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What this tiny socialist country taught me about the marijuana market

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From Justin Spittler, Editor, Casey Daily Dispatch:

Uruguay’s marijuana economy isn’t what you may think.

There are no coffee shops like there are in Amsterdam. There aren’t even dispensaries like there are in Colorado, California, or Oregon.

Buying marijuana in Uruguay is actually quite difficult. And that’s somewhat of a surprise.

You see, Uruguay was the first place in the world to legalize cannabis outright. Here, it’s legal to grow, sell, and consume marijuana.

So naturally, a lot of people arrive in Uruguay with “high” expectations. They think they’ll be able to easily buy high-quality cannabis. But that’s not the case at all.

I know because I was just in Uruguay…

I went there to spend some time with Doug Casey, who lives on a gorgeous ranch about 30 minutes from Punta del Este.

I also came to Uruguay to get a firsthand look at the country’s marijuana industry.

So, I spent a day in Montevideo, Uruguay’s largest city and capital, before heading over to Doug’s ranch.

There, I spoke with several locals about the country’s marijuana industry. One of those people, Mauricio, owns a cannabis shop in the heart of Ciudad Vieja, Montevideo’s historic center.

But this wasn’t a dispensary. Again, they don’t have those in Uruguay. This was more of a paraphernalia shop. It sells bongs, rolling papers, and clothing made from hemp.

Still, Mauricio was extremely knowledgeable about Uruguay’s marijuana industry. So, the two of us talked about the country’s market one afternoon.

According to Mauricio, marijuana legalization in Uruguay isn’t the success that the government and many in the media claim it is.

Instead, it’s somewhat of a disaster. Here’s why…

You can legally only buy marijuana from pharmacies in Uruguay…

That might not seem so bad. But you must understand something.

Less than two dozen pharmacies signed up to sell marijuana. And almost all of those pharmacies are located in Montevideo.

So it’s not that convenient to buy cannabis there.

The good news is that marijuana is dirt cheap in Uruguay. A gram only costs about $2. That’s about one-fifth of what a gram costs in California.

Of course, there’s a reason for this. And it’s because the pharmacies in Uruguay sell low-quality cannabis. According to Mauricio, it’s “rubbish.”

But that’s not the only problem with Uruguay’s marijuana industry.

To buy marijuana here, you must be a citizen…

You also need to go into the government’s system to buy cannabis. In other words, Uruguayans must provide personal information—and even their fingerprints—to buy cannabis.

A lot of Uruguayans aren’t comfortable doing this because they don’t know what the government will do with the information. So, they don’t bother buying cannabis legally.

Instead, they buy marijuana off the black market…

They do this so they can stay out of the government’s system, and because marijuana from the black market is apparently much better.

In short, Uruguay’s legal marijuana industry isn’t the massive success that some people think it is.

Of course, the program is only about a year old. It’s only natural that it would experience growing pains.

But I’m not confident that the program will get better anytime soon…

And there’s a simple reason for this.

Uruguay’s new president, Tabaré Vázquez, isn’t a fan of marijuana legalization. That said, most locals I spoke with don’t think Vázquez will roll back legalization. But they also don’t think that he’ll do a lot to fix the country’s marijuana program.

I’m telling you this because many marijuana investors believe there’s a huge opportunity in Uruguay. I even thought that I might find some interesting investing opportunities there.

Instead, I left thinking that the Uruguayan government is throwing away a huge opportunity to create jobs, generate tax revenue, and attract tourists.

The good news is that there are much better marijuana investing opportunities out there.

I know because I’ve been to the front lines of the global marijuana boom…

I lived in San Francisco, California, and Denver, Colorado last summer. And, as you probably know, these two cities are at the forefront of America’s cannabis boom.

But the best opportunity I’ve come across is north of the 49th parallel. Yes… I’m talking about Canada.

You see, Canada’s government started the process of legalizing recreational marijuana in April 2017.

Today, Canada’s Senate will hold a vote on legalizing marijuana outright.

If everything goes according to plan, anyone over the age of 19 will soon be able to legally buy and consume marijuana in most parts of Canada. That includes tourists.

And I can promise you this: Legalization in Canada will look a lot different than it does in Uruguay.

That’s because Canada’s government isn’t holding its marijuana economy back…

It’s supporting it.

Now, it’s not going to a completely free market. Those don’t exist anymore. There will be regulations. The Canadian government will take its cut of marijuana profits.

But it won’t handicap the industry like Uruguay’s government has done. I’m not the only one who thinks this, either.

