- Pot raises the stakes… by $132 billion and 1 million new jobs
- Sessions’ reefer madness backlash: Is marijuana Trump’s “silver bullet”?
- Monday: Round 1 of U.S. vs. China trade war
- Skyrocketing long-term care premiums… and America’s looming health crisis
- Shrugging off D.C.’s shutdown jitters… “Li Keqiang Index” for the U.S. economy?… A reader catches the “grok” reference… And more!
The pot stakes just got higher. $132 billion higher, to be precise,” say our pot stock expert Ray Blanco.
Ray’s referring to a study from New Frontier Data that says “legalizing marijuana at the federal level would create $132 billion in federal tax revenue and 1 million jobs.
“That’s not even counting state and local tax revenues… or the economic growth created by adding a million more jobs across the entire marijuana supply chain.”
“No matter what your personal politics are, it’s hard to argue against those kinds of move-the-needle numbers,” says Ray.
Indeed: $132 billion in tax revenue and 1 million new U.S. jobs ups the ante for many Americans.
“Even if you personally think recreational pot is a bridge too far, it’s impossible for any reasonable person to make the case that marijuana should remain a Schedule I drug (considered by the federal government to be more dangerous than crack cocaine, meth and PCP).”
But is Attorney General Jeff Sessions a “reasonable person”? Not when it comes to reefer madness… Remember when he said marijuana’s “only slightly less awful” than heroin?
Whatever.
The “Just Say No” fanboy kicked off 2018 in spectacular fashion — calling off the federal ceasefire on marijuana.
On Jan. 4, he “released a new memo undoing the Obama-era policies that kept the feds from interfering with state-legal marijuana.”
According to an article at Politico, “In a long-awaited move, the Justice Department chief withdrew federal guidelines that effectively limited prosecutions of businesses and individuals who sold pot in a legal manner under state law, even though the drug remains illegal under federal law.
“Sessions said future prosecutions would be up to individual U.S. attorneys,” says Politico. “However, the announcement appeared intended to discourage marijuana-related business by being deliberately vague about future federal enforcement efforts.”
If Sessions intended to throw the pot industry into a state of confusion, mission accomplished. “It shook the market for U.S. pot stocks,” says Ray.
The memo had another consequence: “It’s also stirring Americans who are sick of their government playing dumb on pot.”
A bipartisan effort in Congress to legalize marijuana federally and safeguard states where it’s already legal mirrors American sentiment.
Representative Earl Blumenauer (D-Oregon), co-chairman of the Congressional Cannabis Caucus says: “Going against the majority of Americans — including a majority of Republican voters — who want the federal government to stay out of the way is perhaps one of the stupidest decisions the attorney general has made.”
Ouch.
Rep. Blumenauer’s not the only one who’s taken Sessions to task; Trump’s been known to take his attorney general to the woodshed — the Twittershed? — when expedient.
“And between the vastly negative public outcry surrounding the AG’s policy shift,” Ray says, “the billions in tax money and a million new jobs, it’s not hard to imagine it happening again.”
“Pushing for legal pot could be a silver bullet for President Trump, who’s eagerly looking for ways to quantify his administration’s wins,” Ray says.
“Legalizing pot is low-hanging fruit.”
Just how low-hanging? Senior economist Beau Whitney at New Frontier Data says, “When there are budget deficits and the like, everybody wants to know where is there an additional revenue stream, and one of the most logical places is to go after cannabis and cannabis taxes.”
“So Sessions’ big step backward… could be the catalyst that gets legislators to act on decriminalizing pot.
“Not only could federally legal pot open up a $132 billion tax windfall and a million jobs — two things our country could certainly use — it would also make U.S.-based pot companies competitive with their foreign rivals for the first time,” says Ray.
Ray’s takeaway: “Pot could be Donald Trump’s silver bullet in 2018… I’ll continue to monitor the situation as it unfolds.”
[Ed. note: Over the last 18 months, Ray has earned a reputation as one of the foremost experts on the legal weed market. If you’ve been intrigued by the possibilities of trading penny pot stocks, but are flummoxed about where to find reliable, straightforward, no-conflicts-of-interest guidance… well, Ray’s the guy. Check out his premium research at this link — no long video to watch.]
The major U.S. stock indexes are spinning their wheels as the week winds down and the proverbial “partial government shutdown” looms large.
At last check, the Dow has dipped just below 26,000… but the S&P 500 has inched above 2,800.
As we write, the odds of averting a shutdown come midnight are somewhere between slim and none… although Slim hasn’t yet skipped town.
For much of this week, mainstream financial media have attributed the market’s ups and downs to the prospect of an agreement or lack thereof. From where we sit, it’s all noise. The last shutdown occurred from Oct. 1–17, 2013. The S&P 500 dipped more than 2% the first week… but by the time it was all over, it was up more than 2% from when the month began.
In the context of the year 2013 — in which the S&P raced up 30% — it’s a barely perceptible blip…
Shutdown jitters might be having more of an impact on the Treasury market; the yield on a 10-year note is up to 2.63%. The dollar index is holding steady for the moment at 90.6. Gold, meanwhile, is making a run back toward its recent highs, the bid now $1,333.
In the longer term for the markets and the economy, a more important deadline might be Monday — the day a U.S.-China trade war might begin in earnest.
On Monday, Commerce Secretary Wilbur Ross will recommend to the president whether to impose tariffs on Chinese aluminum. Another decision on Chinese steel is due before month’s end. Ditto for Chinese solar panels. (We’ve warned you on that last one previously — if you’re thinking about going solar, time’s running out before yuuuge price increases.)
