DUBAI – “What do people do here?” we asked a local.
“Well, they go out to dinner. And they go shopping. We have the nicest malls in the world.”
The whole city depends on air-conditioning. Without it, it would be uninhabitable… like Antarctica. Or West Baltimore.
Yes, there were people here before AC was invented, but they were just a few camel-drivers and adventurers on the lam.
“There are also a lot of sports,” continued our informant. “You can ride a dune buggy out in the desert… or go sky-diving. And we have beaches with warm water… and a huge water park.”
None of this appeals much to us. But it must appeal to others. The shops are busy, even in low season. And there are high-rise apartment buildings throughout the downtown area… and more going up. Someone must want to live here…
Meanwhile…
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Eternal Truths
We find it breathtaking… puzzling… and amusing…
…that people now take for granted things that we used to take for absurd. Things that couldn’t be true for one minute they believe to be eternal truths.
We have in mind the popular belief that the feds can make us richer by diddling interest rates.
The president of the USA believes it. Politico reports:
“We have people on the Fed that really weren’t – they’re not my people, but they certainly didn’t listen to me because they made a big mistake. They raised interest rates far too fast,” Trump said, despite having appointed four of the five current members of the board. He has vowed to only install new members of the board who support rate cuts, but his last two picks withdrew from consideration after backlash from Congress.
Not only does Mr. Trump think the Fed should rig the credit market, he also thinks he knows what the interest rates should be.
Investors must believe it, too. They bid up stocks on Tuesday, largely because they think that both the Fed and the European Central Bank (not to mention the world’s other major central banks… all of which are headed in the same direction) will cut interest rates before the end of the year.
The Dow now stands close to a new all-time high.
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Cheap Finance
Stocks may or may not go higher (Mr. Market can do what he wants). No matter, the feds can’t improve the economy or make corporate stock more valuable.
Here’s why:
The Fed lends money overnight. It only directly affects the “short end” of the yield curve… where you borrow short-term money.
Lending below the rate of inflation shifted the whole financial system to focus on short-term money, short-term investments, and short-term results.
Why borrow long term at a real interest rate (albeit a low one) when you can borrow short term for free? Why worry about long-term profitability when you can make your money now? Why worry about sales and profits when you can goose up your stock with cheap finance?
But real capitalism takes time. It takes time to build factories and infrastructure. It takes time to train people. It takes time to test out new innovations and inventions. It takes time to put new machinery in place… and to pay for it.
And it takes savings. But as the Fed pushed down interest rates, it made savings so unattractive that current net national savings are lower than they were 20 years ago.
And the rate of savings as a percentage of gross national income is now 80% below where it was when America really was great – in the 1960s.
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Bad for Business
Short-term finance is great for short-term speculators. But it is bad for business. You can’t build a real, prosperous economy with overnight money. You need long-term finance.
And with the savings rate in decline… and capital sliding down the yield curve to the short end… the little long-term capital left went to the safest borrowers – large corporations and the U.S. government.
Alas, money is not “invested” by the feds. It’s squandered. And it is small businesses – not huge crony corporations – that are the major source of economic growth.
The U.S. economy began a cyclical downswing in 2001. Since then, GDP growth rates – averaged over a 10-year period – are only half those of the late 20th century.
The Fed’s fake interest rates may have jimmied up stock prices, but they didn’t stop the decline on Main Street; they made it worse.
Regards,
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Bill
MARKET INSIGHT: HOW NOT TO INVEST IN CANNABIS STOCKS
Editor’s Note: Longtime readers may know Teeka Tiwari as one of the world’s most trusted cryptocurrency experts. Teeka prepared his readers for the 2017 crypto boom well in advance. He made his first crypto recommendation in April, 2016.
But Teeka’s investing interests aren’t limited to cryptos. Today, he sees a profitable speculation taking shape in the legal cannabis industry. But it’s likely not the one you think.
Legal cannabis isn’t our usual beat at the Diary. But for readers interested in speculating in this new industry, read on to see a right way, and the wrong way, to invest in legal pot.
By Teeka Tiwari, Editor, Palm Beach Confidential
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Today, millions of investors across the world are making the same mistake. I hope you’re not one of them…
You see, many people are hungry to get a foothold in the emerging recreational cannabis market. But they’re not sure what to look for. So investors are piling into some of the worst deals I’ve seen since the dot-com boom.
I’m seeing pot stock valuations that make tech stocks look cheap… compensation packages for small-cap executives that would make Wall Street bankers blush… and malinvestment on such a scale, it’d make even a Soviet-era commissar hang his head in shame.
Worst of all, I’m seeing hard-working Americans pour billions of dollars into terrible investments – believing that the next round of millionaire-making opportunities will come from recreational pot stocks.
