Nick’s Note: At the Daily, one of our goals is to help you build a diversified portfolio. That includes a blend of conservative, income-based investments and asset protection. However, we also set aside a small portion our portfolio to smart speculations like cryptocurrencies.
We like smart speculations because they have tremendous upside with little downside risk. In today’s essay, my colleague and Crisis Investing editor Nick Giambruno explains why marijuana stocks are one of the best smart speculations out there today.
By Nick Giambruno, editor, Crisis Investing
Buying marijuana in California is now as easy as buying beer.
On January 1, it finally became legal for adults age 21 and up to buy recreational cannabis in the state.
This was the true tipping point. It practically doubled the U.S. legal cannabis market overnight.
Now that recreational pot is legal in California, the U.S. legal marijuana market is expected to grow from $6.5 billion to $50 billion by 2026. That would make it the same size as the American craft beer and chocolate markets combined.
At this point, it’s nearly impossible to reverse the legalization trend—both in the U.S. and globally. California is just too enormous in terms of people, money, and influence.
Think about it… The state has the world’s sixth-largest economy. Only China, Japan, Germany, the UK, and the United States as a whole are larger.
The new jobs and desperately needed tax revenue (an estimated $1.4 billion annually) will make it politically impossible for the state’s government to roll back legalization.
Likewise, because of California’s sheer size, it will be politically and practically impossible for the federal government to roll it back either.
I expect many other states to legalize recreational use in the near future, especially those with budget problems. (To date, 29 states have approved legalized medical marijuana and eight states have approved recreational use. Washington, D.C. has also approved both.)
The end of marijuana prohibition in the United States became inevitable the moment California voters decided to legalize recreational use. Reversing this trend now would be more difficult than pushing a 20,000-pound boulder back up a mountain with your bare hands.
However, most of Wall Street—and most U.S. politicians—haven’t come to terms with this yet. Change is hard to accept, especially for pencil pushers.
That’s why the situation in California represents such a huge opportunity.
Investing in the nascent cannabis industry right now is like investing in the beer industry at the tail end of Prohibition.
Fortunes are going to be made. And you can be a part of that.
The Birth of a $150 Billion Industry
The United Nations estimates the global cannabis market to be worth around $150 billion annually. I think that’s conservative.
For perspective, about $33 billion worth of coffee is produced annually. So, the marijuana market is about four or five times bigger than the coffee market.
It’s also bigger than the iron, copper, aluminum, silver, corn, and wheat markets. You can see how these commodity markets stack up in the chart below.
Until now, almost all of this money has been underground. But that’s about to change.
The end of marijuana prohibition means we can finally profit off marijuana without risking jail time.
Widespread marijuana legalization is inevitable. It’s happening. And it’s unleashing a $150 billion market that was once underground.
Those profits are up for grabs.
In the coming months, many investors will make life-changing fortunes as the marijuana market steps into the light.
For now, though, marijuana is still illegal in most places.
Up until recently, that made it virtually impossible for regular investors to cash in on the lucrative marijuana trade.
Prohibition has funneled billions of dollars in profits to drug lords, corrupt government officials, and thugs.
Those days are numbered…
I’ve never seen an opportunity with as much profit potential as legal marijuana has right now.
I think investors could make an absolute killing in the U.S. “green rush.”
Editor, Crisis Investing
P.S. On January 10 at 8 p.m. ET, I’ll be hosting a free webinar with legendary speculator Doug Casey that shows you how to get rich in the “second” marijuana boom. We’re calling this event the New Marijuana Millionaire Summit.
During the summit, we’ll share details on how anyone with a few hundred dollars can position themselves into the future “Amazon” and “Home Depot” of the legal pot industry. If you missed the first wave of marijuana investing—when pot stocks were gaining 986%, 17,300%, 69,000%… even 299,000% and 399,000%—don’t worry. It’s not too late to become the next marijuana millionaire.
The Action to Watch in Gold This Week
By Jeff Clark, editor, Market Minute
Gold stocks have enjoyed a great run higher over the past three weeks.
The VanEck Vectors Gold Miners Fund (GDX) has rallied from a low of $21.25, right before the FOMC announcement in December to Friday’s closing high at $23.24. That’s better than a 9% gain in just three weeks.
Now, though, the gold sector is getting extended. And it’s dangerous to chase gold stocks higher right now.
I still expect the gold sector will be higher by mid-February. But for the next few days, a pullback would be healthy.
And according to my gold stock “roadmap,” we should be hitting that pullback just about now.
Take a look at this updated chart of GDX…
GDX closed above its upper Bollinger Band last Tuesday. You’ll notice that when that happened in July, GDX pulled back and retested its 50-day moving average (MA) as support before blasting higher again.
Further, the 9-day exponential moving average (EMA) just completed a bullish cross above the 50-day MA. That often marks the start of an intermediate-term move higher.
We’ve had a good run in this sector over the past two weeks. Traders who are heavily exposed should consider trimming some profits here. Then we can look for a pullback towards the 9-day EMA at about $22.83, or the 50-day MA near $22.50 as a chance to add that exposure back.
Just to be clear… I’m not suggesting that you sell all your gold holdings. I think the sector could be much higher just a few weeks from now. For the very short term, though, we might have to deal with some turbulence.
Trimming some profits makes sense. But it’s not yet time to completely cash out.
P.S. If you’d like to receive my free daily market insights in the Market Minute, click here and I’ll automatically add you to my list. You’ll also receive a link to my “Guide to Options Trading” just for signing up. This free report will teach you how to trade options the right way… and dramatically boost your overall returns.
From Richard D.: The Palm Beach Letter was always one of the best newsletters for conservative income investors and asset allocators preparing for—or in—retirement. I’m disappointed that the primary focus has shifted recently to cryptocurrencies, which I don’t think are appropriate for retirement assets. I hope you get back to your roots and not focus on what’s hot.
Nick’s Reply: Thanks for the feedback, Richard. Cryptocurrencies are a subject we cover frequently… and for good reason. They’re making life-changing gains for a lot of our subscribers. So, we make no apologies for that.
Rest assured, though, we haven’t abandoned our philosophical roots… It remains a blend of conservative, income-based investments, asset protection, and smart speculation.
Smart speculations like cryptocurrencies and marijuana stocks can turbocharge your portfolio—if done in moderation. That’s why we set aside a small percentage of our portfolio to them.
Of the 33 open positions in our Palm Beach Letter portfolio, only five are smart speculations. Yet, they have an average return of 3,890%.
With proper asset allocation, smart speculations like cryptos can boost your portfolio. Still, we know they aren’t everyone’s cup of tea.
If you’re looking for more conservative stocks, we have six buys alone in our Stock Market Income portfolio. These stocks have an average return of 19% and yield of 5.2%. And they’re a perfect fit for any retiree’s—or near-retiree’s—portfolio.
From John J.: In consideration for your time, allow me to get right to the point. I was having a problem with my Palm Beach Confidential subscription. I called your customer service line and was a little more disgruntled than I should have been. The reps I spoke to were Nathan and Marie. And it goes without saying… they couldn’t have done their jobs any better. I run an outside sales office and can appreciate good customer service. It’s this type of service that keeps me and my friends coming back and make us comfortable referring more people we know to Palm Beach Research Group. Bravo!
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