The Biggest Threat to Legal Marijuana

  • From menswear to marijuana: George Zimmer’s new phase
  • A gut-check on whether Jeff Sessions will destroy the pot industry
  • The Fed and the numbers: Market shock one month from today?
  • The most gold-bullish news in years… and the mainstream missed it
  • Why is America’s black market so weak compared with other countries? Readers weigh in

So… The Men’s Wearhouse dude smokes dope. A lot of it. “I guarantee it,” as he’d say in that gravelly voice.

Actually, George Zimmer got fired a few years ago from the company he founded in 1973. But before, during and since his four decades with the firm… marijuana has been a constant companion.

First in the ’60s, he smoked it for fun. Later he smoked it as an alternative to the booze he was consuming too much; now it’s been 35 years since he took a drink. Most recently he says weed soothed the distress of his ouster from Men’s Wearhouse. “I refer to [marijuana] as harm reduction,” he tells Business Insider. “So the way cannabis helps is when you lose your job, you don’t go on a two-week bender.”

Along the way he says he once smoked six joints in an hour with the spiritual guru Ram Dass. (That would be an interesting item to put on one’s “bucket list,” no?)

Not surprisingly, Zimmer’s become an evangelist for cannabis as it becomes legal in more and more places. Today he’s delivering the keynote speech at the Cannabis Collaborative Conference in Portland, Oregon.


“In the emerging marijuana industry,” Zimmer tells the Portland Business Journal, “we have a chance to make a clear statement about stakeholder capitalism. And by stakeholder capitalism I mean that we move beyond simply focusing on what’s good for the owners of the business, but also encompass employees, customers, communities, even vendors to the company.

“We have a chance to say that it’s not just the results, but how they’re obtained that matter.”

Maybe that’s too touchy-feely for you. Or maybe you find it refreshing. Either way, it comes back to an industry set to grow annual sales from $7 billion last year to $21 billion by 2021 — a triple in five years.

But wait — what about Trump’s new hardass attorney general Jeff Sessions? Especially now that he’s been confirmed by the Senate?

After all, weed remains illegal at the federal level… and only last year Sessions was waxing nostalgic about the days of Nancy Reagan and “Just Say No.”

The question keeps coming up. And we keep answering the same way we did when Sessions was nominated in mid-November. Sessions has only so much time and energy. He’ll have to pick has battles with the “blue states”… and he’s more likely to pick a fight over immigration than over marijuana.

Three months on, events are confirming our thesis.

You know about the travel ban. In addition, the feds conducted immigration raids in several cities last weekend. And only five days after taking office, Trump signed an executive order threatening to block federal funds for “sanctuary cities” — jurisdictions where local police don’t enforce federal immigration law.

And marijuana?

Last week, Sessions met with sheriffs from around the country during a conference in Washington. Among the people he talked to was Sheriff Scott Jones of Sacramento County, California.

“Regarding the prioritization of federal resources to combat marijuana,” Jones tells Capital Public Radio, “[Sessions] didn’t see the federal government getting involved in marijuana use or low-level state, what are traditionally state and local crimes, but I don’t think he ruled out the possibility of the federal government getting involved in larger-scale operations.” He said that would include the activity of drug cartels.

In other words, no change to existing federal enforcement policy. Again, the feds have only so much time and so many resources.

But let’s take the worst-case scenario — the feds reverse course, say, six months from now. That’s still ample time in which to bag a quick gain from our newest premium service, Penny Pot Profits, helmed by Ray Blanco.

That’s the whole idea — you don’t wait five years for the industry to triple in size. Instead, you jump in just as an individual penny pot stock gets hot… and jump out as soon as it starts to cool off. In between, you’ve made 10 or 20 times your money in just a few weeks.

The pot sector is notoriously volatile… so there’s no shortage of opportunities to pull this off.

A single trade could more than make up your subscription cost.

Again, that’s the worst-case scenario. Best case, Ray shows you how to execute these trades over and over for as long as the legal weed industry stays on its steep growth curve.

