FDA

New Government Nicotine Rules Send Cigarettes Stocks Spiraling

One of America’s most divisive habits has taken center stage with the FDA, and a new ruling on the subject has the stock market shaken.

Americans have a long and strange relationship with cigarettes, and the Big Tobacco industry as a whole.  Currently, smoking in the United States appears to be on the decline, as early millennials and their younger siblings, who were subjected to massive advertising campaigns that vilified the habit come into disposable income.  As few as 15% of all Americans smoke, according to a CDC study of the 2015 calendar year, which is down from the CDC’s estimate of nearly 21% all the way back in 2005.

Even with Hollywood and the government colluding to make cigarettes “unhip”, the tobacco industry is still big business in the United States, particularly among the investment crowd.  “Sin” stocks, such as gambling, nicotine, and alcohol shares are often make for rock-solid investments due to their addictive properties, as well as their increased use during times of other financial hardships.

That’s why, when the FDA announced that they would be further regulating the amount of nicotine to be found in a pack of Newports, the stock market reacted heatedly.

“Tobacco stocks are plummeting on Friday after the U.S. Food and Drug Administration announced a new regulatory plan to protect consumers that includes cutting nicotine levels in cigarettes to non-addictive levels.

“Shares of Altria Group (MO), which manufactures well-known cigarette brands like Marlboro and Parliament, are down about 9% in early trading Friday, marking the worst day for the company’s stock since the 2008 financial crisis, according to FOX Business’ Charles Brady. Other tobacco companies, including British American Tobacco (BTI) and Universal Corp (UVV) were also down.

“The FDA says the plan is essential to lessen the impact of tobacco use, which causes more than 480,000 deaths annually, according to the organization. With nearly 90% of smokers starting the habit before the age of 18, officials argue that lower nicotine levels in cigarettes will lessen the risk of addiction and make it easier to quit smoking.”

Speculators, rather than allowing for the increased purchase of lower nicotine products to quench many smokers’ addictions, took bets on the future of the industry as a whole.  With a great many Americans having their first smoke before the age of 18, the ability of these less-potent products to create a lasting impression on America’s youth has diminished greatly.

Further complicating the issue are a number of opponents to the FDA’s move who cite the government’s meddling in the regulation of recreational activities as infringing upon their God-given rights.

Much like the pot-legalization crowd, smokers across the nation understand the risks involved with the use of tobacco and choose to smoke willingly – something that they believe the government should butt out of.

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