Accounting firm Deloitte estimates that Canada’s marijuana market could become a $4 billion to $9 billion market once recreational use is legalized. Keep in mind, Canada’s marijuana market is currently estimated to be worth around $400 million.

That means Canada’s legal marijuana economy is set to grow at least tenfold in size… almost overnight.

That alone is reason enough to invest in Canada’s marijuana economy. But it’s not the only reason.

You see, Canadian marijuana companies are already exporting their marijuana, technology, and expertise all around the world. This puts them light-years ahead of the competition, including U.S. marijuana companies.

So, consider buying Canadian marijuana companies if you haven’t yet. Just understand that marijuana stocks are still incredibly volatile.

As always, don’t bet more money than you can afford to lose. Keep your position sizes small. And take profits as they come.

Regards,

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Justin

P.S. Crisis Investing editor Nick Giambruno has three Canadian marijuana companies in his portfolio that are primed for a huge rally. If you’re interested, you’ll want to get in ASAP… because of today’s important vote. It could be the biggest day in the history of pot profits. Click here to get all the details.


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Is weed the new bitcoin? (Yes, but that’s a good thing)

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From Richard Smith, Founder, TradeStops:

“Is weed the new bitcoin?”

This was the question posed by Bloomberg in September, when medical marijuana stock Tilray (NASDAQ: TLRY) had one of the wildest one-day price moves anyone has ever seen.

On the wild day in question, TLRY almost doubled on billions of dollars in volume before losing all of the gains in an hour. It then finished 40% above the opening price.

It was all the emotions of a mania, a collapse and a recovery compressed in a single day’s trading.

As of this writing, Tilray has a market cap above $13 billion. A few months ago, it had a market cap above $26 billion. And a few months before that the stock didn’t even exist.

The company had its IPO in July around $23 per share. It then proceeded to run up more than 1,200% in a matter of months and then got cut in half, but still stands tall as a multibillion market cap enterprise.

There is another marijuana-related stock, Pyxus International (NYSE: PYX), that spent the past 145 years being a North Carolina-based tobacco company called Alliance One International. Alliance One changed its name to Pyxus and emphasized a new focus on cannabis; the share price doubled in three days.

No wonder pot stocks are being compared to bitcoin and cryptocurrencies. The absolute wildness in the marijuana space is comparable to what happened with crypto in late 2017.

But is the enthusiasm justified, or is it just speculators getting out of control? Consider the view of Bill Newlands, president of Constellation Brands.

Constellation Brands, founded in 1945, is a big, serious company in a boring sector — consumer staples. It has a huge market cap at $42 billion and focuses on an established industry, beverages and spirits. If you’ve ever had a Corona or a Robert Mondavi wine, you’ve used Constellation’s products.

That matters because Constellation Brands — this big, serious consumer staples company — decided they believed enough in the future of cannabis to invest $200 million into Canopy Growth Corp. (NYSE: CGC), a budding pot stock. Then, they decided $200 million wasn’t a big enough investment and put in $4 billion more.

That’s no small bet, even for a consumer staples giant. Newlands said the global cannabis market “could be a $200 billion business in very short order.”

Coca-Cola is also looking at pot-related products. They are “closely watching” the cannabis drinks sector, reports the Financial Times.

Then too, the Canada division of Walmart — yes, Walmart! — is investigating the possibility of cannabis-related products. Nothing has been decided yet, but they are fact-finding and taking a hard look.

So yes, the action around pot stocks is, from a certain perspective, completely crazy. But it is also based on an intense jockeying for position in a new market space that could literally be worth hundreds of billions in revenues in just a few short years. And real players are sitting up and taking notice.

Why is this happening?

Because Canada has opened the floodgates. In the United States, those floodgates are still partially closed but they are slowly opening here, too.

On June 19, Canadian Prime Minister Justin Trudeau tweeted the following:

It’s been too easy for our kids to get marijuana — and for criminals to reap the profits. Today, we change that. Our plan to legalize & regulate marijuana just passed the Senate.

That was months ago. On Oct. 17, Canada’s big legalization rollout will go into effect.

This will make Canada only the second country in the world — and the first wealthy G7 nation — to officially legalize marijuana on the nationwide level, paving the way for a commercial market. The first country to do it was Uruguay, back in 2013.

Meanwhile, in the United States, marijuana is still illegal at the federal level. But nine U.S. states and the District of Columbia have legalized it for recreational use and another 30 U.S. states have legalized it for medical use. And there are more legalization measures coming to the ballot box.