To get a taste for how Ray’s proprietary trading system works, you’ll want to give these charts a look.

To the markets… where you’d never guess bookies are now taking bets on whether Trump will make it through his first term.

Most of the major U.S. stock indexes are reaching higher into record territory. It’s blue chips pulling the train today — the Dow cresting 20,600 at last check, but the Russell 2000 off fractionally.

The “risk on” trade is hurting Treasuries, but not gold. The 10-year T-note yield is now 2.51%… but the bid on gold is hanging tough, as it has all week, around $1,227. Not bad in light of renewed dollar strength — the dollar index is up to 101.3, the strongest showing in a month.

The day’s economic numbers are plentiful — and a mixed bag. We look at them through the prism of the Federal Reserve and the likelihood of another interest rate increase in March.

First, the numbers the Fed likes…

  • Consumer price index: Up 0.6% in January, double what the “expert consensus” was counting on. The year-over-year increase works out to 2.5%. Yes, the figure is bogus, but all the same, inflation is running the hottest since the spring of 2012…

Inflation Heats Up

  • Retail sales: Up 0.4% in January — higher than even the most optimistic guess among dozens of economists polled by Bloomberg. Throw out plateauing auto sales and the number would be even higher. And the December number’s been revised up sharply.

Then the numbers the Fed wouldn’t like so much…

  • Industrial production: Down 0.3% in January; the consensus guess was for a flat reading. The manufacturing component of this number was especially disappointing
  • Capacity utilization: 75.3% of the nation’s industrial capacity was in use during January. That’s a mediocre number and it’s been stuck around there for a year

And finally, a couple of “sentiment surveys” that give us an early read on the economy so far in February…

  • New York state manufacturing: Strongest reading since the fall of 2014, says the Empire State survey… and four straight months of growth
  • Homebuilder sentiment: Cooling off from the post-election euphoria, says the National Association of Home Builders’ housing market index… but confidence still abounds.

Put it all together, give the inflation numbers a little extra weight… and there’s nothing here to dissuade the Fed from raising interest rates one month from today. Right now the market is pricing in only a 27% probability of that, even after Fed chair Janet Yellen refused to take it off the table yesterday. But Jim Rickards says right now it’s still a sure thing.

March market shock, anyone?

“One of the most bullish events in the history of gold prices just happened and almost no one noticed,” says Jim Rickards.

Last week, Federal Reserve Gov. Daniel Tarullo resigned. It wasn’t a surprise. The establishment media dutifully noted how his specialty was bank regulation and how his departure will clear the way for a Trump appointee who will be in line with the president’s deregulation agenda.

“That completely misses the point,” Jim tells us. “His resignation means there are now three vacancies on the board.” That’s out of a total seven.

The other two vacancies have been there for years. Jim says Obama did it as a favor to Janet Yellen; five votes are easier to control than seven.

What’s more, “Of the remaining four governors, one is a Republican,” says Jim. That means once Trump fills the slots, there will be a 4-3 Republican majority. And don’t forget: Yellen’s term as chair is over in less than a year.

That means Trump calls the shots at the Fed — and soon.

Jim says you can count on his appointees to carry out his wishes: “Trump wants a weaker dollar to help U.S. exports and to help create U.S. export-related jobs,” Jim reminds us. “Trump complains about China, Germany and Japan using a cheap currency to hurt U.S. workers. Now Trump will pursue a cheap dollar to fight back.

“A cheap dollar means one thing — higher gold prices. Gold is just a form of money like the dollar, euro or yen. If the dollar is strong, the dollar price of gold goes down. If the dollar is weak, the dollar price of gold goes up. It’s that simple.

“So with Trump taking over the Fed, and a weak dollar on the way, look for higher gold prices and much higher prices for gold mining stocks over the next year. The time to load up on physical gold and gold mining stocks is now, before the mainstream media figure out what we just explained.”

