Cigarette smoking is a dangerous and expensive habit. We all know the health concerns surrounding the act of purposely inhaling dozens of dangerous, addictive chemicals. But do any of us ever take the time to study the opportunity costs of smoking?

The figures are interesting, especially with today’s news that Altria (NYSE:MO), the owner of the world-famous Marlboro name, set a healthy 7.6% annual dividend today.

The news made me ponder the following question: What if a smoker was to give up the nasty habit and invest the daily savings in shares of Altria?

I bet the figures would be more than enough to kick the habit?

You decide for yourself.

At today’s prices, $5.60 for a pack of smokes and $16.62 per share of Altria, a pack-a-day habit would equate to 123 shares of the company (365 days multiplied by $5.60 per pack).

The investment would total $2,044.  Thanks to today’s dividend announcement, the free cash, if reinvested, would lead to an extra nine shares. You could kick the habit and easily grab more than 130 shares of one of the nation’s top brands.

Over the course of several years, you could really start collecting a large position. Add in the value of compounding interest and today’s smoking habit could turn into a healthy retirement fund.

With rough estimates (there are a lot of variables, including appreciation estimates), in thirty years this tactic could easily lead to well over $250,000 in accumulated wealth.

Best of all, you will leave to see it.

Source: A Smokin’ Easy Way to Retire Rich

By taking a look at Altria’s chart, you’ll notice a recent support line that was formed around $14 per share. This support line held up perfectly despite the sell-off.

Also, the Slow Stochastic (bottom of the chart) and RSI (top of the chart) both hit oversold levels and are showing a bounce towards overbought levels. As these indicators move to overbought, we should see Altria’s share price move even higher.

Your target should be its January highs ($17.50 a share) – a nearly 10% gain.

This from Investor’s Daily Edge:

So, for what it’s worth, here are my predictions for 2009, please adjust the time frame as necessary.

The bailouts will work. The banking/credit crisis will ease in early 2009, and with it businesses should be able to start borrowing again.  Once the money flows open up we should see some relief from the recession.

Ford (NYSE:F) will survive, I’m not sure about General Motors (NYSE:GM). Chrysler has been dead for a long time. The future of autos is electric and hybrids, not minivans or trucks. This should not be news to anyone except GM and Chrysler.

The market will rebound to the range of about 10,000 to 11,000. Any significant move above these levels will be a function of how well the next administration handles their responsibilities in the early months of 2009. There are very real concerns.

We have elected the most inexperienced candidate, ever. This, during a time when what we need is wisdom, real down home, paid your dues, learned the hard way wisdom. What we have is a person with zero experience that many feel is a leader who can offer change. This may work.

It will work only if he makes all the right moves between January and June. If he makes any serious stumbles, or what are perceived to be serious stumbles, he will lose what is already a skeptical, beaten up American people, and that could be disastrous.

All he really has to do is to be able to explain what he is doing and why, and make us believe it’s good. Not perfect, but at least good.

The confidence of the American people is so badly damaged that we can’t survive another first six months of a new presidency like the last candidate that promised to change Washington, Jimmy Carter. Can’t remember what it was like? Read the editorials in the NY Times for the period of January 1977 to October 1977. Ouch!!

On the other hand, Obama may be able to pull the same smoke and mirror act he did in the campaign. It’s up to the press to let him continue to get away with it. I think they will. If so we may be in for a surge in confidence and better times. And confidence is what we need to get the show on the road. The press however is very fickle, and Mr. Obama may find himself on the other end of that information juggernaut that gave him the presidency.

Everything the government can do is being done to help us through this mess. The success we see in 2009 will be a function of whether the people of this country can get out the funk we are in, start spending and start looking a little further down the road than tomorrow. Pushing them out of the funk has fallen on the shoulders of the new president. It may be the finest hour of any president since FDR. Let’s hope.

Where to make the most money in ‘09: beaten up, high quality, dividend-paying stocks [like General Electric (NYSE:GE), Bristol Myers Squibb (NYSE:BMY), Verizon (NYSE:VZ), AT&T (NYSE:T), Lorillard (NYSE:LO) and Altria (NYSE:MO) etc.)].

