The S&A Digest: Smoking is harmless

Smoking is harmless... Burgers and dividends... $80 oil... I want to live in the good old U.S.A.... Bums at the ballot...

 Porter is now a proud father. He and Andrea are at home with Traveler Rey Stansberry, their six pound, blond-haired little boy. Porter says, "He looks like his mother (thankfully)."

 I almost choked on my steak...

My dinner guest, a respected doctor, was trying to convince the table that smoking did not cause cancer. His argument: Gravity causes a ball to hit the ground 100% of the time; smoking, on the other hand, does not cause cancer in every case.

The other two guests were Ian Davis, our "resident quant" and an expert in math and statistics, and my girlfriend, a medical student. Both thought the doctor had lost his mind. Ian immediately started in with the numbers, "Well, smoking causes cancer in 12% of the cases, and that is statistically significant. Smoking at least increases your risk." My girlfriend, while agreeing with Ian, did not have a solid argument... "We haven't learned that yet."

The doctor didn't let down. He emphasized that no studies show increased risk. I shifted my attention to the perfectly rare, buttery fillet in front of me, hoping the conversation wouldn't turn to saturated fat.

(Porter wasn't at dinner, but he does have his own doubts about the received wisdom on cancer and smoking. Always the devil's advocate...)

 We wrote it, did you buy it?

Assuming the dividend will grow at its long-term average (21%) over the next five years, McDonald’s will pay out $1.77 per share in November 2011. If you buy the stock at today’s price of around $41 per share, by 2011, a $1.77 dividend will feel like a 4.3% yield. Hold for 10 years, and this dividend should grow to $3 a share – a 7.5% annual dividend yield.

– Tom Dyson in The 12% Letter, December 2006

Dyson was optimistic about McDonald's (MCD) dividends, but he may not have been optimistic enough. Yesterday, McDonald's raised its dividend 50% to $1.50.

Talk about a great company... This franchise business has raised its dividend every year since it started paying one in 1976. The yield has increased sixfold since 2002. News bumped the shares above $51, and Goldman Sachs just raised its price target to $61... 12% Letter Editor Tom has made 24% for his readers on this pick. To see what he's currently recommending, click here...

 For our sake, let's hope Goldman's target prices are better than its hedge funds. The troubled Global Alpha fund lost 22.5% in August, it's largest monthly decline ever. The fund has lost one-third of its assets this year, and managers just received word that investors will withdrawal $1.6 billion. The fund will have to return 80% from current levels before management can begin collecting its 20% performance fee.

 Oil briefly hit $80 a barrel yesterday, an all-time high. Suddenly, Jim Rogers' brazen call for $100 oil seems closer to reality.

 New highs: Alnylam (ALNY) and CGG Veritas (CGV).

 We understand that you love America. If you'd like to rant about something else... anything else... drop us a line at feedback@stansberryresearch.com.

 "Sir, why is it you always say America can learn from this or that country, simply put they all learn from us, and just because something works better for a time, one must look at all factions of a country. Name another country you would prefer to live in from childhood on, I assure you it's the good old USA." – Paid-up subscriber Bob Kinder

 "Your ideal (and mine), 'America – a republic where liberty was the highest virtue and government was rightly feared,' went wrong when we messed with the vote. Originally, the vote was intended to be a consensus decision made only by propertied families, by and through the man who headed the household. One vote per propertied family! Some concept, huh? Now, any bum can try his/her best to vote welfare and food stamps and free everything; and he/she does! And if you want to raise the ugly, venomous ire of the media idiots, just try mentioning this concept. It's a hoot! Keep up the revealing insights!" – Paid-up subscriber Marty

 "In regards to the subscriber that quoted Ralph Nader's proposed law that the US not go to war unless ALL draft age children of the Congress and Senate agree to enlist: What is the American liberal's obsession with politicians children serving in the military? Michael Moore and his brethren seem to have put it in everybody's mind that we should require politicians to force their children into the military. Seeing as how you have to be 18 in order to enlist, these grown children are no longer under the control of their parents. It is their choice, not their parents and regardless of their parents chosen profession, if these men and women choose not to pursue a life in the military, that is their prerogative. While I agree that our government probably wouldn't be as eager to go to war if their children were serving, the fact remains that as long this is a free country, we have no right and they are not dutifully required to ask their children to enlist. As long as my father is allowed to leave that decision up to me and my siblings (my brother enlisted, I did not, my father is proud of us both), I would never ask that our politicians give up that same right."

– Paid-up subscriber Justin

 "Thanks for the great investment research. I've learned more as a subscriber than when I got my Series 7 or took the Investing module of my CFP! I've never sent in mail, but I couldn't help myself after reading Randy's hilarious e-mail: Man, turn off the caps-lock, and turn off Fox 'news.' The only WMDs that ‘Soddom’ had were the one's the US government sold him. For everyone else out there who is literate, here's one of the best articles I've read addressing Randy's 'concerns'... Ron Paul, The Law of Opposites."

– Paid-up subscriber Tony

 "I wonder how you explain the terrorist acts against the World Trade Centers. As I recall at the time, Bush was being accused of pushing this country toward the path of isolationism. Had the followers of Bin Laden left well enough alone, we might well have ignored most anything they would have done outside this country. So, how do you figure we would be better off if we were to pull all our troops out of God only knows how many places, and just concentrate on letting the rest of the world take care of itself? I suppose the stock answer to all this is 'We brought it on ourselves with our policies toward Israel and the Middle East.' But, what are we supposed to do? Abandon Israel to appease the Arab nations? Let Saudi Arabia stand alone as the only real muscle balancing Sunni Arab interest against Iran's Shiites? Tell me what happens if Middle Eastern oil is completely controlled by radical, hostile-to-U.S.-interests, Iranian clergymen? Do we simply ignore what happens there while oil may go to $150 bbl. or higher and gas (if there is any to be had at any price) goes to $5, $6, or even $8 per gal? I say I don't believe for even one moment we can 'pull in our horns,' 'live and let live,' and expect to be left alone to merrily pursue our capitalistic ways. Like it or not, Bin Laden declared war on us many years ago now (I believe it was 1997 or 1998), warning us in no uncertain terms that American blood would be spilled in the streets. It has been. Now, what do we do about it? Utopia doesn't exist in today's world."

– Paid-up subscriber George Earhart

Regards,

Sean Goldsmith

Baltimore, Maryland

September 13, 2007

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