Uncle Sam Has a Grudge Against These Industries

Tobacco, oil and even restaurants feel the wrath of the state

     

The tobacco industry is fighting back, and last week, a handful of companies urged a federal judge to block the implementation of those graphic warning labels. Five tobacco companies, including giants Reynolds American Inc. (NYSE:RAI) and Lorillard Inc. (NYSE:LO) have sued the FDA in U.S. District Court, arguing that the graphic images violate the First Amendment. Yet despite what appears to be a clear violation of a company’s right to package its product the way it sees fit, the feds consider cigarettes evil, hence the crusade against another product that people want.

Another industry targeted by the government is the oft-vilified oil industry. Recall that in May 2010, the Obama’s administration halted offshore exploration in waters deeper than 500 feet, its hasty response to the explosion and sinking of the BP-owned (NYSE:BP) Deepwater Horizon drilling rig.

In February of this year, a New Orleans judge ruled that the Obama Administration acted in contempt by continuing its deepwater-drilling moratorium even after the policy was struck down by a U.S. District Judge. In the ruling, the court said the Obama Interior Department acted with “determined disregard” by lifting and re-instituting a series of policy changes that restricted offshore drilling. The same court also ruled that enhanced drilling safety rules imposed by the Interior Department to permit companies to resume offshore exploration violated federal law.

It certainly seems as though this is a case of the feds jumping on an isolated incident and taking advantage of it to restrict and demonize an entire industry. But that shouldn’t surprise anyone, as politicians love to blame oil companies for jacking up the price of gasoline. They also love to talk about the record profits in the industry, as if those profits were somehow garnered at gunpoint rather than via customers choosing to fill up their SUVs.

The industries outlined here are just some of those the government seems to hold a grudge against. Fortunately for shareholders of oil, tobacco and restaurant stocks, this federal grudge hasn’t clobbered the performance of the biggest stocks in the industry. Maybe the feds will one day realize that these industries aren’t the enemy, and instead choose to focus the government’s energy on more important tasks like how to balance the federal budget, reform broken entitlement programs and help foster a climate where businesses want to start hiring again. But alas, I’m not holding my breath.

At the time of publication, Jim Woods held no positions in any of the stocks mentioned in this article.

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