest in marijuana as a tobacco competitor. These letters and memos date back to 1969. In 1970, an adviser to the board of British American Tobacco, Sir Charles Ellis, penned a proposal for a marijuana product to the company, claiming that “smoking such a cigarette is a natural expansion of current smoking habits which, if a more tolerant attitude were ever taken to cannabis, would be a change in habit comparable to moving over to cigars.” The discussions and research paused in the 1980s as marijuana legalization prospects became more remote, but resumed in the 1990s.

More than 19 million people in the U.S. aged 12 and older reported using marijuana in 2012. If recreational marijuana is ever legalized beyond the four states where it’s currently permitted, the tobacco companies will be perfectly positioned to capture this vast market. They already have distribution systems (licensed tobacco sellers already dispense medical marijuana in a number of states), marketing machines, industrial facilities to make marijuana cigarettes and package cannabis for use in vaporizers, patented designs for the vaporizers themselves, research laboratories (and possibly even a head start on commercial product development) and, last but not least, cash resources.

“Marijuana legalization advocates,” Barry and her colleagues wrote, “have not considered the potential effects of the multinational tobacco companies entering the market (or other corporations such as the food and beverage industries), with their substantial marketing power and capacity to engineer marijuana cigarettes to maximize efficacy as drug delivery systems, in the way that modern cigarettes are designed, whose primary objective is maximizing profits through higher sales.” I’m not sure that’s true: The legalization advocates probably wouldn’t mind Big Tobacco’s participation in developing the market.

After all, these corporations can do it better than the tiny companies that have attracted the early marijuana investment into their penny stocks. Companies listed on Marijuanastocks.com may survive on the fringes of the post- legalization industry, but many of them will be put out of business or acquired by the big league players who have survived all the upheavals of the last 115 years while producing top returns for their investors. For those not overly worried about the moral strings attached to investing in companies that pander to addictions, a greener future for Big Tobacco may be one of the biggest opportunities of a lifetime.

Leonid Bershidsky, a Bloomberg View contributor, is a Berlin-based writer. For more columns from Bloomberg View, visit http://www.bloomberg.com/view

© 2015, Bloomberg News

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Dan Gibson

Years and years ago — our government thought they would put a crimp in the business plan of ”big tobacco” — by charging them five or six billion dollars for the ”negative affects their product brought upon the American citizens” — well that pretty much was found to be about two weeks of profit for the tobacco companies — and now — who knows — what may come in the near future — rest assured the politicians have already had their offshore accounts ”enhanced” — and the tobacco ”machine” is working 24/7!!!!

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RegulationWorks

Big tobacco investors, beware.

The author of this article, Mr. Bershidsky, appears to be out-of-touch with the mindset of cannabis reform advocates and the purpose of the reform movement. His belief that “legalization advocates probably wouldn’t mind Big Tobacco’s participation…”is badly misinformed.

In truth, cannabis advocates and consumers abhor the idea.

Equally misinformed is Rachel Ann Barry, who despite writing a book on the subject, stated “Marijuana legalization advocates have not considered the potential effects of the multinational tobacco companies entering the market.” The possibility, or inevitability, that large corporations will try to leverage their considerable resources to control the legal marijuana market has been a topic of discussion and debate on law reform blogs, podcasts, and at industry seminars for a long time.

As for the takeover by big tobacco providing “one of the biggest investment opportunities of a lifetime,” be careful; what Mr. Bershidsky and Ms. Barry don’t seem understand is that cannabis is not just a commodity, it is a well developed culture that has existed for generations and does not trust big business. Cannabis advocates and consumers are already planning to boycott big cocorporations, especially those that they believe have lobbied against marijuana law reform -like big tobacco and big pharma. Cannabis consumers believe that big tobacco has supported prohibition, and therefore, imprisonment of the very people that have paved the way for the profits those companies now hope to control. Many cannabis consumers will not patronize companies owned by big tobacco as long as they have local options not associated with big tobacco.

And those smaller, local options will have a big head start; large corporations will not enter the industry until it is legal at the federal level, which may take many years.

The takeaway is that big tobacco’s success in the cannabis industry is no safe bet. There is no doubt that some of the first-wave cannabis companies will eventually sell their businesses to large corporations. For example, Colorado’s “Medicine Man” has already admitted that they intend to sell out. But it would be a mistake for investors to underestimate the size and strength of a cannabis culture that will organize to resist the entrance of Big Tobacco into the industry they worked and suffered to create.