Also, corporate bonds at a discount, look at banking, aluminum and other metals, consumer goods, tobacco, insurance, just stay in the short maturities, three years or less and investment grade only. This is not the time to be in junk bonds.

As promised here are two bond ideas. As I tell everyone in The Bond Trader, no matter how good these look to you, don’t load up on them. You should have 10 to 20 bonds in your portfolio not one or two with high coupons.

The first is a pure income play. It is about a ten-month maturity with a yield of 7.35. It is perfect if you want to get a good return on money you don’t know what to do with right now. It’s a Goldman Sachs bond of 10/1/2009, cusip 38141GAD6.

The second is what I call a total return bond, at a discount and a good coupon. The total return is about 22.2%. It is an Alcoa bond of 1/15/12. The coupon is 6 percent and you should be able to buy it around 94. The cusip is 013817AF8.

A return of 7.35 percent for the income folks and 22.2 percent for the total return folks, Merry Christmas.

Source: A Few Freebies To Get 2009 Off To A Good Start

This from Today’s Financial News:

Well look at that. Government intervention is actually helping in a way our lawmakers intended. While not all of the Fed’s programs have been a success, the one it created last week is working to get the nation’s economy back on track.

You may recall the Federal Reserve announced last week that it planned to purchase up to $500 billion worth of mortgage-backed securities from government-sponsored agencies like Fannie Mae and Freddie Mac. Its goal was to grease the rusty gears of the real estate industry and force mortgage rates lower.

The plan worked.

The Mortgage Bankers Association announced this morning that last week’s mortgage application rate skyrocketed a record 112%. With the gauge at 857, applications last week were at their highest levels since late March.

Of course, buyers were not gobbling up homes during the Thanksgiving week because Fannie and Freddie were getting a break. They were applying for mortgages because interest rates are at their lowest rates since 2005. Buyers are getting a fantastic deal.

The boosters are ignited

A week or so ago, a 30-year fixed mortgage came with a rate of close to 6.5%. Today, perspective buyers can lock in a rate with Wells Fargo (NYSE:WFC) of just 5.375%. That is enough to pull monthly mortgage payments down by several hundred dollars each month.

With rates this low and homes this cheap, buyers are finally realizing the opportunity they have on their hands. Out of all of the deals the Fed has created over the past three months, this one has the most potential of directly helping the American people.

But what about you as an investor? Well, the news is even better. The real estate industry has traditionally been a leading indicator. In other words, it rises ahead of the financial markets. An increase in home purchases and therefore home values, is a surefire indication that the equities market will be making similar moves in the near future.

There are some great investment opportunities out there.  But for now, stay away from traditional real estate plays like REITs and the nation’s large homebuilders. The deleveraging tsunami is still pulling these sectors under and there will likely to be more pain in the near future.

If you want to make conservative investments with larger-than-usual profit potential, stick with the big guys. Blue Chips are a great investment as the nation gets back on track. Companies like General Electric (NYSE:GE) and Altria (NSYE:MO) with their strong dividends and proven history of healthy revenue growth are worth your money.

The Federal Reserve is making positive moves, the real estate market is on the rebound and moneymaking opportunities are all over the place. If you are not going to buy a house or two at these great prices, at least invest in a few discounted stocks.

Source: The real estate industry gets a favor from Bernanke

There are great wealth-creating opportunities in today’s miserable markets, says Andrew Snyder. Take oil, for example. The black goo is on a slippery slope towards $50 a barrel, and no OPEC production cuts are going to stop this in the short term. Andrew says the UltraShort Oil and Gas ProShares ETF (AMEX:DUG) is the best way to profit from the oil industry’s downturn.

More from Today’s Financial News:

Our good friends at OPEC are up to their same old tricks. Oil prices are dropping so the cartel is meeting later this week to discuss a cut to pumping quotas. It is a last-ditch effort to try to keep crude prices from plummeting all the way to $40.

The cartel is expected to reduce production output by as much as two million barrels per day, which would be considered a major cut. There are even rumors that Russia may reduce its output as well. Remember, there are scores of countries that are now dependent on huge sums of “oil” money to fuel their economy.