The ugly truth is: They won’t…
The competition in the recreational pot industry will be as fierce as it is in the airline industry. There will be a cutthroat race to the bottom on prices – and it’ll bankrupt 90% of the current players in the marijuana space.
That’s not to say cannabis companies aren’t worth investing in. But you need to invest in the right ones.
That’s why I’ve been focusing on a handful of companies who are working on products in the legal cannabis space. And today, I’ll show you why you need to focus your investment dollars there, too…
Cannabis Confusion
The biggest mistake pot-stock investors make is not distinguishing between legal and illegal cannabis at the federal level.
You see, the cannabis plant creates many types of products.
But most people are familiar with just one: marijuana (also known as pot or weed). It contains tetrahydrocannabinol, or THC. It’s the psychoactive compound that makes people feel “high.”
Now, the federal government lists marijuana as a Schedule I drug. So it gets the same treatment as heroin, LSD, and ecstasy. And because it’s illegal, most big banks won’t touch financing for marijuana deals.
Another type of cannabis, though, is hemp. It produces a chemical called cannabidiol, or CBD. Unlike THC, CBD doesn’t make you feel intoxicated.
In December 2018, President Trump signed a farming bill legalizing industrial hemp as a crop. It lifted restrictions on the sale, transport, and possession of hemp-derived products.
Yet there’s a big mistake most investors are making: They’re focusing solely on weed companies. And while pot is medically legal in 33 states (and recreationally legal in 11), it’s still illegal at the federal level.
Now, I expect the feds to change their stance in the future. But in the meantime, our research indicates that hemp-based products will earn most of the profits from the legal cannabis boom…
Life-Saving Cannabinoids
CBD isn’t the only cannabis compound with the potential to treat numerous ailments, either. Two others are tetrahydrocannabivarin (THCV) and cannabigerol (CBG). And our research indicates these types of cannabinoids will end up garnering most of the profits from the cannabis boom.
If you haven’t heard of them yet, you will. Right now, CBD has the biggest growth potential.
You see, Brightfield Group forecasts CBD sales to grow from $591 million this year to $22 billion by 2022. And Merrill Lynch projects the CBD industry to directly disrupt existing markets worth around $2.6 trillion.
Millions of people already use CBD to alleviate joint pain, arthritis, epilepsy, anxiety, and many other ailments.
In fact, a January 2019 Consumer Reports survey found that over 25% of Americans say they’ve tried CBD. And one out of seven of those people said they use it every day.
But THCV and CBG are showing great promise, too…
Despite the $72 billion U.S. market for weight loss products, over 300,000 people per year die due to complications from obesity, according to the Centers for Disease Control and Prevention. It’s the second leading cause of preventable death behind tobacco. As an appetite suppressant, THCV could save millions of lives.
How much would you pay for a THCV product that stops you from feeling hungry without getting you high? In my never-ending quest to manage my weight, I know I’d pay a lot.
Plus, some studies show that when used in conjunction with traditional treatments, certain cannabinoids make cancer cells more receptive to medication. One study cited by the National Cancer Institute even found that “cannabinoids appear to kill tumor cells.” And animal studies indicate that under certain circumstances, anti-inflammatory CBG can shrink cancer cells.
Last year, people spent more than $130 billion on cancer treatments. So you can see the future market potential of cannabinoids in medicine is huge…
Let the Game Come to You!
– Teeka Tiwari
P.S. Look, recreational pot will end up much like the modern-day alcohol and tobacco industries: A handful of well-financed survivors will thrive off a stable of big brand names.
But since pot is still illegal at the federal level, it’ll be years before these opportunities come to fruition. So it’s nearly impossible to guess which pot stocks will win big at this stage.
Meanwhile, you run the risk of missing out on profiting from the mother lode: non-THC cannabinoids.
That’s why I’ve spent the last three months neck-deep in the cannabinoid market.
I’ve been flying all over the world… talking to the most important CEOs in the cannabis space… and trudging through the jungles of Colombia and the grow rooms of Canada… all to find the world’s best cannabinoid investments.
And next Wednesday, June 26 at 8 p.m. ET, I’ll explain just how big this CBD opportunity is during a special free event I’m calling the Pocket Change Millionaire Summit.
I’ll tell you about a unique way to play this trend. It’s a secret that Wall Street has used for years to make millions. In fact, I’ve been using it for years to explode my own wealth higher.
And now, I’m kicking down the door to bring these deals to Main Street. So come join me. Click here to reserve your seat.
