Big gains ahead: retreating from beyond the bounds of reason
Wednesday, 27 September 2017
By Bernd Struben
- Following in Lesotho’s footsteps
- Have you looked into these gold stocks yet?
‘Prohibition… goes beyond the bounds of reason in that it attempts to control a man’s appetite by legislation and makes a crime out of things that are not crimes… A prohibition law strikes a blow at the very principles upon which our government was founded.’
I pulled the above quote from Goodreads.
You have to wonder what Lincoln would have thought of the decades long war on cannabis the US government launched under Richard Nixon. A war that since went global.
‘Beyond the bounds of reason’ likely sums it up well.
If you’ve been following along with Port Phillip Insider, you’ll know we’ve been keeping a close eye on the de-prohibition of cannabis.
That’s not because we encourage the recreational use of marijuana. Though we do share Lincoln’s take on prohibition.
And we do wholly support marijuana’s medicinal use.
For years researchers were stymied in their efforts to study the potential medical uses for cannabis.
Researchers were not, generally, outright banned from these studies. But there were miles of red tape involved. First you had to procure a dependable supply of quality cannabis. (Good luck.) Then you had to prove you were adequately safeguarding that supply. If a few grams were unaccounted for, the entire project could get shut down.
All this meant few companies bothered funding new studies.
Fortunately, that’s all changing. Fast.
Breakthroughs using natural products derived from cannabis are already proving effective at treating a range of illnesses. These include epilepsy, cancer, Crohn’s disease, glaucoma and nerve pain, among others.
It’s why colleague Sam Volkering predicts medicinal marijuana will be the single biggest medical breakthrough since the discovery and development of penicillin.
That’s a big call. But one I believe is spot on. Which is why we’ve spilled so much digital ink on the topic.
Our beat here at Port Phillip Insider is to help you make money. We do that by bringing you our editors’ and analysts’ best investment ideas.
Few, if any, of these ideas have the blue-sky potential of today’s top cannabis companies. While many of these leading pot stocks have seen investors reap 1,000% or more gains already, I’m convinced that’s just the tip of the iceberg.
That’s because we’re still in the early days of unwinding the tangled web of cannabis prohibition.
Canada looks set to fully legalise cannabis in 2018. But it has not done so yet.
In the US, 29 states have legalised medical marijuana. And eight states, plus Washington DC, have made its recreational and medical use completely legal. That’s a good start. But it still means more than 40% of Americans live in states that have yet to axe prohibition.
Further south, Mexico legalised medicinal marijuana in June this year. But the nation has yet to address recreational use.
Australia, as you know, also legalised medicinal marijuana last year. And many European countries have done the same. Some are looking to follow The Netherlands towards legalising recreational use as well.
And now it looks like Africa may not be far behind. (More on that below.)
From an investor’s perspective, it’s like a financial snowball rolling downhill…gaining momentum and mass with each new turn. How much mass? Bank of America Merrill Lynch predicts that, by 2020, North American marijuana sales alone could hit US$35 billion. That’s up from ‘just’ US$6.9 billion in 2016.
With growth figures like that, you can understand why Sam devoted countless hours to his latest project. And now he’s uncovered what could be the three best stocks to benefit from the next boom in the de-prohibition revolution.
Now to the markets…
Overnight, the Dow Jones Industrial Average fell 11.77 points, or 0.05%.
The S&P 500 was flat (up 0.18 points, or 0.01%).
In Europe, the Euro Stoxx 50 index finished down 1.43 points, or 0.04%. Meanwhile, the FTSE 100 lost 0.21%, and Germany’s DAX index gained 0.08%.
In Asian markets, Japan’s Nikkei 225 index is down 66.67 points, or 0.33%. China’s CSI 300 is up 0.15%.
In Australia, the S&P/ASX 200 is down 6.98 points, or 0.12%.
On the commodities markets, West Texas Intermediate crude oil is US$52.08 per barrel. Brent crude is US$58.59 per barrel.
Gold is trading for US$1,293.41 (AU$1,642.22) per troy ounce. Silver is US$16.82 (AU$21.36) per troy ounce.
One bitcoin is worth US$3,892.87.
The Aussie dollar is worth 78.76 US cents.
Following in Lesotho’s footsteps
As mentioned above, Africa looks to be taking its own first steps towards recognising the potential medical benefits of cannabis. For a continent beset by war, famine, poverty and disease, you’d think African nations would have long since turned their backs on the fruitlessness prohibition.
Yet it took the tiny nation of Lesotho to get the ball rolling.
As Sam wrote to subscribers of Revolutionary Tech Investor two weeks ago:
‘Lesotho is a small, land-locked country in the southern part of Africa. It only has 2.2 million people and only became independent from being a British Colony in 1966.