If we see prices go much further below today’s levels, we are going to see several countries buckling to their knees. The same nations that gouged us for the past few years are in desperate need of help. I cannot wait to see them shed some tears.

Let ‘em fall

Really, all that OPEC is trying to do this week is change investor sentiment. We all know the organization’s price-fixing scheme has been utterly unsuccessful in the past. Greed, corruption, and a powerful producer force outside of OPEC continue to allow the free market to price a barrel of crude.

But if OPEC can sway investor sentiment, make us think demand is not dropping all that much, and make the world believe oil prices truly deserve to be high, then its mission later this week will be a success.

Fortunately, OPEC does not have the slightest chance of keeping oil prices artificially high. Sure, this week prices may not make the drops we saw over the past few weeks. But the decline will continue. We will see valuations drop all the way down to the $40 range.

I know the world has evolved into a market that demands instant gratification, but oil prices will not plummet $30 overnight. It will take some time. But over the next few months and quarters as we see more examples of a worldwide economic recession, crude demand will slip, supply will increase, and prices will drop.

Last week, I recommended that readers take a short position on oil. That way, as prices fall they can profit. The best way to take advantage of the fall is through an exchange-traded fund (ETF) like the UltraShort Oil and Gas ProShares (AMEX:DUG).

The fund is designed to move inversely to crude prices at a 2-to-1 ratio. In other words, for every percentage point crude prices fall, this ETF will increase in value by two percent. It is a great way to take advantage of the oil industry’s downturn.

Another great aspect of ETFs like this one is the ability to buy and sell options based on it. For savvy options investors, there are all sorts of profit and hedging opportunities.

If you are a Hot Stock Confidential subscriber, do not be surprised if you hear about one of these highly profitable plays in the next two days. Last week, we made 85% gains in just a day on Altria (NYSE:MO). We might just reap some more gains from the oil industry.

Oil prices are going even lower. Take advantage of the situation and put some profits back in your portfolio.

These are some highly volatile times for the energy industry and the market as a whole. Pay attention to what is going on, and you have a shot at some great, wealth-creating investments.

Source: OPEC cuts create fantastic buying opportunity

Andrew Snyder says this creates a great opportunity for contrarian investors. When stock prices tumble, the ratio of dividend payouts to stock prices increases. This gives “smart investors a shot at some great low-priced, high-yield equity plays.”

Andrew says Altria Group (NYSE:MO) is a great option for dividend-seeking investors.

This from Today’s Financial News

According to Standard & Poor’s, a company that measures everything finance, dividend seekers are looking at the worst market in nearly two generations. In fact, the third quarter of 2008, in terms of dividend reductions, is the worst in the 52-year history the agency has recorded dividend figures. Over $22 billion in dividend payments have been taken off the table.

During the third quarter of 2007, according to the report, just 21 companies reduced their dividend payouts. This year, 138 firms lowered their payouts. Not surprisingly, the amount of payout increases was dramatically lower as well. Only 346 companies raised their annual payouts, down from last year’s Q3 figure of 439.

Good news for you

This report highlights a very important lesson for investors.

Companies lower their dividends because of lowered corporate earnings. Dividends are simply the stockholders share of the profits. As profits lower, so will annual paychecks.

We all know earnings across the country will be reduced dramatically as the economy slows. The impact is already being felt. That is why we saw such a rush of dividend cuts over the past few months.

But remember, stock price valuations focus almost solely on earnings forecasts and potential. So as earnings drop, dividends will fall, but most importantly so will share prices. Many times, share price drops dramatically faster than dividend payouts which require board approval and all sorts of other factors to get implemented.

Because of this phenomenon, dividend payouts as a percentage of share price often rise during bear markets, giving smart investors a shot at some great low-priced, high-yield equity plays. Investors get paid a premium to wait until the bulls are back in charge.

For investors who do their homework and invest wisely, reports like this one can lead to great profit opportunities. While the market fumbles, you can get a nice quarterly paycheck. And once the cycle rebounds, you will be able to stand back and watch your shares soar in value.

I realize a lot of folks are too busy to do their homework or have no idea where to start their investment search. That is why I like to throw my picks out there.

