Two forecasts…one future…get ready…

Tuesday, 23 April 2019
Adelaide, Australia
By Bernd Struben

  • Canadian market riding high on pot stocks
  • In the mailbag
  • ‘Nanny Staters Ban Queensland Government Junk Food Ads’

You know the law: Two men enter, one man leaves.

Tina Turner, Mad Max Beyond Thunderdome

It’s hard to believe the original Mad Max film celebrates its 40th birthday this year.

The movie was shot on a shoestring budget, primarily in Victoria, and hit the theatres in 1979.

As you probably know it was a huge success. Enough to see it earn a spot in the Guinness record book for world’s most profitable film.

It launched Mel Gibson into the global spotlight. Mel was only 23 years old in 1979. And few outside Australia had ever heard his name.

The original movie also launched a spate of sequels. Each, in your editor’s humble opinion, worse than the last.

Nonetheless there were striking scenes and memorable lines in every iteration.

Like today’s opening quote from the third instalment, the 1985 Mad Max Beyond Thunderdome.

In the movie’s dystopian village of Bartertown, disputes are settled in the Thunderdome in a fight to the death. As Turner’s character Aunty Entity proclaims, ‘Two men enter, one man leaves.’

That line came to mind last week when I first heard about Port Phillip Publishing’s own Thunderdome approach to settling a great internal dispute.

This dispute involves the outlook for the Australian property and stock markets heading into 2020 and beyond. And the stakes are high.

On the one side we have Phillip J Anderson. Phil’s Grand Cycle Theory calls for a slowdown in 2020 followed by a fairly rapid rebound into new highs over the following six or so years.

On the other side we have Harry S Dent. Harry’s own demographics and innovation cycles tell him Australia is facing far more than a mild pullback. And that any rebound in stocks and real estate following the coming painful crash will be years in the making.

Only one of these forecasting gurus can be right.

Now only time will ultimately prove who that is. But planning your investment strategy around the right forecast could make an immense difference to your wealth.

If Harry Dent is right, preparing your portfolio for another 30% fall in home prices — and the resulting hit to stocks and the wider economy — could see you emerge with your wealth intact…or even greater than today.

If Phil Anderson is right, falling back into a highly defensive investment approach early could see you miss out on some of the greatest wealth building opportunities of the century.

But obviously they both can’t be right.

And so Port Phillip Publishing has organised the great debate. One which will see Harry Dent and Phil Anderson face off to convince you — and perhaps even each other — why you should heed their advice.

It all takes place in three weeks, on Tuesday, 14 May at 4pm AEST.

We’re filming the whole live event. And you can tune in for free to watch both men enter…and see which one leaves.

But there are only a limited number of ‘virtual spaces’ available. To secure your place at no cost to you, tune into Port Phillip Insider tomorrow.

Now, to the markets…

Markets

Overnight, the Dow Jones Industrial Average closed down 48.49 points, or 0.18%.

The S&P 500 closed up 2.94 points, or 0.10%.

In Europe the markets were closed for the Easter holiday long weekend.

In Asian markets, Japan’s Nikkei 225 is up 5.44 points, or 0.02%. China’s CSI 300 is down 0.04%.

In Australia, the S&P/ASX 200 is up 57.08 points, or 0.91%.

On the commodities markets, West Texas Intermediate crude oil is US$65.70 per barrel. Brent crude is US$74.26 per barrel.

Turning to gold, the yellow metal is trading for US$1,275.97 (AU$1,790.08) per troy ounce. Silver is US$15.03 (AU$21.09) per troy ounce.

One bitcoin is worth US$5,548.41.

The Aussie dollar is worth 71.28 US cents.

Canadian market riding high on pot stocks

On 12 April, fresh on the heels of attending SAREIC (the annual resource & energy conference in Adelaide), I wrote to you about the fastest growing soft commodity market in the world.

Namely marijuana.

As a market that essentially didn’t exist only two years ago — at least not legally — the growth potential here is mindboggling.

But, as with any brand new market, it’s populated by a lot of small start-ups and a handful of mid-sized ‘established’ players.

Many of these smaller companies will see investors lose money. Even the successful ones are subject to serious price swings. That’s to be expected in a market where constant news stories can see frenzied traders pile into a small stock one day only to take profits the next.

