James Comey Just Amped up the Risks to Global Markets
- One helluva relief rally: Clinton off the hook again, stocks soar
- The parallels to the shock “Brexit” vote: They’re eerie
- A foretaste of a shock Trump victory, in three charts
- Nancy Pelosi just gave her blessing to “penny pot stocks”
- When a potluck meal can land you in prison
- A “worn out” reader’s complaint
OK, let’s see if we have this right: After 10 days in which she was once again under FBI investigation for the emails from her private server… Hillary Clinton is once again not under FBI investigation for the emails from her private server.
Leave the politics aside for the moment: By taking Mrs. Clinton off the hook again, FBI chief James Comey has just amped up the risks to global markets… and the profit potential of Jim Rickards’ election trade.
Yesterday’s news has brought a certain, umm, complacency back into the markets: “Markets Rally as Investors Bet on Clinton Win,” says a Financial Times headline.
Stocks rallied last night in Asia, overnight in Europe and this morning in the United States. Really, it’s a helluva “relief rally,” to use the trendy term — the Dow industrials are up 335 points as we write, to 18,224. The dollar rallied, too.
But safe havens like Treasuries, the Japanese yen and gold tumbled — the Midas metal slipping $15 the moment electronic trading opened for the week. At last check, the bid is even lower, at $1,279.
The salmon-colored rag says it all adds up to “a sign investors are betting a Clinton victory will avoid the policy turmoil that could ensue if rival Donald Trump wins Tuesday’s election.”
We’ve seen this movie before. Less than five months ago, in fact.
“Stocks Rise as Investors Grow Hopeful That Britain Will Stay in the EU,” said a Los Angeles Times headline two days before the “Brexit” referendum shocked global elites.
We cited that very headline here in The 5. We also cited the novelist Vladimir Nabokov’s observation that “Complacency is a state of mind that exists only in retrospective. It has to be shattered before being ascertained.” And we shared a less cerebral version of the same idea…
“Once markets decided to price for ‘Remain,’ this became one of the best trading opportunities I’ve ever seen,” Jim Rickards recalled. In the space of 72 hours, one Brexit-related trade leaped 64%. Another more than doubled, up 129%.
Even if the “Remain” side won, the complacency was so widespread the trade would have still been profitable — the sort of “asymmetric” trade Jim finds irresistible.
Still, Jim’s methods require constantly checking and rechecking your assumptions in light of new information. That’s the key to his “Kissinger Cross” technique that proved so lucrative with Brexit.
The latest polls give Clinton a lead of four or five percentage points over Donald Trump.
On the other hand, the Los Angeles Times poll we mentioned last week — it uses an unconventional methodology and came closer than anyone else to nailing Obama’s margin of victory in 2012 — gives Trump a substantial edge:
You don’t have to look far for anecdotal evidence to back that up. The ongoing email furor is such that “I’m crossing party lines,” a registered Democrat in Florida tells NBC News. Adds Vice reporter Michael Tracey, “I’ve heard many variations of this basic rationale from voters of all stripes throughout Pennsylvania, Ohio and North Carolina.”
Said Jim Rickards in this space on Friday, “The election will definitely be close, and we see strong evidence that Trump will win.”
But just what would a Trump victory mean for the markets?
That’s easy. It would be an earthquake. And you don’t have to recall the two-day, 850-point drop in the Dow that followed the Brexit referendum in June. You just need to go back 10 days to when FBI chief James Comey announced Clinton was once again under investigation and suddenly it looked as if Trump might pull out a victory.
“All three major U.S. stock market indexes fell in reaction to the news,” Jim recalls, “before bouncing back later in the day:
“Gold also rallied sharply when the FBI news was disclosed,” says Jim. “Donald Trump is the first major presidential candidate to speak favorably about the role of gold in the international monetary system since Ronald Reagan in 1980:
“Finally,” Jim reminds us, “the Chicago Board Options Exchange (CBOE) Volatility Index spiked over 5% in just minutes when the FBI news broke:
“None of these price shocks was equivalent to what will happen in the event of an actual Trump victory,” says Jim.
“Based on events during the afternoon of Oct. 28, it’s easy to see how much greater the market shock will be when Trump wins.
“The U.S. presidential election is close and could go either way, although we expect Trump to win a narrow victory. What is not close are market expectations, which still skew heavily in favor of a Clinton victory. That sets up a ‘heads you win, tails you don’t lose’ scenario. Those are the best kinds of trades.”
Indeed. Jim sees 300% profit potential from his recommended trade in the event of a Trump victory and the market shocks that are sure to follow. But even a Clinton victory could deliver gains of 46%.
Still not convinced? You can see Jim make the case for this trade right here. For obvious reasons, the sooner you do, the better. It will be out of date and we’ll take it offline once the markets close at 4:00 p.m. EST tomorrow.
Marijuana legalization — so respectable that Nancy Pelosi feels as if she can safely support it now.
If you’re been reading in recent days, you know we’re watching marijuana ballot measures in nine states just as keenly as the presidential election for the investment implications.
The big one is California — where Proposition 64 would legalize recreational pot. The most recent poll indicates 58% support. That’s a far cry from when a similar measure failed in 2010.
In 2010, then-House Speaker Nancy Pelosi didn’t take a public position. On Friday, however, the now-House minority leader declared her support for Prop 64. Also in favor is Sen. Barbara Boxer, who opposed the 2010 measure. The only member of California’s congressional delegation publicly opposing Prop 64 is the hard-core prohibitionist Sen. Dianne Feinstein.
