Why the 'Green Wave' Is Worth Your Attention Today

Mergers can mean different things... ExxonMobil and Chevron discuss a deal... A major drugmaker gets into cannabis... Why the 'green wave' is worth your attention today... Video: Anthony Pompliano on bitcoin... Eric Wade's latest crypto message...

Out with the old and in with the new...

We begin today's Digest with talk about a pair of notable mergers. News of these deals – one proposed and one final – came across our desks this week...

Mergers always pique our interest because these deals can tell not only a story about the specific companies involved, but also give clues on where particular industries are headed.

For example, one of these items is about an industry that has seen better days... And the other involves an industry that's steadily maturing, with plenty of upside ahead.

Here's the first one...

ExxonMobil (XOM) and Chevron (CVX), two of the largest players in the battered oil and gas industry, are considering a "consolidation" because of their ongoing financial troubles, as Stansberry NewsWire analyst Daniel Smoot detailed earlier this week.

This industry took the brunt of the COVID-19 pandemic, as in-person economies essentially shut down in countries around the world at various points... Remember when the price of oil briefly traded for negative $37 per barrel last spring?

Things have gotten a little better – oil prices hit a one-year high this week – but the industry is still struggling in a big way...

We've seen bearish oil-price estimates from the oil cartel OPEC, the International Energy Agency ("IEA"), and oil-research firm Rystad Energy for 2021 – and potentially beyond.

In the meantime, the devastation is already significant across the oil and gas landscape...

In 2020, 46 North American oil and gas producers filed for bankruptcy, accounting for more than $53 billion in combined debt, according to oil-bankruptcy firm Haynes and Boone. The list of victims included shale giant Chesapeake Energy (CHKAQ).

And today, those companies still alive are making moves to scoop up struggling competitors... For example, Chevron bought Noble Energy for $5 billion last year. And ConocoPhillips (COP) made a $10 billion deal for Concho Resources.

A deal between ExxonMobil and Chevron would create the world's second-largest oil producer behind Saudi Aramco. It would also be one of the largest corporate mergers ever... ExxonMobil's market value equals roughly $200 billion today, while Chevron is worth around $170 billion.

If the big boys of the oil and gas industry are looking to merge, it tells us that they're expecting times to be tough for almost everyone else in the space in the years ahead...

'More bloodshed is coming'...

That's what editor Bill Shaw wrote in the June 2020 issue of his Commodity Supercycles service. He said supply and demand changes from the COVID-19 pandemic have rocked the industry like never before...

Eventually, expected supply cuts and demand growth might result in a predictable pattern again. But there's also a good chance that many companies have been forever changed. And as Bill wrote in that month's issue...

By then, many of the weaker players will be gone or in dire financial straits. Consulting firm PwC suggests that the COVID-19 fallout will force oil and gas firms to "reshape" in one of two ways...

These companies can branch out into other sectors – such as renewables, which are closing the gap. Or they can sell noncore assets and focus on cutting costs in one specific area.

In the past, energy companies that owned both upstream and downstream businesses were "hedged" against price cycles. But all of that changed during the COVID-19 pandemic...

Every segment of the energy industry got crushed at the same time. As a result, according to PwC, these companies need to begin reshaping their business models immediately.

We're seeing that play out now as ExxonMobil and Chevron at least talk about combining their resources, but they still face big headwinds. And ExxonMobil is facing even more trouble than you might think...

Last month, the U.S. Securities and Exchange Commission said it opened an investigation into a whistleblower complaint that alleged ExxonMobil overvalued its assets in the Permian Basin. As Daniel also reported...

The complaint was first made in 2019 after employees said they were told to provide unrealistic estimates about the pace of drilling to match the company's production forecasts.

In sum, while merger talk in the oil and gas industry is a sign of weakness... in the long run, as Bill wrote to his Commodity Supercycles subscribers last month, the pain will clear out the weaker companies and make the survivors stronger...

And as contrarians, these are the types of opportunities we live for. So we're building our watch list of oil and gas survivors and keeping a close eye on this sector as it recovers.

Here's the second merger story we want to talk about today...

And as we mentioned earlier, this one tells a story of growth...

Yesterday, Jazz Pharmaceuticals (JAZZ), a predominately neuroscience-focused company, announced that it would acquire GW Pharmaceuticals (GWPH), a leader in the cannabis industry.

The deal is valued at $7.2 billion – in the ballpark of the two already-completed oil mergers we mentioned earlier – and here, the overall industry trend is up. As Cannabis Capitalist editor Thomas Carroll told us in a private note yesterday, shortly after the merger was announced...

This is a major milestone because an established pharmaceutical company – Jazz – is essentially endorsing cannabis as an active ingredient in medicine. This is the first major pharma move seen in the cannabis sector.

Pharma will have a major role in cannabis, and consolidation in the sector is coming.