FEATURED READS
The Hidden Factor That Determines If You’re Middle Class
How do you know if you’re part of America’s middle class? Most people might point to their salary or the size of their home. But nowadays, economists say it depends on another factor: how much money you can borrow…
Fed Leaves Rates Unchanged
The Federal Reserve announced it plans to hold rates steady throughout 2019 while it left the door open for rate cuts next year. But it’s feeling pressure from President Trump to cut rates sooner rather than later…
The Man Who Bet $100,000 on Bill’s Trade of a Lifetime
Recently, Bill shared his Dow-to-Gold trading model with his long-time friend and colleague Tom Dyson. Tom was so convinced by the model, he went “all in” on the trade. And he believes it could be the secret to securing intergenerational wealth…
MAILBAG
Today, one dear reader disagrees with your editor’s view that wars are “win-lose deals with no real winner”…
Bill, I take issue with your view that warfare is nugatory. As I see it, the wonderful life you lead today, along with most Westerners, and many others too, is down to prior warfare. There is hardly a thing you can point to about our lifestyles today that does not owe something to the imperative to go to war. Pretty much all progress has arisen through the need to prepare for and fight wars.
You might point to this or that invention as evidence I am wrong. I would suggest looking a little deeper, as you’d find none of those things could have come about without some prior innovation that owed its provenance to war. Yes, war is nasty and bitter for those in the firing line at the time. But then, the world blooms in its wake. We forget the troubles and celebrate the bounty until the next round.
– Kenneth L.
Meanwhile, another reader adds to your editor’s thoughts about the relationship between money and politics…
This line, “But money flows through the veins and arteries of politics. The more money it gets, the more aggressive and destructive it becomes,” isn’t quite complete. The money and the politics, both forms of speech, are, like form and function do, leapfrogging each other. It’s equally true that the more aggressive and destructive government (the product of a political process) becomes, the more money we give it and the process. Cause and effect, effect and cause.
Unfortunately, voting to tax the 1% in 1913 with the income tax was the beginning of the current escalation in the battle to control the political process. The establishment of a central bank was another. From then on, you had to be big and powerful to survive attacks.
When individuals or entities or industries are attacked, they fight back. They either become bigger as their competitors fail, figure out how to fight back, conglomerate, or form big trade associations and other lobbying groups (AARP, unions, chambers of commerce, political parties). Attacking each other is the way we escalate the destructiveness of government, whether we use money, votes, or time.
Money, votes, and time are also what we use to defend each other. Government serves with the consent of the governed. If the governed would stop asking it to attack the rights we share, and stop authorizing it to do things it’s ill-equipped to do (e.g., pick who wins, keep us safe, keep us healthy, keep us fed, provide eternal life, prohibit prosperity), and throw the bums out when they do so in violation of their oaths, then there would be no reason to spend money on politics.
Voters’ first mistake was to vote to attack each other, including those who form businesses, charities, and other associations, with governing documents to run them, big and small. Money is just a tool like votes, time, and words.
– Sandra K.
And finally, Tom Dyson responds to questions from dear readers after sharing his bet on the Dow-to-Gold ratio and tales of his adventures abroad…
The Dow-to-Gold ratio trade is a great idea, but if one held half their portfolio in physical gold and the other half with high-quality, cheap companies, would there not be a hedge that could potentially profit both ways?
– Russell K.
Tom’s Reply: Hi, Russell. High-quality, cheap companies don’t exist right now. The U.S. stock market has one of its richest valuations in history right now… near 1999 levels.
Anyway, even if this weren’t the case, my answer would still be, “No.” In both cases (stocks or gold), you’ve sold dollars to buy them. So you are “long” stocks and gold and “short” dollars.
My trade is “long” gold, “short” stocks. And I am “flat” the dollar.
Hi Tom. Your Dow-to-Gold bet sounds interesting. Could you please explain just how you made this bet? I just spent six months in India and three months in Nepal. I am currently in Thailand and returning to Pokhara, Nepal in November when I can get a new visa. I doubt I will ever return to the States. Good luck with your travels!
– Thomas C.
Tom’s Reply: Thomas, we sound like peas from the same pod. I wonder what your age, nationality, and family situation are that you’re able to lead such an unconventional lifestyle?
I bought a portfolio of gold and gold-related investments, and then I shorted the Dow in the futures markets. But there are other ways of doing it, which I’m exploring with Bill and Dan Denning.
IN CASE YOU MISSED IT…
World-renowned crypto expert, Teeka Tiwari, is gearing up for his biggest announcement yet… and you don’t want to miss it.
He says the new opportunities in the cannabis sector could give early investors as much as 3,700 times their money.
He’s been traveling all over the world, searching for the best cannabis stocks to invest your wealth in. And on Wednesday, June 26, at 8 p.m. ET, he’ll share the details on five small-cap stocks that could make you a fortune.
Plus, he’ll reveal a unique Wall Street investment that turned his $1,000 stake into $1.6 million.
Go here now to reserve your spot.
