- The “Trump is doomed” market freakout: A one-day wonder? Rickards weighs in…
- The marijuana biz converges on D.C., while lawmakers move to give them a break
- Brazilian meltdown… Wal-Mart’s survival strategy… manic manufacturing numbers
- Mainstream says bank stocks are dead: Here’s why they’re set to jump
- The latest official expatriation numbers (they’re understated)
- Another front-line mortgage story… who benefits from California’s new autograph law… two good questions about our sales messages… and more!
For the moment… the market’s Trump-agenda-in-peril freakout is over.
As we check our screens, the Dow industrials have recovered about 60 of the 373 points they lost yesterday. Gold has shed a few bucks of yesterday’s big run-up, the bid now $1,252. And Treasury rates are backing up, the 10-year at 2.22%.
Has the foundering ship of state been righted now that a special counsel’s been named to look into “Kremlingate”? Seems unlikely.
Perhaps instead, the hard math of political reality is setting in…
“Trump will not be impeached,” says a note from Jim Rickards — in contrast to the mainstream consensus now seriously contemplating a President Pence.
“That will never happen in a Republican-controlled House of Representatives. Democrat dreams of regaining the House in 2018 are mostly wishful thinking (because of the way congressional districts are established), and even if they win, the investigations will mostly be over by then and Trump will be exonerated, if not unscathed.”
Jim goes even further: “We’ve just about reached peak political hysteria. Things should calm down a bit from here.”
But the damage is done to the Trump agenda, for sure: “The dysfunction in Washington will have real-world consequences for markets,” Jim goes on.
“Tax cuts, tax reform and massive infrastructure spending will not happen this year. Obamacare repeal may happen in some form, but that is the least impactful part of the Trump agenda in terms of economic growth. A government shutdown over spending priorities is a real possibility for Oct. 1. A nasty debt ceiling fight could ensue right after that.”
Perhaps the only thing that has a prayer of passage in Congress right now is… marijuana reform.
“Republican and Democratic senators on Wednesday renewed their drive to make banking easier for marijuana-based businesses in those U.S. states where the drug is legal,” says a Reuters dispatch.
For the moment, the banking system is off-limits to legal marijuana businesses. They’re cash-only… even to the point of delivering their state tax payments in cash. The bill would change all that, forbidding the feds from interfering with banks that take on pot businesses as customers.
“The unlikely collection of senators sponsoring Wednesday’s bill have attempted to get similar legislation approved before,” says Reuters, “and gained wider support with each try. That could help the legislation pass the closely divided Senate.”
Elsewhere in the Beltway, the oldest and largest marijuana industry conference and expo in the country is underway.
The venue is the Gaylord National Resort & Convention Center. Our Ray Blanco showed up a couple of days early for private briefings from some of the industry’s up-and-coming players.
“I’ve also been networking with cannabis investors to get the latest inside scoop on the state of the industry,” he tells us. “Some faces are familiar. Others are new and include Wall Street bankers and Fortune 500 C-level types.”
Estimated attendance is about 3,500. “And they’re all here for one reason — to make money on the exploding marijuana market. This market is moving so fast that, unlike other trade events, this one is held twice a year.”
Watch this space for an update from Ray tomorrow or early next week…
In the meantime, our proprietary Penny Pot Index is taking a breather.
“We use this index,” Ray says, “to gauge what’s happening in the market for marijuana-related stocks as a whole. It’s down about 15% from its highs back in late February. We’re seeing dips across the board.”
Ray’s not concerned. “Markets climb and they correct. That’s the expected pattern that we see repeating over and over again.
“If anything,” Ray goes on, “the recent correction in the pot market is a sign that many of these ragtag tiny stocks are actually maturing. After all, recent rallies in pot stocks have been orderly, and the corrections have been too. This is the sort of price behavior you’d expect to see in a more stable corner of the market — and that’s a good thing.
“Make no mistake, I’m not saying that pot stocks are turning into big, boring stocks that mirror the rest of the market,” Ray makes clear. “They’re not, and they won’t. The gain potential in pot investments is utterly massive. Period.
“But I am saying that we’re probably in the early stages of some of the biggest names in this space becoming less volatile. In other words, when they head toward their massive gains, there will be fewer scares and speed bumps along the way.”
That means you can now buy with more confidence in the “penny pot flashes” that our proprietary trading system generates. You’re less likely to get whipsawed and shaken out. And it’s still your fastest route to cannabis riches. Ray shows you how the system works right here.
Yesterday’s 1.8% drop in the U.S. market is nothing compared with today’s 9.8% drop in Brazil’s market.
The interim president — the one who replaced the one who was impeached — was caught on audio egging on a corporate CEO to pay hush money to a jailed lawmaker. All of this year’s gains in Brazil’s Bovespa index have been wiped out in a matter of hours.
Closer to home, earnings and economic numbers are in view…
- Wal-Mart managed to escape the clutches of the retail apocalypse — delivering an earnings “beat.” Better yet, same-store sales in the United States are up 1.4%, and WMT’s online sales jumped 63%
- Mid-Atlantic manufacturing is insanely strong, judging by the “Philly Fed” survey. The May reading is the second-highest since 1983. That’s an interesting contrast to Monday’s report from New York state, which shows manufacturing there is slowing down.
Don’t bet against bank stocks — even if the Trump agenda’s dead in the water — says the newest addition to our team, Chris Whalen.
Financials were among the hardest-hit sectors yesterday. For days now, mainstream analysts have been hanging crepe about the impact on financial stocks if tax cuts and other changes don’t happen. But Chris says those analysts overlook two important short-term factors.
First is the Federal Reserve’s plans to raise interest rates again next month — and yesterday’s hiccup in the markets won’t change that. Second is the Fed’s next round of “stress tests” for the banks. Banks that pass the tests are likely to step up the pace of share buybacks.
“These two key factors are keeping a positive tone on bank stocks,” Chris says, “even though it is pretty clear that the Trump revolution in Washington is moving much more slowly than most people expected at the start of 2017.”
So far this year, the number of Americans giving up their citizenship is keeping up last year’s blistering pace.
Last year set a record with 5,411 published expatriates. For the first quarter of this year, the IRS says it’s 1,313; assuming that holds the rest of the year, 2017 will fall just short of last year’s total.
As we’ve been saying for years — long before it became trendy for Drudge to post these numbers — the trend is driven by Americans already living overseas who are fed up with onerous banking and tax requirements. It’s just easier to turn in their passports.
And the IRS numbers might well be understated, according to international tax lawyer Andrew Mitchel — who follows these numbers more closely than anyone else: “During the first quarter of 2017,” he writes, “the FBI added 1,484 individuals who renounced their U.S. citizenship to the NICS index.
“The IRS list is supposed to include U.S. citizens who have lost their U.S. citizenship as well as long-term green card holders who have terminated their green cards. The IRS number is lower than the FBI number, when we would expect it to be significantly higher than the FBI number.”
“Dave, the problems in retail definitely seem to be about more than Amazon, or how stretched consumers are,” writes one of our regulars. “It’s a fascinating issue.
“Brick-and-mortar retailers (other than Wal-Mart) who have a fighting chance could be those who sell things people want to visually inspect before buying: auto parts, groceries and home improvement supplies. Overall, these players have been doing pretty well. But pretty much every other specialty is struggling.
“Not that everyone in those three niches will get through the bloodbath unscathed. It could get ugly — and a few might not survive. AMZN and WMT are putting fierce pressure on everyone.
“It’s an intriguing area to watch. There will be implications at several levels, for the retailers themselves as well as their employees, REITs and supply chains!”
The 5: Oh, yes. We expect one final washout a week from today.
