Good news! President Obama is calling for a $250 payment to seniors.

This news comes on the eve of an announcement by the Social Security Administration stating that there will be no "cost of living" this year. By law, increases in Social Security payments are tied to the cost of living, or COLA. Since there is no inflation this year, there will be no increase in Social Security benefits. This would be the first year since 1975 with no increase.

Attention seniors! You may not be receiving your cost of living adjustment (COLA) this year.

We must understand that the COLA increase is based on the Consumer Price Index (excluding food and energy) This is called the "Core CPI." The Core CPI, excluding volatile food and energy, actually rose 1.5% on an annual basis.

About 50 million retired and disabled Americans receive Social Security. Since 1975 Social Security payments have increased based on the cost of living adjustment.

The war between Coca-Cola (NYSE: KO) and PepsiCo (NYSE: PEP) is becoming as fierce as the fight between the two monsters in the classic Japanese flick War of the Gargantuas (don't tell me you don't remember that one!).

This time, the conflict is over the duo's respective sports drinks. According to Bloomberg, PepsiCo believes that Coke has been promoting its Powerade beverage by issuing false claims against PepsiCo's Gatorade.

The cola wars between Coca-Cola (NYSE: KO) and Pepsi (NYSE: PEP) that consisted of a high-profile battle for carbonated supremacy are quiet for now and, according to some experts, it's hurting the industry.

Some industry experts predict that soda sales will decline 1% per year for the next ten years. The accuracy of such a forward-looking prediction aside, it puts a lot of pressure on the soda companies.

Coke responded with its high-profile acquisition of Glaceau, the maker of VitaminWater, and Pepsi is preparing the launch of Tava, "An Inspired Sparkling Beverage" promising "Zero Calories. Zero Caffeine. Zero Worries." The packaging looks slick and the flavors -- Tahitian Tamure, Mediterranean Fiesta, and Brazilian Samba -- certainly sound enticing. The product will launch in the first half of 2008, but Pepsi investors should be wary of putting too much faith in it. A large percentage of new beverages fail to catch on with consumers -- Remember Crystal Pepsi, Pepsi Blue, and New Coke?

Maybe they'll be able to compensate for the decline in categories like energy drinks and vitamin-enhanced water -- but investing in Coca-Cola when you think Coke is headed for a long decline seems silly -- especially given that the stock hit a multi-year high on Friday.

With the decline -- and expected continuation of the decline -- in soft drink sales, you also have to wonder about Jones Soda's (NASDAQ: JSDA) prospects. The company has its own serious internal problems, and trying to make a comeback in a declining industry could prove too much for it to handle.

Perhaps big new marketing campaigns and a rebirth of the cola wars can help brighten soda's prospects -- but if the decline is caused by factors like increasing health-consciousness and a preference for noncarbonated drinks, it might just be a big waste of money.

Given today's choppy, consolidating markets, if your portfolio does not contain a consumer products defensive stock, consider adding PepsiCo (NYSE: PEP).

Pepsi has all the ingredients for a reasonably safe consumer play: a leading primary brand, product diversification, established market positions, a wide geographical footprint, marketing savvy, and cost discipline.

Pepsi has a large snack operation, but the major business model here is, of course, beverages, led by Pepsi Cola, which vies with Coke (NYSE: KO) for global cola supremacy. Operating in about 200 countries, look for PEP international market share to increase in 2007-2009. The company is also well-positioned in the juice and non-carbonated drink segments, which are also expected to perform well, moving forward. Rising commodity costs may pressure margins, but PEP does have modest pricing power as a response. Superior marketing adds to an impressive corporate operation: Pepsi frequently responds to rival Coke's new marketing efforts with something more trendy and cool, particularly as interpreted by teens and younger adults.

Technically, PEP's chart looks good. Aside from the August 2007 market sell-off, PEP's stock has danced with its 50-day moving average on three occasions in 2007, but the chart otherwise displays a healthy advance, minor correction pattern. PEP's chart has also cleared resistance at $70. Equally important, PEP has been above its 200-day moving average -- the toughest average to break -- for about three years. The P/E of 19 is not cheap, but it's reasonable given the company's growth prospects.

