Record Pot Takeover (Just the Beginning)

Posted On May 15, 2018 By Dave Gonigam

  • Canada cannabis deal: It’s not too late to jump into this “budding” sector
  • Dollar rallies, everything else tanks (ugh, look at gold)
  • Trump applies the defibrillator paddles to dying ZTE
  • German industrial giant falls in line with Iran sanctions…
  • …but China goes its own way, via a new rail line
  • A new reader entreaty to steer clear of politics, and The 5’s response

Nothing says a new industry has “arrived” like a headline about a record takeover.

Yesterday Aurora Cannabis announced it would buy its competitor MedReleaf Corp. for $2.51 billion. The deal brings together two of Canada’s biggest pot players, six weeks before recreational cannabis becomes legal nationwide on July 1.

“Canada’s relaxed regulations, a mature industry and free-flowing capital have offered firms a unique opportunity to advance research without the legal and political risks that bog down growers in the United States and elsewhere,” says the Reuters newswire.

It’s a familiar story for readers of Ray Blanco’s premium trading advisory, Penny Pot Profits. He recommended Aurora barely six months ago, and it’s up 160% since. He recommended MedReleaf in mid-September, and it’s a 174% gainer.

It was two years ago this month that The 5 began to back away from a long-standing wariness of pot stocks.

The nonpartisan Tax Foundation pointed out the federal government and the states were passing up $28 billion in tax revenue every year as long as weed stayed illegal. Longtime skeptics like Colorado Gov. John Hickenlooper were coming around: “It’s beginning to look like it might work,” he said of his state’s first-in-the-nation move to legalize recreational cannabis.

By the summer of 2016, Ray had us convinced: The pot sector was finally coming into its own. It was time to act. He’s been booking his readers triple-digit pot-stock gains ever since. For good reason, his publishers have begun promoting him as America’s No. 1 Pot Stock Expert. “When I need to know something about cannabis investing, I ask Ray. The man is an encyclopedia of pot stock opportunity,” publisher Aaron Gentzler tells me.

But don’t get the idea that the most lucrative moment has already come and gone.

By the end of 2025, the California-based consultancy Grand View Research says the global market for legal marijuana will generate $146 billion in revenue. There’s still a long runway.

And that’s the publicly known information. Right now, Ray is working on a big new investigation… and a bold new round of pot stock predictions. As soon as he’s ready to go public, you’ll be the first to know.

For the moment, his premium advisory Penny Pot Profits is off-limits to new subscribers. Several of the recommendations are so tiny that a wave of new readers would artificially goose the share price. We’ll let you know when the moment is right again.

In the meantime, if you still haven’t dipped a toe into the sector, Ray has suitable recommendations just for you in his entry-level newsletter Technology Profits Confidential. For best results, you’ll want to act before Canadian legalization kicks in July 1. Click here and you’ll see how to get started with as little as $50.

To the markets today… where the dollar is rallying and nearly every other asset class is taking it on the chin.

At last check, the Dow is down nearly 200 points. Falling bond prices have pushed up the yield on a 10-year Treasury to 3.06% — a level last seen in 2011. Gold has gotten whacked hard, the bid now below $1,300 for the first time this year.

But the dollar index has powered ahead to 93.3 — the highest since late December.

No, there’s no obvious reason for any of it. On the one hand, Home Depot missed analyst expectations on sales. On the other hand, homebuilder sentiment is still buoyant. On the one hand, retail sales for April came in as expected this morning. On the other hand, the number doesn’t look so hot if you factor out auto sales (which vary considerably from month to month) and gasoline sales (because prices are rising).

And now to pick up where we left off at the end of yesterday’s 5

Trump tweet

Someone needs to run the numbers and determine what percentage of presidential tweets lack an exclamation point. It’s got to be in the single digits, right?

But that reflects the unusual spot the president’s in right now, with Democrats mocking him for “making China great again.” As we mentioned yesterday, U.S. sanctions have the potential to shut down the Chinese mobile phone maker ZTE — wiping out 80,000 jobs. Given China’s history, that’s a recipe for rebellion. That’s the last thing stability-minded Chinese leaders want… and really, it’s not as if U.S. leaders are keen to see what comes after the Communist Party is overthrown.

So the president’s tweet more or less confirms a Wall Street Journal story that says if a deal can be worked out, Washington will give ZTE relief from the sanctions and Beijing will lift tariffs on billions of dollars of U.S. farm goods.

What a hairball. Of course the Democrats are being total demagogues about it, but the president has only himself to blame. Like any other politician, he’s blind to the unintended consequences of his actions. (What? Two hundred U.S. companies supply ZTE with parts worth $2.3 billion in sales? Who knew?)

Speaking of sanctions, it appears Corporate Europe is lining up with Donald Trump’s decision to re-impose sanctions on Iran.

As we mentioned in a special edition over the weekend, European politicos are objecting to Washington dictating who European companies can and can’t do business with. Said French finance minister Bruno Le Maire, “The international reach of U.S. sanctions makes the U.S. the economic policeman of the planet, and that is not acceptable.”

But it’s not the politicos who will feel the bottom-line impact if companies defy D.C.’s dictates — it’s the companies transacting in dollars, still the world’s reserve currency. Thus Joe Kaeser, CEO of the German industrial giant Siemens, says his company will not cut any new business deals with Iran. The risk of “targeted retaliation” from Washington isn’t worth it.