‘But Lesotho now holds a unique, progressive title as being the first African country to legalise medical marijuana. Their view is, this is an opportunity to generate national income rather than outlaw it for the benefit of petty criminals.
‘It’s a smart move and one we see being replicated at pace around the entire African continent. Other’s will realise the opportunity on offer here and legalise as well. If Lesotho is raking in the cash from legal weed, how long do you think it will take the others to catch on?’
You might think that Sam was being optimistic when he wrote that he saw Lesotho’s move ‘being replicated at pace around the entire African continent.’ Or that he was talking his own book.
The truth is, Sam’s theory now looks prescient.
A week after Sam wrote the above extract, Cannabis Now reported the following:
‘A commercial agriculture company in Kenya has sent the country’s National Assembly a letter requesting the legalization of marijuana.
‘In the letter, biochemist and CEO of Hyaquip Inc International, Simon Mwaura, told half of Kenya’s legislative branch of government they should do away with the country’s current marijuana laws that outlaw the plant. In the letter, he argued that legalizing “bhang” — Kenyan slang for cannabis — would lead to economic recovery and wellness products being made widely available for Kenyans.
‘“The government should give license to the farmers to grow the important commodity to allow many residents grappling with immune deficiencies to recover and enjoy their lives,” Mwaura said in the letter. “This will also create job opportunities to our youths who will be involved in the all the processes in the farming and from my company, which will buy all the bhang.”’
Now Kenya’s parliament has yet to act on this recommendation. But Mwaura certainly makes a good argument. And with the Western world moving to end the prohibition on cannabis, what could nations like Kenya possibly gain from, as Lincoln said, ‘continuing to make a crime out of things that are not crimes.’
If Kenya does follow Lesotho’s lead, the ripple effect across Africa could move fast. Lesotho, after all, only has two million citizens. That’s about the same as the population of Brisbane.
Kenya, on the other hand, has almost 50 million residents. That’s more than twice the size of Australia’s population.
Once Kenya starts hauling in huge tax revenues from legal cannabis, its neighbours will almost certainly follow suit.
And the world’s best, established cannabis companies will have first mover advantage in any partnerships and merger deals down the road.
Make no mistake. Despite early investors in leading cannabis companies having already pocketed gains of 10 times or more, this megatrend is in its early days yet.
Have you looked into these gold stocks yet?
Yesterday I wrote to you about our in-house gold expert, Jason Stevenson’s favourite gold plays. (You can find those here.)
My reason for throwing the spotlight on gold — aside from a potential looming crimp in gold supplies — stems from my belief that a shooting war with North Korea is looking increasingly likely.
As terrible as that reality would be, I don’t believe investors can afford to go through life with their heads in the sand. Especially as the picture continues to deteriorate.
As Bloomberg reported this morning:
‘President Donald Trump said the U.S. is prepared to use “devastating” military force against North Korea but encouraged the world to work together to end the country’s nuclear program as he imposed new sanctions on the country’s banks.
‘“We are totally prepared for the second option — not a preferred option — but if we take that option it will be devastating I can tell you that,” Trump said during a joint news conference Tuesday at the White House with Spain’s Prime Minister Mariano Rajoy. “For North Korea that is called the military option. If we have to take it we will.”’
Despite the inflammatory words coming from both sides of the Pacific, global markets are remarkably complacent. And though gold has edged up, it’s hardly soaring.
From The Australian Financial Review:
‘If there is going to be a war between the United States and North Korea someone other than President Donald Trump or Kim Jong-un might have to tell Wall Street.
‘At the moment investors couldn’t care less, which is odd.
‘Indeed, if the moves in sharemarkets are any guide no one seems to be listening to the barbs being thrown around by the two leaders right now.
‘It’s all just viewed as cheap trash talk on Twitter or something out of a bad spy movie.’
Granted, both Donald Trump and Kim Jong-un would fit right in on the set of a cheap spy movie. And their Twitter exchanges are indeed akin to cheap trash talk.
But they’re not actors. And they’re not angry teens engaged in threats of ‘see you in the carpark after school’.
Donald Trump is Commander in Chief of the most powerful military the world has ever known. And Kim Jong-un is sitting on a sizeable — and growing — nuclear arsenal. One that may now contain hydrogen bombs.
We can only hope for a peaceful long term solution. A solution that sees the trade sanctions take hold and brings an end to North Korea’s nuclear dreams. But if things take a sharp turn for the worse, global markets will lose their complacency in a hurry. And gold, the go-to safe haven, is likely to take off.
If that happens, leading gold stocks should see their share prices rocket. You can check out those gold stocks here.