Stock Analysis: PEP is a low-risk stock. If you don't already own a consumer products stock as a defensive, consider adding PEP to your portfolio. Investors with an investment horizon longer than 1 year should be rewarded from PEP's shares. Sell / Stop Loss: $53.

Coca-Cola (NYSE: KO) as a defensive play? Correct.

This is not your parents' Coca-Cola company: this is the drink-diversified KO. Coca-Cola has adeptly positioned itself in the health and sports drink (Powerade) segment, while continuing to effectively publicize one of the most iconic brands in the world, its namesake cola drink.

Other positives: KO has dominant or large-lead market share positions in key developed nations, an impressive emerging market presence, a superior balance sheet, more-effective cost controls, and marketing skills that many companies can only dream about. KO's shares closed Thursday up $1.12 cents to $61.30.

The Reuters F2007/F2008 EPS consensus estimates for KO are $2.66/$3.00

In addition, buy some of Coca-Cola's shares and you're buying not only a consumer products defensive, but also uniting yourself to a part of Wall Street history -- one of Wall Street's famed adages. And, as those in the Concrete Canyon will confirm, it's always prudent for investors to heed Wall Street's adages. The generations-old adage regarding KO is: "No one ever went broke holding Coke."

Jones Soda Company (NASDAQ: JSDA) has lost whatever fizz it might have had as an investment and is in the process of losing its identity as a brand. Yes, it was a big deal when quirky Jones Soda beat out Coca-Cola (NYSE: KO) to be the soft drink of choice for the Seattle Seahawks at their stadium. But such a venue may be the wrong place to sell a soda that made a name for itself precisely because it marketed unfamiliar flavors in unfamiliar (and somewhat undesirable) locations such as tattoo and piercing parlors, grunge cafes and slacker parks. And yes, it was nice that customers could send in a picture of their mutt as a possible bottle label. But if it wishes to play in the big leagues, Jones will have to come up with some version of a Coke-like flavor to serve to stadium customers who, just because they must buy the product at the game, may not be willing to shell out premium soda prices for Jones' products at the grocery store. And just exactly what is Jones Soda doing for sale at Wal-Mart (NYSE: WMT)? Is Jones Soda now going to market itself as a value-priced soda, except with weird flavors?

Jones Soda cannot seem to settle on a business model, cannot figure out what it wants to be when it grows up. I suggest it might be time to think about becoming a profitable company. The number of cases of soda sold in 1Q 2007 doubled to 1.72 million. But revenue increased by 5% while EPS was ZERO, the same as it was in 1Q 2006. Sell more product, make less money. Counter-intuitive marketing campaigns can be very effective, but at some point Jones Soda must show some ROI to justify its current P/E multiple of 101.09, 400% above the industry average.

PepsiCo. Inc. (NYSE:PEP) is encroaching on Coca-Cola Co.'s (NYSE:KO) turf at McDonald's Corp. (NYSE:MCD).

Some McDonald's restaurants are selling Pepsi's Gatorade, Propel Fitness Water, Lipton Iced Tea, Tropicana orange juice, and Mountain Dew, according to the Associated Press. McDonald's had sold Coke's products exclusively since 1955, the AP said.

This is obviously a huge win for Pepsi. Demand for non-carbonated beverages is rising at a much faster pace than soda. It's the latest front in the cola wars. This will certainly help Pepsi over the long term.

Investors, though, continue to bet on Coke. Its shares have jumped 12 percent this year compared with 5 percent for Pepsi. Going forward, it's a different story.

Fourteen out of 16 analysts rate Pepsi shares either a buy or a strong buy. Two rate it a hold. Their median price target is $73 about $10 above were it currently trades.

Analysts are expecting on average for Coke to hit $53 in the next year, about $5 above its current price. Twelve out of 17 analysts rate Coke either a buy or strong buy and five consider it a hold.

Note: The Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Volatility Index S&P 500 Options-VIX up .08 to 10.28.

