Being in Business with the US Government.

As most of you know I have been doing this for almost three decades and as I have learned you can never be sure of anything. My largest long and option position is (LO) Lorrilard Inc. Lorrilard is a tobacco company that has as it's largest product menthol cigarettes. Lorrilard is a highly profitable company because it makes a highly additive legal product and it has a defacto government monopoly with a government guaranteed profit. All this due to the Master Settlement with the states and trial lawyers several years ago. The trial lawyers, federal and state governments are frankly addicited to the money tobacco companies generate as well. Do not let anyone fool you all the parties involved do not want smoking to go away with the money being made here. That is the reason it is my largest holding, I like being in business with a government monopoly.

Today a FDA government panel suggested that menthol be banned from cigarettes. Now the panel does not have final say, but they do have influence. The panel was stacked with the anti-smoking zealots as expected, but most people assumed they would use good judgement here. Understand if menthol cigarettes are banned menthol cigarettes will not go away. Upon banning a strong black market in menthol cigarettes will commence. If you do not believe so, think about the fact despite illegal how easy it is to get marijuana.

Add in the fact that the vast majority of menthol smokers are black females and young people. Now here is where it gets interesting. Obama banning a product blacks and young people enjoy? Go figure? No race implied here, just wonderment about the political thinking of others. The odds here for an outright ban in a final decision by the FDA are not as high as it might seem and the stock has bounced around all morning from a low of around $75 to almost $83. Frankly no one knows what to think here. Add in the little fact that the government panel released this report on a Friday morning, precisely on the day known as "triple witching" to traders. Triple Witching is the day of the quarter where all options expire and you got a volitle ride. (Note here: Do not tell me that the panel did not know today was triple witching day.)

As I write this the stock is at $82. This is why I enjoy doing this so much, nothing is for certain, and I get to satisfy my competitive nature constantly competing against the best minds.