“Ready or not, here comes a trade war between the U.S. and China,” says Jim Rickards — who points out that in addition to those looming decisions, the president’s State of the Union address on Jan. 30 would be an ideal opportunity to declare a trade war.
“The U.S. just posted its largest-ever annual bilateral trade deficit with China,” Jim goes on. “Trump has been eager to confront China on its trade practices, but has been constrained by a desire to seek Chinese cooperation on the North Korean weapons development issue.”
For reasons we won’t rehash here, that cooperation hasn’t been forthcoming. “That gives him a free hand to confront China on trade,” says Jim.
Jim says this next trade war is unlikely to proceed the way the last one did.
Thirty-odd years ago, Ronald Reagan launched a trade war on Japan. “Reagan scored a significant victory,” Jim reminds us, “by forcing Japanese and German car manufacturers to relocate their factories to the U.S. Today most ‘Japanese’ and ‘German’ cars seen in the U.S. are actually manufactured in Tennessee or South Carolina.”
But now? “China has much more leverage than Japan ever had,” Jim says. “China is also in a more adversarial posture toward the U.S. than Japan was. These realties mean that China will not acquiesce, but will retaliate for any actions taken by the U.S.
“The leaked announcement last week that the People’s Bank of China was considering allocating its reserves away from additional purchases of U.S. Treasury securities should be taken not as an immediate threat but as a shot across the bow indicating how China could retaliate for U.S. tariffs or other trade penalties.
“This new trade war will get ugly fast, and the world economy will be collateral damage… Markets are not prepared.” Jim says gold and cash will provide shelter from any storm.
[Developing story: Newsmax reports the president is days away from naming the aforementioned Wilbur Ross as director of the White House National Economic Council — replacing “Goldman” Gary Cohn. If true, that’s reinforcement of Jim’s trade-war thesis. Indeed, it’s a compelling sign the president’s protectionist-minded advisers are muscling aside the globalist-minded advisers like Cohn.]
And now the first visible sign of cracks in an unsustainable U.S. health care system.
Yesterday’s Wall Street Journal had a long front-page story about millions of older people who bought long-term care insurance and now face staggering premium increases — in some cases, nearly doubling in two years.
The companies peddling long-term care policies badly miscalculated how much they’d be shelling out in claims. Meanwhile, their investment returns on customers’ premiums are terrible because interest rates have been so low for so long.
So much for the peace of mind that’s supposed to come with a long-term care policy. The increases are so steep some policyholders are thinking about rolling the dice and giving up coverage. If they do and they end up on the losing side of that bet — needing nursing homes, assisted living or personal aides — they would have to deplete all the assets they’d hoped to pass onto their heirs… and then fall into the tender mercies of Medicaid.
The article was packed with a lot of whys and wherefores and finger-pointing. From where we sit, it underscores a bigger point we made here in mid-2015: Sometime in the next 20 years, you’ll no longer be able to get treatment for chronic disease in the manner to which Americans have become accustomed. The costs are so high they’re going to break the system.
You might want to revisit that episode of The 5. The figures we cited might be a little out of date by now, but we assure you they’re not getting better. One example we dug up with little effort: The annual per-capita cost of health care in the United States reached $10,348 in 2016.
“Dave, this may be one of the most useful insights ever posted on The 5,” a reader enthuses after yesterday’s episode.
[Gee, what did we say?]
“Chinese Premier Li Keqiang, who is an economist by training, looks at three indicators when he wants to know what’s really going on:
- rail cargo volume
- electricity consumption/production
- bank lending.
“In other words: transportation of commodities and products around the country, power usage and finance activity. That’s not a bad three-factor model for keeping tabs on a nation’s economy! Those criteria pretty much cover the fundamentals.
“As you cited two years ago from a diplomatic cable: ‘By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth.’
“I find it fascinating that the assets owned by Warren Buffett (via Berkshire Hathaway) are heavily into these same industries. His portfolio includes a number of finance/insurance companies as well as a smattering of utilities and railways — and he seems to know what he’s doing. Great minds think alike, no?
“I wonder has anyone has compiled a ‘Li Keqiang Index’ for the U.S. economy. It sure would beat the wonky numbers we keep getting from official government sources.
“Thanks as always for the great work you and your team do.”
The 5: Not that we’re aware of.
Also, this is the first time a reader has included a link to a previous episode of The 5 in an email to us. Attentive, you are…
“Haven’t written in a while (do you remember ‘Frankenbuzz’?),” writes our final correspondent, evidently someone from New England.
“Well, great shades of literary work. I caught your ‘grok’ reference (not to be confused with current local hero Gronk). Everyone else must be a Stranger in a Strange Land. That book had something of a cult following back in the ’70s. One of my favorite books ever.
“Still love The 5. Love especially the flowery vocab and the head-on facing of criticism.”
The 5: We’d forgotten about Frankenbuzz; the reader raised the prospect of genetically modified pot in mid-2016.
“Grok,” it turns out, merits its own (rather substantial) Wikipedia entry. Who knew?
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. Congrats are in order for Alan Knuckman’s Weekly Wealth Alert readers: This morning they were filled on a sell order for Coca-Cola call options, good for 50% gain. Not bad for a 15-day trade.
Will you be on board for Alan’s next trade come Monday? Here’s what’s in it for you.