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Jeff Deutsch

For Cancer patients, for kids suffering from Seizures, and for so many others, safe, legal, access to Medical Marijuana is a matter of life and death. Its critical that Marijuana be removed from Schedule 1 immediately. Please call the whitehouse comment line at (202) 456-1111 and ask that the President get that to happen, to protect the health and safety of Americans that need Medical Marijuana. Have everyone else you know call them too.

I’m a Scientist with a strong interest in Cancer research. The clinical evidence of the value of Marijuana as a life saving medicine is now so strong that the need to remove Marijuana from Schedule 1 has become a moral imperative. Google Medical Marijuana testimonials. Google Medical Marijuana Cancer Patient Testimonials.

This weekend over 3,000 Americans will die, in pain, of Cancer. Every day after that, 1,500 more Americans will die, after suffering horribly, from it. Every single minute another American dies of Cancer. Every American Cancer patient deserves the right to have safe, legal, and economical access to Medical Marijuana. Every single one.

Americans who need Medical Marijuana shouldn’t be used as “Political Footballs” Please call the Whitehouse comment line at (202) 456-1111 and ask that the President take immediate action to remove Marijuana from Schedule 1 so American Physicians in all 50 states can prescribe it.

Oncologists have know it for more than a quarter of a Century that Marijuana is a “wonder drug” for helping Cancer patients.

The American Society of Clinical Oncologists wants Marijuana removed from Schedule 1. So does the American Medical Association, the professional society of all Physicians. A strong majority of Americans want Physicians in all 50 states to be able to prescribe Medical Marijuana. So do their Physicians., Cancer patients can’t wait.

The need to immediately, completely, legalize Marijuana throughout the world is one of the most pressing moral issues of our time, because of its medical benefits and because of the damage prohibition causes to America and to the world.

Complete legalization is critical — its vital that there aren’t “strings” or “hoops” that Cancer patients and others who need Medical Marijuana are forced to jump through.

“Charlottes web” is NOT the solution. Cancer patients and people who suffer from chronic pain need THC, not just CBD. The “Berkeley study”, where 96% of stage 4 Cancer patients who had a wide variety of Cancers achieved remission, used high dose Medical Marijuana oil, 72% THC, 28% CBD, 1 gram/day (oral) over a 90 day course of treatment. It was a small study, and not placebo controlled, but those kinds of results are clearly remarkable, have been widely reported on in the press, and demand the need for immediate large scale clinical trials.

More and more present and former members of law enforcement agree about the need to end prohibition, and have formed a rapidly expanding group of current and former undercover cops, FBI, DEA, prosecutors and Judges, from all over the world, called

LEAP — Law Enforcement Against Prohibition

because they’ve seen the damage prohibition causes to America and the world.

See http://www.leap.cc/

I’m a Scientist. Not a politician, not a cop.

But as a Scientist with a strong interest in Cancer research, I feel even more strongly about the need to ensure that no Cancer patient is denied it, because I’m so impressed with its benefits for Cancer patients.

I urge everyone reading this to PLEASE call and email the Attorney General, the press, Congress and the President today.

Medical Marijuana helps with Alzheimer’s, Autism, Cancer, seizures, PTSD and chronic pain, and has helped many Americans, including many veterans, stop using Alcohol, and hard drugs, both legal and illegal ones.

Every minute an American dies of Cancer.

Every 19 minutes an American dies of a prescription drug overdose.

Many vets become addicted to prescription opiates and die from them.

NOBODY has ever died from smoking too much pot.

Cancer patients are seeing remarkable results using high dose Medical Marijuana oil, in many cases achieving complete remission, even for stage 4 cancers — there are many excellent articles on the web, and videos on youtube with patient’s personal stories about their experiences with it — and every Cancer patient that uses Marijuana to ease their suffering benefits greatly from doing so.

It is immoral to leave Marijuana illegal, for anyone, for even a second longer.

For Cancer patients, its a matter of life and death.

Cancer patients can’t wait.

Medical Marijuana has an unmatched safety profile, and for people who suffer from so many diseases, of so many kinds, its a medical miracle — and the scientific evidence behind it is rock solid.

For Cancer patients, Medical Marijuana encourages apoptosis and autophagy of Cancer cells, while leaving normal cells untouched, is anti-angigogenic, anti-proliferative, and is anti-angiogenic.

Its also synergistic with chemotherapy and radiation therapy, making both more effective.

For many Cancer patients its meant the difference between life and death.

For everyone else, its a far safer alternative to Alcohol, and infinitely safer than Cigarettes.

Either take them off the market too, or legalize Marijuana right now.

2016 is too far away, Its too long to wait. Every year we lose more Americans to Cancer than died in WWII.

Between now and the 2016 elections, roughly 1 MILLION Americans will die of Cancer.

And Its a horrible way to die.

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