From a CNN article: “Siemens says delivery of three gas turbines to Iran is still pending, but its business with the country represents a ‘very small portion’ of overall revenue. The opposite is true of the United States, where Siemens makes about $20 billion a year — roughly 20% of its global sales — and employs about 50,000 workers.”

But those are the Europeans. The Chinese appear not to care and are happy to step up their trade with Iran.

Last Thursday — two days after Trump announced U.S. withdrawal from the Iran nuclear deal and revived U.S. sanctions against Iran — the Chinese opened a new rail line to Iran.

It runs from Bayannur in Inner Mongolia all the way to Tehran — more than 3,000 miles as the crow flies. The cargo on the inaugural run was 1,150 tons of sunflower seeds.

The Chinese authorities did not disclose the exact route of the rail link… but they did say it cuts travel time to only two weeks or so — compared with five weeks using a cargo ship.

Map

Sanctions? What sanctions? “I want to stress that the Chinese government is opposed to the imposition of unilateral sanctions and the so-called long-arm jurisdiction by any country in accordance with its domestic laws,” says Chinese Foreign Ministry spokesman Geng Shuang.

And unlike the Europeans, the Chinese are in a position to pull it off. “The difference is that China has more companies that are isolated from the U.S. market — and possible sanctions,” explains King’s College London security fellow Dina Esfandiary. “And even if they aren’t isolated,” she tells The Washington Post, “all the Chinese government has to do is to create new, separate companies.”

We’ve said it before in other contexts, and we’re sure we’ll say it again: This is what an empire in decline looks like.

“Sad state about seniors struggling with a solar system,” a reader writes after yesterday’s mailbag. “Not sure of the laws of going off grid and if they allow it.”

“A relative in Kingston, Jamaica, installed a 6-kw system on his house back in 2010. He has 24 batteries and is totally off grid. Power is expensive there, and because of storms, he has always had a genset to get by with. His home is over 6,000 square feet with an additional pool house.

“We have stayed with him a few times and the only time the genset has ever kicked in was when he had a dozen or more people staying there. You can imagine how much energy is used when that many people are in the home. The genset would kick in around 5:00 a.m. and run for about 10 minutes to top up the batteries and the daylight around 6:00 a.m. would then take over.

“A grid tie system is similar except that there is a disconnect that would separate your home from the grid when the power goes down on the grid. This is a safety feature so that nobody gets electrocuted while working on it. You could even install a Tesla wall battery along with a grid tie inverter and have insurance from any power outages and use grid power to keep it topped up.

“I would never opt into the ‘power back to the power company’ option. They are determined to make money either way. If you can go off grid, do it.”

The 5: Yes, a grid-tied system makes you subject to the whims of power companies, public service commissions and state lawmakers. The rules for “net metering” — i.e., how much of a discount you get for the power you generate — can vary greatly and change at any time.

Your relative in Jamaica seems to have a nice arrangement. Well, as long as there’s fuel for the genny…

“My dislike for The 5 is simply this,” writes someone calling himself “a usually pleased subscriber.”

“When you’re not acting as a shill for the other Agora publications or authors (most of which and whom I love and respect), you’re continually denigrating President Trump, his agenda and appointees. Do you really fail to comprehend how much better off our country, its citizenry and the free world are with Trump in office compared with his predecessor’s occupancy of the office?

“Advice from the great unwashed: Stick to financial matters and lay off your political remarks — at least as much as possible.”

The 5: We’re sorry if you’re offended that we find Trump little different from other politicians — as noted above, oblivious to the unintended consequences of their actions — even if at times he’s more entertaining.

For the record, we’re pleased that the tax cuts are structured in a way that perhaps 95% of taxpayers have more money in their pockets. But without accompanying spending cuts, it just means more debt piled onto our backs in the future. Enjoy the sugar-high prosperity while you can, because you’ll be paying for it later.

We’re also pleased that new regulations are being written at a slower pace. That said, businesses subject to stepped-up immigration raids aren’t sharing in the lessened bureaucratic burden.

We’re pleased with the “get along with Russia” rhetoric — as we said during the campaign, there won’t be an economy or markets for us to cover if nuclear war breaks out — but the administration’s actions aren’t backing up those words.

We’re pleased with the rhetoric about less involvement in Middle East quagmires… but the president’s advisers appear to be spoiling for war against Iran. That might be good for the House of Saud and the Likud Party, but for everyday Americans it only means higher prices at the pump.

And Trump has been a total bust in his choices to staff the Federal Reserve. He could have radically re-made the central bank with five vacancies out of seven total positions on the Board of Governors — but he’s opted for egghead economists and/or career Fed apparatchiks.

As our executive publisher and 5 founder Addison Wiggin said years ago, “Politics are the problem, and you ignore them at your peril.”

Best regards,

David Gonigam

Dave Gonigam
The 5 Min. Forecast

P.S. Long ago we called out Paul Ryan as a phony, back when “tea party” types who should have known better were gushing all over him. But by 2015, everyone else caught up to us.

Come to think of it, the bloom came off Ryan’s rose at the very same time Trump was catching fire on the campaign trail. People want to believe in a savior, it seems.

Our approach has long been Sauve qui peut, which translates roughly to “Let he who can, save himself.” That’s why we do the work we do — to empower our readers to secure their own financial future instead of relying on politicians to wave a magic wand that doesn’t exist.


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