“Americans aren’t slouches when it comes to dodging taxes,” reads the first of many replies we got after we noted yesterday that the United States ranks last out of 12 developed countries in the scale of its “shadow economy.”

“The consequences under U.S. and state tax laws, if you get caught, are simply too high to justify the risk,” the reader adds.

Counters another: “Perhaps we should be proud that we are ‘dead last’ in underground economy. Does it not reflect that for the most part, Americans collectively believe in the rule of law?”

Hmmm… That’s not the question. The question is whether government leaders believe in the rule of law. But we digress…

“The ‘shadow economy’ measure for the U.S. does not jibe with my experience in Hawaii,” writes another.

“While not a large player and possibly not representative of the rest of the country, though I think it is, I review many tax returns a year for my work. Most individuals have ridiculously low reported income for income tax purposes. When queried, the answer is always, ‘I have a lot of cash (unreported) income.’ That is the America I know.”

“A couple of years ago, I paid two guys about $600 to prune and clean out some pine trees in my yard.

“Since I paid in cash, I asked if they were going to tell the IRS about the deal. The man replied, ‘I’m not even going to tell the Mrs. about it!’ The job that was done was very good and every bit of the trimmings was hauled away and the yard cleaned up. I was very pleased.”

“Are we fat and dumb? Definitely. Are we happy? Very unlikely.

“It’s interesting that at least half of those countries on your bar graph enjoy a higher standard of living than we do. After marrying a Greek man (reference the bar graph), it didn’t take long for me to learn the underground economy. I currently wait tables for a living, and I can tell you that the little bit extra in my pocket can go a long way for those of us who live on the margins of society. I use it to pay bills for my mom and dad. He’s a WWII vet and Social Security doesn’t come close to covering their medical and other bills. They don’t deserve to die in abject poverty.

“I could go on and on, but there’s a sizable segment of our society who scrape along, stretching our buying power by this underground economy, paying for home and car repairs. Thankfully, it also helps me to afford your newsletters, from where I pass along useful ideas to my friends, family and co-workers.”

“I’m glad to have lived to see the day that reason is coming back regarding marijuana regulation, but don’t go too far in the other direction,” a reader cautions.

“It seems to me that absent the government overhead, marijuana ought to be less expensive than a like amount of cotton, for example. I don’t know what it costs per pound to produce, but if it were sold the way hemp was sold to make rope, it is probably cheaper than cotton or leather — or else hemp wouldn’t have been the preferred rope.

“It’s pretty obvious that marijuana, even as a heavily regulated medicine, will be cheaper than a drug. If the history of acupuncture and chiropractics is any indication, insurance companies will most likely lead the way in supporting it for anything it can supplant that costs more for pain or surgery avoidance. As a food, it should be even cheaper. Yes, they may have to ride shotgun on the fields at first, but backyard farmers will undercut the price until it’s just easier to get at the store.

“In short, I’d be careful about investing in pot if the assumption is that the price will remain high (no pun intended). It’s pretty obvious that Colorado’s pot tourism business days are numbered, too.”

The 5: All good points. Nothing goes up in a straight line forever.

We’ve compared marijuana to the dot-com boom more than once. We know how that story ended in the early 2000s. And we’ll be on the lookout for signs the pot boom is reaching “euphoric” levels, shall we say. (Outright fraud is usually a good marker.)

But in the meantime, it’ll be one heck of a ride.

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. From the San Francisco Chronicle: “San Francisco would have its own independent department of marijuana under legislation headed to the Board of Supervisors.

“‘The goal is to create a single office to manage the onslaught that we are facing come Jan. 1, when recreational pot becomes legal,’ said Supervisor Jeff Sheehy.”

Headlines like this are becoming commonplace.

As we said yesterday, we’ve been onto the marijuana investing story since early last summer… and now we’re taking it to the next level.

Our team has perfected a system identifying “Penny Pot Flashes” that can send individual pot stocks 10 or 20 times higher… in a matter of weeks. And we’re taking the wraps off that system this week. Follow this link and be among the first to know.

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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