But if you can handle the volatility, pot stocks as a whole have been among the world’s best performers this year.

In fact, cannabis stocks are credited with helping send Canada’s S&P/TSX Composite Index to all-time highs, up 16% this calendar year as of last Thursday.

From Bloomberg:

Canadian stocks jumped to a record, driven by a resurgent energy sector and a rally in volatile cannabis shares…

Cannabis shares have been leading the charge in Canada, driving the S&P/TSX Health Care Index to a 46 percent gain as companies defy qualms of overvaluation amid a patchy roll-out of sales since the country legalized recreational sales in October.

While first-quarter earnings are likely to disappoint, according to Bank of Nova Scotia, that hasn’t stopped stocks such as Hexo Corp. from surging 93 percent, making it the top performer in the sector after being seen as undervalued last year.’

With a market cap of CA$1.98 billion, Hexo Corp [TSE:HEXO] counts among the bigger cannabis companies. And it gained another 4.67% in Monday’s trading (overnight here in Oz).

But as I wrote to you on 12 April, while Canada offers plenty of opportunities, its medicinal and recreational cannabis markets are dwarfed by the still emerging US market.

As you likely know, marijuana remains illegal in the US under federal law. This has made it tricky for US pot stocks to gain bank financing and for established Canadian stocks to merge with their US cousins.

But that hasn’t stopped Canopy Growth Corp [TSE:WEED] (with a market cap of CA$22.08 billion) from forging ahead with a first of its kind $3.4 billion cross-border deal.

Also from Bloomberg:

Cross-border cannabis consolidation has begun.

Canopy Growth Corp. announced Thursday that it’s buying Acreage Holdings Inc. in a $3.4 billion deal that keeps it onside with stock-exchange rules while giving it an entry point to the U.S. market the moment federal legalization occurs.

The deal is “the most complex M&A transaction completed in decades,” according to Jonathan Sherman and Jamie Litchen, partners at Cassels Brock & Blackwell LLP, the law firm that advised Canopy on the offer.’

Canopy, and other firms investing in the booming cannabis industry, are banking on the passage of the STATES act in the US.

If you haven’t heard of it, the acronym stands for Strengthening the Tenth Amendment Through Entrusting States. If it passes, the bill would remove marijuana as a Schedule One prohibited drug, giving states the right to determine its legality. And it would likely see a new surge in leading pot stocks around the world.

If you haven’t already, you can check out Sam Volkering’s favourite ASX-listed pot stock plays here.

In the mailbag

George RR Martin, of Game of Thrones fame, says that he can write pages of gory battle scenes and not receive a single disgruntled reader letter. But the moment he writes about sexual violence, the mail pours in.

I know how he feels.

Here at Port Phillip Insider, I can write a whole issue on speculative investing without stirring readers off the couch to offer feedback.

But trot out religion or legalising drugs and…look out.

In the 12 April issue I wrote the following about the (in my opinion) complete failure of the global war on drugs:

Oh, what a foolish herd of sheeple we all were to buy into the propaganda. And to let cannabis prohibition stand for more than half a century…

Cue the reader mail.

Like this, from reader Graham:

This ignorant communication about us dumb sheeple not knowing good ole cannabis is totally harmless, is a total disgrace for a website I had thought was reasonably well run.

People who know will tell you that 70% of drug addicts (cocaine etc) started on maryj and then needed something harder to get the same buzz. And to hold up Canada as an example of progressive thinking fits the tone of the letter. Canada is an advanced example of the thinking that is bringing the world down to chaos. I won’t waste my time explaining that to you. The amazing thing is that clowns like your Bernd are getting paid for this rubbish!

I’ll leave you with that for today. Time for me to scrub off the clown makeup and think up some fresh rubbish for tomorrow!

Remember to send your feedback to letters@portphillipinsider.com.au. If we publish your letter, we’ll only use your first name.

Finally, here’s the latest from The Australian Tribune:

‘Nanny Staters Ban Queensland Government Junk Food Ads’

Easter is freshly behind us. And children’s Easter baskets around Australia are brimming with chocolates and other sweet treats. As they should be.

But don’t expect to find those lollies advertised by Queensland’s nanny state government.

The Queensland government wants people...’

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd