Less Pain, Weed Gain

  • Is the NFL coming around to cannabis?
  • Our big Apple prediction: There’s still time
  • Rickards: Gold approaching a huge make-or-break moment
  • The country where video game tokens are worth more than currency
  • Punk auto sales… luring orange growers to Wisconsin… three decades of leveraged buyouts… and more!

If the NFL can finally acknowledge cannabis has medical value, can the federal government be far behind?

On Monday The Washington Post reported that the NFL has reached out to the players union, offering to go in together on researching marijuana’s potential for pain management.

The NFL is notoriously hard-ass when it comes to weed. In fact, the league’s allowable level of THC in the bloodstream is less than a quarter of that allowed for Olympic athletes.

The NFL will neither confirm nor deny the report. “We look forward to working with the Players Association on all issues involving the health and safety of our players,” says spokesman Joe Lockhart — who became well-practiced in the art of obfuscation as White House press secretary during the Clinton impeachment spectacle.

Of course, the whole thing might be a cynical ploy by NFL Commissioner Roger Goodell — or as Deadspin writer Drew Magary has dubbed him, the Ginger Hammer. The union contract is up in 2020: Perhaps the league will trade looser limits on marijuana for some sort of pay concession by the union.

Still, for the NFL to even suggest a “legitimate” use of cannabis exists is a milestone. Could the Drug Enforcement Administration be next?

Meanwhile, another federal agency has inadvertently put wind in the sails of a few “penny pot stocks.”

Last Friday, the FDA announced it will look into mandating a gradual reduction in the nicotine levels of cigarettes — ultimately to a point where cigarettes would no longer be addictive.

Big Tobacco stocks took an instant dive. This morning Altria Group (MO) is down nearly 12% from where it was before the announcement.

But the news is a huge boost to a company Ray Blanco is following in his premium trading service, Penny Pot Profits. One of its divisions is focused on reducing harm from tobacco products — even furnishing some of its wares to the FDA. Little wonder that industry scuttlebutt has this company as a takeover target for Big Tobacco. Shares are up 27% since Friday.

Ray’s been getting phenomenal feedback since we launched Penny Pot Profits earlier this year. And this fast-moving market is serving up new opportunities every few days. Follow this link and learn how much money readers like you are already making.

After two days of anticipation, the Dow industrials have finally crested the 22,000 level. Barely. And it might not hold by day’s end. But there you go.

Actually, the Dow is the only major U.S. stock index in the green. In contrast to the blue chips, the small-cap Russell 2000 is down more than 1%.

The S&P 500 and the Nasdaq are struggling despite gangbuster performance by the single biggest company in each of those indexes — Apple.

AAPL delivered stellar quarterly numbers after the closing bell yesterday. IPhone sales slowed, yes, but they didn’t completely stall out in anticipation of the new model. Oh, and CEO Tim Cook confirmed the new iPhone will roll out on time next month. Meanwhile, sales of Macs and even the left-for-dead iPad are rebounding strongly. Put it all together and AAPL is up 5% as we write, to new all-time highs.

No, the company did not announce the blockbuster acquisition our Louis Basenese was anticipating. To be sure, there were no guarantees about the timing. But all the forces are still in play: Apple’s cash hoard has now grown to $261.5 million. No other company has the wherewithal to acquire Netflix. And a tie-up with NFLX would generate profit growth for Apple in a way no other deal can.

There’s still close to a year for Louis’ option recommendation in The Takeover Alert to reach its full potential. (And that’s after his recommendation to charter subscribers delivered a double in roughly three weeks.)

“There’s no way around it: the go-go years of breakneck car sales are skidding to a halt,” says Greg Guenthner in this morning’s Rude Awakening.

The automakers came out yesterday with their monthly sales figures. They were uniformly terrible, affirmation of our David Stockman’s “Carmageddon” thesis. General Motors? Down 15% for the month. Ford? Down 7.5%. Fiat Chrysler? Down 10.5%.

“No bullish market cycle can last forever,” says Greg. “Myriad factors are weighing on the auto world right now. Cars have become ultra-reliable from almost every single manufacturer. Autos are staying on the road longer, which means that fewer shoppers are looking to replace their ride.”

And the subprime auto lending craze is finally cracking: “Lending to subprime borrowers for auto purchases has been ballooning to unsustainable levels.” Defaults are finally starting to hit home.

But hey, it’s a great time to be a car buyer. And if you’re in the used market, you’ll make out even better if you wait a few more months — till a flood of fleet vehicles heads from rental lots to dealer lots…

Gold is hanging in there at $1,270 this morning — as it approaches a make-or-break point. Jim Rickards is counting on “make.”

“This chart is one of the most powerful bullish indicators I’ve seen,” says Jim. “Gold analyst Eddie Van Der Walt has produced a 10-year chart for the dollar price of gold showing that gold prices have been converging into a narrow tunnel between two price trends — one trending higher and one lower — for the past six years.

Gold price since 2008

“Since gold will not remain in that funnel much longer (because the funnel converges to a fixed price) gold has to ‘break out’ either to the upside or downside. A breakout is typically a huge move that decisively disrupts the pattern. At the extreme, this could imply a gold price on its way to $1,800 per ounce or $800 per ounce.”

All the stars are aligning for a breakout to the upside, Jim believes: “Central banks are determined to get more inflation and will flip to easing policies if that’s what it takes. Geopolitical risks are piling up from North Korea, to Syria, to the South China Sea and beyond.

“The failure of the Trump agenda has put the stock market on edge, and a substantial market correction may be in the cards. Acute shortages of physical gold have set the stage for a delivery failure or a short squeeze.

“Any one of these developments is enough to send gold soaring in response to a panic or as part of a flight to quality.”

Sunset Bolívar: While the news from Venezuela this morning is about allegations the turnout numbers from Sunday’s referendum were tampered with… it’s a safe bet everyday Venezuelans are more concerned about making ends meet…

Real-world inflation rate

Venezuela’s official inflation rate is bad enough — 741% a year as of this past February. But a few years ago, Johns Hopkins economist Steve Hanke developed something he calls the “Troubled Currencies Project.” Using black-market currency exchange rates, he calculates a real-world inflation figure for a handful of economic basket cases around the globe.

And yes, he figures inflation is now running at a 952% annual clip — up from 790% only a week ago!

Nowhere else in the world that Hanke’s tracking comes even close. In war-ravaged Syria, the real-world inflation rate is down to 8% — less than the official figure. It’s gotten so bad that according to one Twitter user in Caracas, the Venezuelan bolívar is now worth less than the tokens used by players in the video game World of Warcraft.

WoW gold worth more than Venezuelan Bolivar tweet

[Hat tip for the “Sunset Bolívar” line to colleague Matt Insley…]

“With enough subsidies,” says George Mason University economist Matthew Mitchell, “you could get orange growers to relocate to Wisconsin.”

In our mailbag section on Monday, a couple of people piped up in defense of the $3 billion in subsidies Wisconsin taxpayers will furnish to the Taiwanese electronics giant Foxconn to build a factory in House Speaker Paul Ryan’s district. President Trump was keen to take credit for the promised 13,000 jobs — 10,000 of which are for the plant’s construction.

Mitchell has run the numbers and says they don’t add up. Included in the subsidies are $252 million in highway upgrades near the site, plus a promise the state will pick up 40% of the cost of any local government incentives offered to Foxconn should the deal not come to pass.

“That money might have been spent on a genuine public good, or it might have been spent on a statewide tax reduction,” Mitchell says in a Reason interview. The Milwaukee Journal Sentinel, as Reason notes, reports “Foxconn will get 17 cents in tax credits for every dollar it spends on employees.” Only a little bit more than that and you really could induce orange growers to the Badger State!

“Regarding your comments on Payless and other retailers in trouble because of debt load due to leveraged buyouts,” a reader writes: “You imply much of the blame lies on current low interest rates, which promote questionable business investment.

“I would suggest you check out similar situations back in the late 1980s and early 1990s, which ended in similar results but during a much higher interest rate environment.

“I was personally affected by Carl Icahn buying controlling interest in TWA and then starting a holding company — TWA Acquisitions Inc. (of which he owned 90% controlling interest) — raising capital through debt and then using the debt-loaded Acquisitions Inc. to ‘buy’ TWA from himself. Essentially getting all his money out, still controlling the company, but leaving the employees to sacrifice in order to service the debt or go out of business.

“He also raided the pension funds by using an unrealistic assumed rate of return (I believe it was 14%), thereby claiming the pension funds were overfunded, and he withdrew that ‘extra’ cash. TWA later declared Chapter 11 bankruptcy (three times).”

The 5: Rates were higher, yes, but here’s the key point: They were falling. You can perform a lot of financial wizardry in an environment of falling interest rates — which has been the environment in these United States for 36 years now.

Hell, Mitt Romney made a career out of financial flimflam, as our David Stockman chronicled in his 2013 tome The Great Deformation: “Romney was not a capitalist businessman; like the other LBO kings, he was a master financial speculator who bought, sold, flipped and stripped businesses, but he did not build enterprises the old-fashioned way: out of inspiration, perspiration and a long slog on the free market fostering a new product, service or process of production.”

There are now two adult generations of Americans who have literally no memory of what it was like when interest rates were steadily rising, as they did from roughly 1946–1981. It’s gonna be real interesting to see how those Americans adjust to a new reality when the cycle finally turns (and it could be a while yet)…

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. Ray Blanco just issued a new “penny pot flash” today. It’s a company he’s had on his radar for a while, but he was waiting for just the right moment to jump in. “Shares are retreating a bit today, giving us an opportunity to buy the dip.”

If you’ve given any thought to short-term speculating in penny pot stocks, there’s no better time to start than now.

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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