It’s estimated that legal weed is a $9 billion business in the U.S. alone, even with its current limited status. When the U.S. finally goes all the way — and that is just a matter of time now, given dramatic shifts in voter sentiment — that number will explode.

And then the marijuana industry will inevitably go global — a phenomenon that has already begun. For example, in the United Kingdom, medical cannabis prescriptions will become legal as of Nov.1.

So, “Is weed the new bitcoin?” In a manner of speaking, yes.

But that is because bitcoin is a real and transformative thing, not a temporary fad like Beanie Babies or Cabbage Patch Kids.

It’s a wild time right now because cryptocurrencies like bitcoin are at the forefront of “Internet 3.0” and the transformation of the technology landscape, while the commercially regulated cannabis industry is in the process of going from non-existent to hundreds of billions in revenue in record time (likely a short number of years).

This means a whole lot of volatility could continue to swamp the cannabis space. Pot stocks could continue to show aggressive trading patterns.

But there will also be real opportunity in this space, and in a strange way even the possibility of safe-haven investments. That’s because, in the event of a world gripped by fear and uncertainty, investors might flock to the handful of industries still showing rapid growth (especially with FANG cooling off).

Here’s a list of a handful of marijuana-related stocks you can track in TradeStops.

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There is a lot to keep an eye on in this industry — plenty of peril, but plenty of serious opportunity, too. We’ll continue to dig into this exciting new industry and share what we find.

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Richard

Crux note: Volatile assets like cryptocurrency and pot stocks can be extremely difficult for self-directed investors to navigate… 

That’s where TradeStops comes in…. Dr. Richard Smith’s investment tools take the guesswork out of the equation by telling you when to sell a losing stock – meaning you can make more money while taking less risk.

Richard’s philosophy is to cut your losses and let your winners ride… And his results speak for itself. You can discover why one satisfied investor called TradeStops his “safety net” right here.


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Investors have spoken… It’s time for more risk

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From Dr. David Eifrig’s Health & Wealth Bulletin:

All eyes have been on the 10-year U.S. Treasury yield over the past couple of days.

It recently broke out above 3.2% to a new seven-year high, causing a lot of reaction from the financial media… both positive and negative. The 10-year yield is significant for a couple different reasons…

First, as we talked about back in July, the spread between the 10-year Treasury yield and the two-year Treasury yield are recession predictors.

Second, the 10-year Treasury yield is the benchmark that guides other interest rates. It affects rates on everything from auto loans to home mortgages to consumer and business loans.

Finally, the 10-year yield is a signal of investor confidence. When investors are scared of owning stocks and corporate bonds, they tend to put their money in risk-free assets like government bonds. And as demand increases for government bonds, prices rise – which drives yields lower (bond prices and yields move in opposite directions).

When investors are optimistic about stocks, they don’t want to have their money in boring government bonds. Demand for Treasuries falls, and prices fall – which means yields shoot up.

That’s what we’re seeing today with the 10-year Treasury breaking out to multiyear highs. It shows investors want more risk. They don’t want to settle for 2%-3% returns in Treasuries. They want to chase the higher returns they can get in the stock and corporate bond markets.

The chart below shows how much money flows in to and out of U.S. Treasuries on a weekly basis…

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Last week, investors pulled $1.6 billion from U.S. Treasuries and $1.1 billion the week before. That’s nearly $3 billion, by far the largest two-week outflow since the start of 2018. And according to EPFR Global, investors put $1.2 billion into U.S. stocks last week.

The message is clear… Investors don’t care about risk-free assets. They want higher returns. And they think the stock market will deliver it to them.

As yields on Treasuries creep higher to 3.5%, 4%, or even 5%, we may start to see some more folks shift their money back in to these assets. Earning 5% risk-free is hard to turn down. But we may be awhile away from that.

For now, folks want to own stocks. That’s bad and good…

It’s bad because this is what happens at the end of every bull market. Investors see their friends making tons of money in the stock market and can’t stand to sit on the sidelines anymore. They pull money from safe assets and from their savings accounts to plow into equities. This of course, creates a bubble… and we all know how it turns out from there. (Not well.)

We start to see headlines from financial-media sites such as CNBC like this…

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And this from Bloomberg…

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If you’ve been following Stansberry Research for long, you know that my colleague Steve Sjuggerud has been pounding the table for folks to buy stocks now because of the “Melt Up” that you see above.

The Melt Up is where we’ll see one final surge in the market before it collapses. According to Steve, folks who are invested before the market takes off could make 100% to 500%, if not 1,000% gains.

And that’s the good news from folks preferring riskier assets like stocks – massive returns in a short period of time.