Jazz is adding GW Pharma's Epidiolex drug to its portfolio. This is a cannabis-based medicine that's approved by the U.S. Food and Drug Administration for pediatric seizure disorders.

GW is also known for being the company that developed Sativex, a multiple sclerosis treatment that was the first natural cannabis plant derivative to gain market approval in any country.

This is yet another 'crest' in what we've described as the 'green wave'...

In the December 7, 2020 Digest, we wrote in detail about the growing acceptance of legal marijuana around the country, both for medical and recreational use. From that Digest...

As of Election Day, 15 states and Washington, D.C. have now legalized cannabis for adult recreational use. And 34 have legalized it for medicinal purposes.

These updated numbers include five states – Arizona, Mississippi, Montana, New Jersey, and South Dakota – that legalized cannabis in one form or another just last month.

At the time, we noted the possibility for major legalization legislation happening at the federal level... and that it may be earlier than many people think, according to Thomas.

Decriminalization of marijuana at the federal level – via the Marijuana Opportunity, Reinvestment, and Expungement ("MORE") Act – had just been passed in the House of Representatives back in December, but it faced a hurdle in the Senate.

Since then, though, the January runoff elections in Georgia in favor of two Democrats have made it a more realistic possibility that this bill will become law. More from that Digest...

The MORE Act would remove marijuana from the list of "Schedule 1" drugs in the Controlled Substances Act. This list also includes heroin, ecstasy, LSD, and other drugs that are deemed addictive and of no legitimate medical use.

This "de-scheduling" – in cannabis (marijuana) industry-speak – would eliminate criminal penalties for growing, distributing, or possessing weed and its "derivatives," and allow the expungement of previous convictions for federal marijuana-related offenses.

And practically speaking, a law like this would make it easier for the cannabis industry to do business... That's because even in states where marijuana is now legal, companies currently end up doing all of their business in cash.

The MORE Act is very important for the industry to keep growing...

As we said in the December 7 Digest...

As of today, the banking system won't recognize cannabis businesses as long as the federal government says it's illegal. In short, with the MORE Act, the government could take a huge metaphorical pair of scissors to the "red tape" that the roughly $60 billion industry faces.

Thomas told his Cannabis Capitalist subscribers in January that he expects this to happen, providing another catalyst for growth in the sector and U.S.-based cannabis businesses...

We believe legal cannabis businesses will soon be permitted to use local or national banks just like any other business. This will be immediately accretive to cannabis companies. Today, they must negotiate a patchwork of banking services from regional banks that are not insured and are provided at astronomical fees.

Additionally, cannabis companies may soon be able to take business deductions like any other business. Today, they cannot... and they have much higher tax rates than other businesses of the same size and structure.

These operating expenses will fall dramatically and directly impact the bottom line.

Back in December, we also noted the reason why these changes are happening. This isn't totally out of the goodness of lawmakers' hearts so more people can receive cannabis treatments.

No, it's about the money, of course...

In 2019, $1.9 billion of tax revenue came to states with recreational cannabis laws. Colorado alone has raked in more than $1.3 billion in revenues from medical and recreational cannabis since 2014.

That's a good amount of money for governments that are already broke and will only spend more money in the years ahead. From the December 7 Digest...

Government spending and debt is one of these "things that never change"... unless an alien species wants to one-up central banks' "helicopter money" and drop $17 trillion or so from space to wipe out all the negative-yielding debt worldwide today.

Governments – both federal and state – need money from somewhere to pay the bills. And as Thomas wrote in the January issue of Cannabis Capitalist, legal marijuana is a likely and rare source of potential revenue growth over the next several years...

By 2024, the market is expected to nearly double from 2020, exceeding $30 billion. Moreover, with the recent green sweep on Election Day and the Democratic Senate wins in Georgia, these estimates are likely to accelerate even higher.

The point is, the 'weed' industry is worth another look today...

A major pharmaceutical company buying a company known for cannabis drugs is another big sign of that.

If you left this industry for dead after the "pot stock bubble" back in 2018 and 2019, I (Corey McLaughlin) urge you to give it another chance today...

We see an innovation and acceptance cycle happening here, just like we've seen with bitcoin (which we talk more about in today's featured video)... or any other number of emerging industries throughout our history.

And the increasingly positive sentiment is being reflected in stock prices...

A lot of cannabis stocks hit one-year highs after news broke about the Jazz-GW merger. And they had already been pushing higher off March's bottom without any significant pullbacks.

Here's a chart of the North American Marijuana Index, which tracks a basket of 41 U.S. and Canadian stocks. Notice that the trend was down heading into the March 2020 stock-market bottom. But recently, it has headed to highs last seen in 2019...

Thomas has been way ahead of this curve over the past year...

If you're a Cannabis Capitalist subscriber, you know what I'm talking about.

