Philip Morris' Legal Cancer Has Metastasized

Given the current political climate and its obvious culpability, the tobacco company should pull the plug.
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Anyone notice the elephant in the

Dow Jones Industrial Average

? No, I am not talking about

IBM

(IBM) - Get Report

, which reports Wednesday and may decide whether we continue to flirt with or leave the 10,000 level -- in either direction.

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I'm talking about

Philip Morris

(MO) - Get Report

. Holy cow, what the heck is happening there? This stock, which now yields north of 5%, is showing all of the signs of a company in the throes of a near-death experience. Tell me that people aren't worried about that yield. If you do an

S&P

search of the other high-yielding dividend plays, you will discover that in every case investors have doubts about whether such a dividend can be sustained.

If you look at the chart, you can see that MO is all the way back to where it was before the big payoff talks began with the states for Medicare. I can't believe that the market -- and I, for that matter -- was so stupid as to take these stocks up in advance of the settlement talks.

Philip Morris Gets Smoked
The stock is saying that the tobacco industry made a classic misjudgment.

What the stock is saying now, of course, is that Morris and the tobacco industry writ large made a classic misjudgment. (

RJR

(RJR)

actually started this rolling stone, MO just played along.) It would have been better simply to keep fighting and denying and lying or whatever the heck else was necessary to keep the forces of good -- public health advocates -- from combining with the forces of evil -- the mass tort bar -- to bankrupt big tobacco.

I and many others genuinely believed that after these Medicare suits were paid out, tobacco might be home free. But in retrospect not only did they

not

get immunity, they are now in a free-fire zone for just about anybody with a law degree.

The stock is saying that MO will never get out of this morass. That whatever happens, it has lost its friends in

Congress

and in the courts. The congressional allies turned out to be more receptive to the pleas of the plaintiff's bar. And even the court system decided to see through the lies.

Maybe it would not have mattered if they had stonewalled. A popular president took aim at these guys at a time when they were plenty vulnerable anyway. I mean, by this time, did anybody not have a relative who had been killed by these guys? I don't know of anybody. Morris now has that same feel that

A.H. Robins

had after the IUD problems. It looks a lot like

Eagle-Picher

did from the asbestos run. I am sure that these guys will shudder at someone saying this out loud, but I wonder whether they shouldn't just declare bankruptcy. Get all of these claims paid and then come out as a series of brands with that miserable tobacco unit left to be run by some sort of drug consortium that would be paid dividends depending upon how many people would be encouraged to quit each year.

Sound far-fetched? Let me ask you, in an era where

American Home

(AHP)

just paid $4 billion to some people who used a drug of theirs in combination with another drug -- EVEN THOUGH AHP DIDN'T TELL THEM TO DO IT!!! -- what standing does some company that knowingly produces cancer have to argue why it should stay in business?

These guys are history. They should face it, declare bankruptcy and figure out a structure like the one I am suggesting. They may not like it. But it won't hurt so much to look in the mirror in the morning anymore if they do. And if they don't have any pangs when they look in the mirror, they deserve to have the bankruptcy foisted on them.

Oh yeah, if you are asking me what you should do with your Philip Morris stock, while I am not short it -- I don't want to pay that dividend and I don't know a put contract long-lived enough to play this out with -- I think you can guess what I would do with it if I were you.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.