When you are addicted to something, whether it’s a substance, an activity or a person, it seems as if nothing can replace the object of your addiction. You go to sleep at night thinking about it. You wake up in the morning thinking about it. If you don’t have it for a day, it feels as if the whole world can fall apart.

Many daytraders are addicted to the adrenalin they get when they place a trade. Being a workaholic is a very serious addiction that makes you feel as if you are only functioning normally if you are in the middle of a heavy and stressful work-related schedule.

Addiction is not curable. Most people reading this column are addicts of some sort, and it’s a painful way to go through life. The safest way to end an addiction is with a "methadone": replacing one addiction with another, hopefully more mild, form of the original addiction.

For better or worse, capitalism is a philosophy of addiction. We want oil and can’t do without it. We want Hannah Montana or Crocs (CROX) shoes or McDonald's (MCD). We want coffee and cigarettes. Everything we want, we should get.

Companies are set up to deliver us our addictions and make it as easy as possible to satisfy our desires. The time it takes for McDonald's to sell its second trillion hamburgers will certainly be less than the time it takes to sell its first trillion hamburgers. Occasionally, government interference tries to curb our addictive behavior (no TV advertising for cigarettes, for instance), but it’s a raft going up against a tidal wave.

And when we can’t get what we want, the forces of capitalism instantly conspire to create our methadones until we find the next addiction. When our addiction to oil in the Middle East becomes too great, we’ll turn to the tar sands of Canada, or we’ll more heavily invest in ethanol or coal-related fuels.

A great example of all this was in the Great Vanilla Wars of Madagascar in 2002. The country, which was the largest producer of vanilla, was engulfed in civil war, causing the price of vanilla to skyrocket from $25 per kilogram to $400 per kilogram. Nothing could stand in the way of the world’s desire for vanilla (a known aphrodisiac), and scientists went into overdrive creating synthetic vanillin (a byproduct of petroleum production, ironically) and utilizing hydroponics to create vanilla in environments other than off the coast of Africa. Synthetic or “homegrown” vanilla quickly occupied 99% of the vanilla market, causing prices to drop to about $125 per kilogram.

Phew! I’m going to take a sip of my vanilla milkshake before I finish writing this.

Chocolate, however, might be the one addiction we will never be able to escape. And demonstrating the linkage between capitalism and chocolate, it's no surprise that cacao beans were actually used as currency by the Aztecs. In addition, chocolate is known to lower blood pressure, it contains massive amounts of antioxidants, it boosts serotonin (makes you happy, like a good addiction should), it's a sexual stimulant (hence people give boxes of chocolate as gifts when on a date), and it even helps suppress persistent coughing. Chocolate use has been documented as far back as 1100 B.C. (to put it in perspective, that’s around the time of Moses), and it’s a safe bet that it will be around in 3000 A.D., regardless of whether or not the economy suffers from subprime malaise or if we have any trillion-dollar financial meltdown. People will still need their sexually stimulating, anti-coughing, happy drug: chocolate.

So forget about the hot fads of the day. It’s a no-brainer to invest in chocolate stocks. Hershey (HSY), for instance, is the world’s largest public chocolate producer, with $5 billion in revenues. The company trades for just eight times cash flows, has raised its dividend (currently at a 3.3% yield) every year for the past 10 years and, perhaps most important, was up 50% during the bear market of 2000-2002.

A smaller, more speculative play is Rocky Mountain Chocolate Factory (RMCF), also with a 3.3% dividend yield. It has raised dividend every year since first issuing one in 2002, and it also was up about 50% during the last bear market.

And if you like Chocolate Mocha Spoonable Ice Cream Topping, let's not forget about J.M. Smucker (SJM), which has a 2.5% dividend and trades for just nine times cash flows. It's also increased dividends every year since 2000, and during the recent bear market, it was up more than 100%. You can take jobs away from Americans, but you can't take their sweets.

Betting on an addiction or its equivalent methadone is a safe way to make money through troubled times. Money is certainly an addiction as well, and it's worth pointing out that money won’t solve all of your problems. But it very well might solve your money problems.


A note from James Altucher:

Every weekend I send an email to Jim Cramer and several hedge fund managers about the most interesting portfolios posted on Stockpickr that week. Usually those portfolios not only list stocks according to a theme but also offer significant analysis as to why the stocks are cheap.

Here are some examples:

Stocks related to drilling the Marcellus Shale

MLPS with yields above 7%

Microcaps trading for less than tangible book

Stocks that do well after Hurricanes

Here's the challenge: Build a portfolio at Stockpickr.com with great analysis, and send me the link. Each great portfolio (with analysis) will get posted on TheStreet.com with your byline (as a "Stockpickr Guest Columnist") and will be included in my email I send to Jim and the other
hedge fund managers on my list.


Published July 31, 2008