Among the four other states with recreational pot on the ballot, passage appears most likely in Massachusetts. The vote could go either way in Maine, Arizona and Nevada.
Meanwhile, Florida appears set to become the first state in the Southeast to allow medical marijuana.
In Florida, ballot measures require 60% for passage. A medical-marijuana referendum two years ago didn’t meet that high mark. But the latest poll indicates 71% support in the Sunshine State, despite another big-bucks “No” campaign funded by casino magnate Sheldon Adelson.
A similar measure in Arkansas is a tossup. Passage appears unlikely in Montana. North Dakota is too small for anyone to bother polling there.
“If even just half of those states vote the way we expect them to, early investors could still have a lot to gain,” says Ray Blanco of our science-and-wealth team.
“Buy the right companies now, before the election, and you stand to make six figures or more.”
Passage in California could turn a $7 billion-a-year industry into a $22-billion-a-year industry over the next four years.
Ray has vetted more than 350 publicly traded companies to identify the best of breed — the ones that could turn a mere $50 investment into a small fortune — or maybe even a big one. For access to his research, look here.
Land of the Not-Free, Potluck Edition: A single mom from Stockton, California, faces prison time for selling a couple servings of a homemade dish to an undercover cop.
Stockton is home to an informal potluck group on Facebook. They trade recipes, and sometimes they trade dishes. Occasionally, they’ll trade dishes for a small amount of money.
Police with apparently nothing better to do recently set up an undercover sting to bust these menaces to society. And they snared Mariza Reulas, who accepted a few bucks for a few servings of her ceviche, a Mexican seafood dish.
Prosecutors, as usual, tried to get her to cop a plea… but Ms. Reulas wouldn’t play ball. Now she’s going to trial; a conviction could get her up to a year in prison.
Pressed for comment by the area’s Fox station, prosecutor Kelly McDaniel resorted to the Nuremberg defense: “I don’t write the laws, I enforce them. And the legislature has felt that this is a crime.”
“It’s true that McDaniel didn’t make the law,” writes Robby Soave at Reason. “But the people who did probably intended for her to exercise discretion in cases like this one, where the alleged perpetrator didn’t really do anything wrong.
[That might be giving lawmakers too much credit. But we’ll let it go today…]
“There’s a world of difference,” he goes on, “between operating an illegal business and occasionally accepting some kind of compensation in exchange for a plate of food. The latter is none of the government’s business.”
“The policy wonks have finally realized that if they legalize marijuana, it becomes something else they can then tax and regulate,” a reader writes — picking up on a theme from last week.
“Yes, the quality of the legal stuff may be better than what you currently buy on the street, but it will no doubt cost you more than in the free market.
“You and l have to pay for all those taxes and regulations, and for the advertising in the regulated market. Just something else for government to mess up.”
The 5: No doubt.
The more intriguing question is how much of it is the shift in public opinion — it’s dramatic, and we’ve documented it more than once — and how much of it is a shift among the elites in where they want to direct the flows of money?
In other words, who’s decided that the police unions, alcohol companies and Big Pharma no longer matter as much as the up-and-coming portions of the economy that would profit from legal pot and generate a revenue stream?
We don’t presume to have the answers. All we can do is follow the money.
“It seems — and I used to buy into it — that all your special tips on stock picks have to be bought,” a reader complains.
“You advertise as being ‘in the know,’ but it seems all your groundbreaking picks have to be bought with a yearly fee. I’m worn out on clicking on the blue typeface only to have another sales pitch and a one-year fee of only $79–1,750. How can I find a service that doesn’t try to charge me a yearly fee or have a bait-and-switch tactic for each of their picks?”
The 5: Just so there’s no misunderstanding, you signed up for a paid subscription from us. If it’s a lower-priced, entry-level service, you’re getting a monthly newsletter with recommendations along with weekly email updates. If it’s a higher-priced, premium service, you’re getting recommendations and updates via email at least once a week, if not more.
As part of that paid subscription, you get The 5 as a free bonus — a window into the research of all our editors. Our policy has always been that our analysis is free, but the specific recommendations you have to pay for. That’s how we make our money, so we can retain our independence and not kowtow to advertisers. We think it’s a more honest business model.
So today, for instance, we’re happy to share our analysis that markets are way too complacent about the possibility of a Trump victory, and we’re happy to tease out the possible consequences. But if you want a specific way to reel in a substantial profit — even if Clinton wins — yes, that’s something we’re going to charge for.
The 5 Min. Forecast
P.S. And yes, we charge a substantial sum for access to recommendations with the potential to double or even quadruple your money in three days.
For one thing, it discourages entry-level investors from jumping into riskier plays they really shouldn’t be doing. For a more sophisticated investor, it means the possibility of making up their entire subscription cost with just one trade.
Shortly after the Brexit referendum in June as markets everywhere were tanking, we got the following email from a reader…
“9:32 a.m. Friday after all the talk on morning TV about disaster due to Brexit…
“My wife and I are out shopping.
“She asks me (after seeing me check my account), ‘How bad is it?’
“My answer: ‘I’m up $30,000.’
“Thanks, Jim Rickards.”
That’s the potential we’re talking about with Jim’s election trade. But again, it might not be for everyone. Click here and decide whether it’s for you.