He has been pounding the table about this emerging "green wave" since 2019. And he has been making fantastic buy recommendations on companies in the industry... His model portfolio of 13 positions is currently up an average of 123%.

Thomas looks at this industry through the lens of a health care sector analyst with two decades of experience. And he's a careful evaluator of which companies are best-positioned to make money from this emerging trend... and stick around in the long run.

Last February, he recommended a U.S.-based "big box" store for marijuana and said, "buying this company could be like buying Home Depot in 1981." It sure looks like that so far...

Depending on the day, you might see this stock – GrowGeneration (GRWG) – in our "Top 10 Open Recommendations" at the bottom of our daily e-mail. Subscribers who've followed Thomas' advice are up 532% on a combined position with this stock in about one year.

Like we said, give the cannabis sector another long look if you've put it to the side in the past. Because unlike some other industries, things are looking up for it... and in Thomas, we have a top-notch industry expert to help us make the most of the trend.

If you're interested in learning more about a subscription to Cannabis Capitalist, click here. Right now, you can take advantage of a special offer... Get instant access to all of Thomas' research at 50% off the regular price.

Anthony Pompliano: How Bitcoin Goes to $1 Million

Bitcoin to $1 million.

You've heard this idea before... from our colleague and Crypto Capital editor Eric Wade. And today, we're sharing an exclusive interview with Anthony Pompliano, a popular bitcoin bull who details why he also believes this milestone could happen in his lifetime...

I think it's a foregone conclusion. You just have to be able to stomach tons of volatility... 80% drawdowns over a year and also 100% appreciation in just a couple months. All that volatility scares a lot of people, but if you're a long-term holder, you do your research and you get comfortable with it. It can be a pretty amazing thing to put in your portfolio.

Pompliano, who writes the Pomp Letter, touches on much more during the interview, including the recent moves of institutional investors buying crypto...

Bitcoiners don't want to sell their bitcoin, but the institutions want bitcoin, so the U.S. dollar price has to appreciate in order to accommodate everyone.

He also weighs in on regulatory bodies talking about cracking down on bitcoin and the likelihood of central banks adding the cryptocurrency to their coffers. This is a must-watch...

Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter.

And when you're done, if you want to get the best cryptocurrency research in the industry, be sure to check out our Crypto Capital service. Now is the perfect time... Eric recently recorded a special new message for anyone who is interested. Check it out here.

New 52-week highs (as of 2/3/21): ARK Fintech Innovation Fund (ARKF), Siren Nasdaq NexGen Economy Fund (BLCN), Futu Holdings (FUTU), Alphabet (GOOGL), GrowGeneration (GRWG), Green Thumb Industries (GTBIF), Harrow Health (HROW), Harvest Health & Recreation (HRVSF), Innovative Industrial Properties (IIPR), Jushi (JUSHF), KraneShares CSI China Internet Fund (KWEB), ETFMG Alternative Harvest Fund (MJ), Microsoft (MSFT), OptimizeRx (OPRX), ProShares Ultra Technology Fund (ROM), Rayonier (RYN), Sea Limited (SE), Silvergate Capital (SI), First Trust Cloud Computing Fund (SKYY), Simulations Plus (SLP), Scotts Miracle-Gro (SMG), and Vanguard Short-Term Inflation-Protected Securities Index Fund (VTIP).

In today's mailbag, feedback on yesterday's Digest that touched on taxes... and kudos for Ten Stock Trader editor Greg Diamond. Do you have comment or question? E-mail us at feedback@stansberryresearch.com.

"Taxes – 'who knows where the money is actually spent.' How about a bipartisan giveaway of many billions to Pakistan, Jordan, Egypt, Vietnam, Venezuela, Colombia, Ukraine, Sri Lanka, Bangladesh, Afghanistan, Belize, Costa Rica, El Salvador, Israel, Trinidad & Tobago, Curacao, Ecuador, Tunisia, Oman, Panama, Honduras, Nicaragua, Guatemala, and Peru, to name just a few receptacles to ease our quantitative load. I didn't hear of any long, bitter negotiations for that distribution – I guess they'd have to actually know what was in the 5,000+ pages they were signing for that.

"And now the hedge funds have dropped their exposure to the market – that might be the best signal for an imminent correction. We'll just wait for the exact catalyst that they're already aware of... Then it'll be off to the races again as they pour back in. With dry powder, I'm ready to swig the rig." – Paid-up subscriber Gary S.

"If I had a partnership in Stansberry Research, I would insist on assigning a team of bodyguards to Greg to keep him safe. I have made more money using his research in a short period of time than I have lost over the years following others. The man is gifted and one of the hardest working guys I have ever come across. Great job on hiring him!!!!!" – Paid-up subscriber William R.

All the best,

Corey McLaughlin
Naples, Florida
February 4, 2021