A few weeks ago, I recommended shares of Altria Group (NYSE:MO) to dividend-seeking investors. The company pays a dividend of $1.28, which is a hefty 6.3% yield, and will stay strong no matter what the economy does. Over the last three weeks, while the rest of the market has plunged, this powerhouse has remained strong.

Get shares of this company and any other dividend-paying strongholds. Just because the headlines are bleak does not mean the profit potential is just as bad.

Source: Dividend Income: Earnings Fall, You Win

As an investor, I need to be able to assign values to things. If I do not know what the future holds, I cannot make calculations with even a hint of certainty. I can’t assign a value to a company if I have no idea what assets will remain on its balance sheet.

It is impossible to invest in any financial institution with any sort of certainty. All you would be doing is making a very risky gamble.

Fortunately, the financial sector is far from the only game on Wall Street. With the banking world in turmoil, valuations of other American companies have been drug deep into undeserved territory.

An oasis of safety and profitability

For proof, look at the news from Microsoft (NASDAQ:MSFT) and Nike Inc. (NYSE:NKE). Investors in both companies are smiling today thanks to news of major increases in the firms’ share buyback programs.

The maker of the software that runs the world announced this morning it is increasing its share repurchase program by $40 billion, while increasing its dividend by two cents. And the company that helps the world run comfortably, Nike, announced it will purchase another $5 billion worth of shares from the Street.

Both of these announcements show that some companies believe they are undervalued and will see positive times ahead. It also helps current investors sleep better at night knowing there is a firm technical floor under the share price. In a market as tumultuous as this one, these are the kinds of companies you need to be studying and investing in.

Last week, I recommended shares of Altria (NYSE:MO). It is another strong company that is buying back its own shares, while paying a hefty dividend. If you have not already, grab some shares of this vice-industry powerhouse.

Parts of Wall Street are downright scary this week. The answer is simple. Stay away from them.

Head to the undervalued companies with proven business models and strong balance sheets with figures you can actually trust and measure.

Take a look at the three companies I mentioned, plus the multitude of firms in similar situations, and invest away. Do not be afraid. As this market rebounds, you will be glad you followed my advice and did not stash your cash under your mattress.

Source: Markets in flux: No bailout needed for Nike (NKE), Microsoft (MSFT) or Altria (MO)

“We are refraining at this point from adding another stock in the financial industry because of the extremely unsettled conditions,” said Robert Thomson, managing editor of The Wall Street Journal, regarding the change. “We realize this decision leaves the Dow Jones Industrial Average under-weighted in financials, and we will address this situation in due course.”

First created by Charles H. Dow in May 1896 as an index of just 12 stocks, the Dow has now become one of the most widely recognized indicators of the general health of the U.S. economy.

“When you think of a Dow stock, you think of a company with a stable, solid business model and an enduring franchise representative of the American economy. Kraft clearly fits that bill,” Christian Andreach, who helps oversee $18 billion at Manning & Napier Advisors in Fairport, New York, told Bloomberg News. “It should give the stock a short-term kick.”

New Dow components often get a short-term boost as fund managers purchase shares of the addition to rebalance portfolios that are managed against the index. Similarly, stocks that are replaced face downward price pressure as shares are sold.

Dow components are generally seen as the cream of the crop of the large-cap U.S. market. Kraft certainly fits the bill in terms of size with a market capitalization of $50 billion and sales of over $37 billion last year. But as a rather recent spin-off of former parent company Altria Group Inc. (MO), Kraft just doesn’t have the distinguished history of some of its new Dow peers.

While some questioned the choice, Warren Buffett has been a fan of Kraft for quite some time. The Oracle of Omaha’s Berkshire Hathaway Inc.  (BRK.A, BRK.B) purchased an 8.6% stake in Kraft earlier this year, making it the foodmaker’s biggest shareholder.

The last changes to the blue-chip stock index occurred in February of this year when Bank of America Corp. (BAC) and Chevron Corp. (CVX) replaced former Kraft parent Altria and Honeywell International Inc. (HON).

Source: Warren Buffett Favorite Kraft to Replace Sinking AIG in Dow

This from Today’s Financial News:

Investors are scared. Nearly everywhere you look there are signs of economic calamity.

What is an investor to do?

First, do not panic. Those kinds of reactions are how markets topple and huge sums of wealth are lost.