“I have been a loan originator in the mortgage industry since 2002,” writes a reader — continuing our thread about who’s to blame for the mortgage crisis of a decade ago.
“My first six years, I worked for the largest lender in the country (which is no longer in business). Between 2004–08, the management of that company pushed us to sell negative amortization loans, also called ‘option ARMs.’ These loans had payment options but one option allowed the borrower to pay a minimum payment that was less than interest only. When the client made that min payment, their balance would increase. Then when property values dropped, the borrowers owed more than the property was worth… Hence, all the foreclosures.
“Management said that these loans were the most profitable and we were leaving money on the table for the company and ourselves if we did not promote these loans to clients. They used their sales force in Florida as an example. They said 60% of all mortgages originated in Florida by this company were option ARM loans, but here in Arizona only 18% were.
“There is plenty of blame to go around, but I wanted you to hear from someone on the front lines what message we were getting from management.”
“As you probably know,” writes another regular, “I love reading The 5 and the thought that you typically put into covering the hidden, or at least uncovered, story within certain headlines.
“I’m not even going to try to hide this ‘big but,’ though.
“But your snippet Tuesday about bookstores being strangled by regulation seemed to miss the real story, which is who is sponsoring this legislation and why?
“You danced around the story by mentioning that book signings are the one thing that bookstores still have over Amazon and that lawmakers ‘appear determined to drive them out of business.’
“Don’t you at least wonder why, with ‘Rome burning’ on so many other important matters, that lawmakers would spend their time on, of all things, protecting us against forged book autographs?
“Who has something to gain with this legislation seems to be the real story.
“Still love The 5.”
The 5: Thanks for keeping us on our toes. You’re absolutely correct. The new California law carves out an exception for pawnshops and online retailers.
Says the lawsuit challenging the law, “Pawnbrokers and online marketers are just as likely, if not more likely, to engage in sales of fraudulent autographs.”
Exactly what they did to get out from under the blizzard of paperwork requirements, we don’t know. But it doesn’t take much imagination, either…
“The sales emails pay the bills. Fair enough,” writes a reader about our business model. “I have two questions:
“1. The Agora newsletters are well-written and directed toward an intelligent, informed audience, unlike many other media outlets we know. Why do the sales emails take a totally different tone, heavy on the provocative statements and clickbait? ‘You won’t believe what crime Obama committed!!!!!! Even America-hating liberals will be speechless!!!!!!! Click this link only if you are a TRUE Patriot!!!!! OMG!’
“2. Do you (and your fellow editors) mind having your name signed at the bottom of these often-inflammatory emails? I know you didn’t write them… first, you manage to stay anti-partisan in The 5, and second, I usually get the same email several times, one with your name at the bottom, and the others with the editors of the other Agora newsletters to which I subscribe.”
The 5: You have a keen eye.
First question: The sales emails have only one aim — to induce you to click to the sales promotion.
But in our daily episodes of The 5, we have a different, dual, objective — that you learn at least one thing you didn’t know before, and that you come back the next day. If we also induce you to subscribe to another paid publication on top of the one(s) you already get, that’s gravy.
Second question: I do review those sales emails before they go out. (Occasionally, one slips through the cracks. In any event, they’re the only thing that go out over my name that I don’t write myself.) Sometimes I change a word or two. On occasion I kick them back to the copywriter to try again and come up with something more consistent with our general editorial stance.
Good questions. Smart readers. Another reminder I’m privileged to do what I do for a living…
The 5 Min. Forecast
P.S. Here’s a recent sales message you might’ve missed — and it’s time-sensitive. Jim Rickards, take it away…
What she’s doing there could arm the United States with the ultimate weapon…
It won’t stop North Korea… Or bring peace to Syria…
But it could change the world forever.
I haven’t seen anyone else cover this story like our team.
But we’re leaving this information up for only a limited amount of time, right here.
After tomorrow it’s gone. You’ll see why when you watch.