Since everyone is demanding higher returns, their money goes into the stock market, which pushes stock prices higher and higher.

The even better news… We’re getting close to Steve’s Melt Up, but we’re not there yet.

Folks are getting more bullish, but we’re not at an extreme level of bullishness yet. We hear warnings all the time because of high stock valuations… or warnings about rising interest rates.

This isn’t typical top-of-the-market or Melt Up behavior.

Steve firmly believes that the real Melt Up has not started yet and there are still incredible gains to come.

That’s why, on October 24, Steve will show you how to cash in on the Melt Up, discuss when the bull market will end, and give away his No. 1 recommendation right now.

Don’t miss out on this opportunity… Click here to claim your spot.

Here’s to our health, wealth, and a great retirement,

Dr. David Eifrig and the Health & Wealth Bulletin Research Team


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An important ‘test’ for the market

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From Justin Brill, Editor, Stansberry Digest:

The broad-market sell-off continued today…

All three major U.S. indexes closed sharply lower again.

The benchmark S&P 500 Index fell 2.1%… the Dow fell 2.1%… and the tech-heavy Nasdaq fell “just” 1.3%.

More important, as you can see in the following chart, today’s decline pushed the S&P 500 below its 200-day moving average (“DMA”) for the first time since April…

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As longtime readers may recall, the 200-DMA is considered a rough gauge of the market’s long-term trend. During bull markets, stocks tend to spend most of their time trading above the 200-DMA. During bear markets, they spend most of their time trading below it.

The S&P tested this level three different times following February’s “volatility panic,” but it never broke solidly below it. In fact, outside of a few days early this year and two days during the “Brexit” panic in June 2016, the S&P 500 has not broken below this level in a meaningful way since the broad market correction in early 2016.

Seeing this support level fail again today is concerning…

But it could simply be another “false” breakdown like those we’ve seen several times over the past couple years.

Why do we say that? Take another look at the chart above…

At the bottom, you’ll see the S&P’s relative strength index (“RSI”). This is a simple momentum indicator with values ranging from 0 to 100. Values below 30 indicate an asset is “oversold” and may be due for rally. Values above 70 indicate an asset is “overbought” and may be due for a correction, or at least a pause.

As you can see in the earlier chart, stocks are now extremely oversold. In fact, they’re now stretched to the downside to nearly the same degree that they were stretched to the upside back in late January.

This is a bullish sign.

Of course, this doesn’t necessarily mean stocks will head higher tomorrow. It’s common to see a “divergence” form – where stocks go on to make a new extreme that isn’t confirmed by a new extreme in the RSI – before a significant reversal begins. But this reliable indicator says at least a short-term bottom is near.

As always, no single indicator is foolproof. So make sure you continue to follow your trailing stops, just in case. But history is clear: Anyone who panics and sells stocks now is likely going to regret it.

Of course, this isn’t the only reason we remain cautiously bullish today…

As regular Digest readers have no doubt become sick of hearing, all of the reliable long-term indicators of stock market, credit market, and economic health we follow remain positive today.

While a broad market correction of 10% or more is always a possibility, these measures tell us the chances of a true bear market or a recession are still extremely low.

So-called “seasonality” could now provide a tailwind as well. As Morgan Stanley analysts explained in a research note today, we’re now entering an historically bullish time for stocks…

Seasonality is about to get ‘helpful’: October is technically a positive month for risk assets, but with some fascinating bifurcation: it often starts badly, but ends strong.

From 1998-2017, the average return over the first 10 days of October was -0.4%. The rest of the month? +2.0%.

Finally, we’ll also note that third-quarter earnings season is about to kick off in earnest tomorrow. And analysts are expecting strong sales and profit growth for the third straight quarter.

In other words, if you want to profit from the ‘Melt Up,’ you must be prepared for more volatility…

Of course, for most investors, this is easier said than done. You’re likely to panic and sell too early… or worse, hang on too long.

That’s why we’re preparing a special event this month…

On Wednesday, October 24, Steve Sjuggerud will sit down with some of the biggest names in finance – in front of a live studio audience – to discuss exactly what you should do with your money during the final stage of this long bull market.

We guarantee this event will be unlike anything you’ve seen from us before. Whether you’re currently leaning bullish or bearish, you don’t want to miss it. You’ll even get the name and ticker symbol of one of Steve’s favorite Melt Up recommendations – a stock that he believes could soar as much as 1,000% in the coming months – just for tuning in. Reserve your spot for free by clicking here.

Regards,

Justin


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