The key to success right now is remembering there are two major factors that control the markets. They are fear and greed. This concept is one of the first things taught in Investing101.

Let’s Get Emotional

Greed makes prices go up and creates financial anomalies like tech bubbles and credit crunches. Without excessive amounts of greed on Wall Street, we would not be in the current crisis. But we would also never have seen the Dow reach 13,000 in May. Everything in investing is a trade-off.

The days of greed are gone, for now. Fear is overwhelmingly controlling the market, just as it should be. When former ultra-bulls like Lehman Brothers (NYSE:LEH), AIG (NYSE:AIG), and Bear Stearns are lying dead on the Street getting picked to nothing by vultures, investors have good reason to be fearful.

Use that healthy fear to make solid investment decisions. Invest in companies you are not scared to be part of.  Throw away the rest.

Start looking for undervalued companies now and start buying. The market has made a tremendous slide in the last few days. Many companies that do not deserve discounting saw huge price cuts.

One of these is Nortel (NYSE:NT). Shares of the telecommunications manufacturer made a precipitous plunge today, down nearly 45% to levels unseen since the early 1980s, nearly three decades ago.

Normally, news that revenues will be slightly lower than analysts forecasts (Nortel expects a drop of two to four percent in annual revenues) calls for a small share price pullback, maybe 10% or 15% at most.

In a fearless market like we had just a few months ago, a 45% drop was reserved for the most speculative of companies, not a $2-billion multi-national powerhouse.

When it comes to investing, a little greed is never a bad thing. Go ahead and start your value search by grabbing shares of Nortel.  It deserves a hit to its share price, but not one of this magnitude. You should not plan on owning shares for more than a week or so.

The malfunction of some of the world’s largest financial institutions is scary stuff.  It is no wonder many investors are running in fear. Fortunately, if you know where to look and how to control your emotions, there is big money to be made.

PS: In yesterday’s Hidden Value newsletter, Andrew recommended three Russian stocks oversold in the recent market crash. One of those – Rostelecom (NYSE:ROS) – has already made over 35% gains. Andrew says its a good time to book these profits, but recommends readers continue to hold his other Russian picks: Mechel OAO (NYSE:MTL) and Vimpel Communications (NYSE:VIP).

Source: Market crash: Time to Buy Nortel (NT)?

“The combination of Altria and UST creates the premier tobacco company in the United States with leading brands in cigarettes, smokeless tobacco and machine-made large cigars,” Michael E. Szymanczyk, Altria’s chairman and chief executive, said yesterday (Monday) in a statement.

It’s a smart move for Altria, which has had little success with its own Marlboro-branded smokeless tobacco products. Smokeless tobacco accounts for $3.7 billion in sales annually. It is the fastest growing segment of the tobacco industry.

UST manufactures the two most popular brands of smokeless tobacco for adult users. According to data from the U.S. Center for Disease Control, Skoal has a 28% market share and Copenhagen has a 22% share. Together, they make up half of the U.S. market.

Meanwhile, demand for cigarettes has been on the decline in the United States, dropping 3.5% this year. Higher state taxes have boosted the price of cigarettes and are taking a toll on demand.

“Altria is buying two tremendous brands in Skoal and Copenhagen, which it can drop quite profitably into its own distribution network,” Thomas Russo, who manages more than $3 billion at Gardner Russo & Gardner, told Bloomberg News.

Altria predicts the consolidation will generate an estimated $250 million in annual savings by 2011.

This deal mirrors a similar purchase by Altria’s chief rival, Reynolds American Inc. (RAI), which purchased the second-largest maker of smokeless tobacco, Conwood Sales Co. LLC for $3.5 billion in 2006.

Altria’s purchase of UST could put pressure on Reynolds to make a bid for Lorillard Inc. (LO), another major American tobacco company, The New York Times reported.

Investors “are sniffing out the next deal in tobacco,” Matthew Kaufler of Clover Capital Management in Rochester, New York told Bloomberg after rumors of Altria’s interest in UST were reported late last week. “I would expect Lorillard to be next.”

Source: Altria Group’s $11.4 Billion Purchase of UST Could Spark More Tobacco Takeovers