STMicroelectronics - (NYSE:STM) calls active as STM price approaches 34-month high. STM, a global semiconductor company, with a market cap of $17.4 billion and sales of $9.8 billion. STM is recently up .52 to $19.62 on takeover chatter. STM call option volume of 16,990 contracts compares to put volume of 516 contracts. STM March option implied volatility of 30 is near its 26-week average of 28 according to Track Data, suggesting non-directional price risks.

PepsiCo Inc. (NYSE:PEP) implied volatility at historic lows into Gatorade AM & Gatorade PM. PEP is recently down .68 to $64.35. PEP told the audience at CAGNY Gatorade AM & Gatorade PM will be available soon. Tava, a health-active lifestyle beverage will also be introduced in 2007. PEP over all option implied volatility of 12 is at historic lows according to Track Data, indicating decreasing price fluctuations.

Option volume leaders today were: Altria (NYSE:MO), US Steel (NYSE:X), Apple Inc. (NASDAQ:AAPL) and Whole Foods (NASDAQ: WFMI).

PepsiCo is scheduled to give its Q4 earnings review via live webcast on Thursday February 8, 2007. The PepsiCo website states that "the live webcast will be accessible through PepsiCo's website at http://www.pepsico.com, and will be archived for replay at the same website for a period of 14 days."

Based on estimates which PepsiCo, Inc. (NYSE:PEP) reaffirmed on October 20, 2006 in this press announcement, PepsiCo is expecting EPS of at least $3.31 prior to the effects of a completed tax settlement and a fourth quarter restructuring of manufacturing flow. PepsiCo states that core EPS should be at least $2.98. I'm expecting a penny or two more. The general consensus on investment blogs and message boards is that PepsiCo is doing well and will continue to do so. There's even some dialog about a stock split if PepsiCo reaches and holds $70 a share.

For third quarter 2006 PepsiCo had an impressive gain of 73% in EPS over the previous year but that was due in part to tax effects involved in the repatriation of cash in the year 2005. PepsiCo stated; "Excluding the impact of the prior year tax charge, EPS increased 12%.

An item of very significant interest is the fact that PepsiCo now offers a direct stock purchase plan via The Bank of New York. For as little as $260 you may now open an investment account and purchase PepsiCo shares. After your initial investment you may then add funds in increments as small as $50, and you may even set up your account for automatic monthly deposits. The fees associated with the Pepsico direct share purchase plan are almost non-existent. Review the purchase plan booklet I've linked to. I think you'll be pleased. They, with the assistance of Bank of New York, have made it very easy and inexpensive for you to become a share holder of the company. It's a situation which I myself plan to become involved with.

Playing into my declaration that water is a word for investors to watch for this year, PepsiCo will be pushing a new variation on its Aquafina brand. Aquafina Alive is a vitamin and flavor enhanced water which will be available in three flavor combinations.

Gary E. Sattler intends to take a position in Pepsico this year.

Also check out some other earnings reports that we're following, and let us know what you're expecting.

When I was writing about Jones Soda Co. (NASDAQ:JSDA) and their announced switch to sugar instead of high fructose corn syrup as sweetener, I didn't read all the way to the end of the Wall Street Journal [subscription required] story. I should have, though, as it's really the big news.

PepsiCo, Inc. (NYSE:PEP) funded a study on high fructose corn syrup, which indicates that sugar and high fructose corn syrup have nearly the same effect on the body, and found no difference in the way the two substances contribute to weight gain. (The study is being written up for submission to a journal by researchers at UC Davis.) Pepsi is promoting this study heavily and said in response to Jones' move, "To say cane sugar is healthier than HFCS just isn't true. Marketing a myth for a competitive advantage is irresponsible and short-sighted."

But. But! Pepsi is working on some versions of its most popular sodas, including Sierra Mist and Pepsi itself, that contain sugar instead of high fructose corn syrup -- along with the removal of some preservatives and artificial colors. This news, reported by Beverage Digest magazine, seems at cross purposes with Pepsi's spokesman's claim.

If Pepsi is so sure high fructose corn syrup is safe -- and so interested in making sure consumers believe it -- why would it even dream of converting? Something tells me we haven't heard the end of Pepsi's evaluation of HFCS.