It's a 'New Day' for Cannabis

Big news out of Washington... Congress prepares for an unprecedented vote... It's a 'new day' for cannabis... What Apple's unusual announcement really means for investors... Checking in on an important tech 'megatrend'...

We'll begin today with some 'breaking news' on the cannabis industry...

This morning, the U.S. House of Representatives Financial Services Committee approved legislation that would open up the U.S. financial system to legal cannabis businesses for the first time.

Known as the Secure and Fair Enforcement ("SAFE") Banking Act, the bill would allow banks and credit unions to work with any marijuana-related business that operate legally under state law.

Why is this important?

In short, because cannabis remains illegal on the federal level, most banks have been unable (or unwilling) to work with businesses in the industry.

As a result, even many of the biggest and most successful legal cannabis companies still don't have access to the basic banking services most industries take for granted today. This includes everything from checking accounts to loans and credit cards to payroll services.

Instead, most still operate as cash businesses, which is not only a logistical nightmare but a huge public safety concern as well.

Whether or not one believes cannabis should be legalized on the federal level, there's simply no logical reason for this. If a business is operating legally in a particular state, it should also have access to financial services in that state.

The SAFE Banking Act would right this "wrong."

The bill will now go to the full House for a vote.

Of course, there's no guarantee it will pass... And there's even less certainty the bill would make it through the Republican-controlled Senate if it does. But today's approval is an important milestone, nonetheless.

This is only the third time in history that any standalone cannabis bill has been approved by a congressional committee. And this bill currently has 152 cosponsors – representing more than one-third of the House, including several Republicans. That is more support than any previous cannabis bill has ever received.

But this wasn't even the biggest cannabis news out of Washington this week...

In an interview on Wednesday, Massachusetts Rep. Jim McGovern – chairman of the House Rules Committee – said he expects the House to go even further. McGovern believes the House will vote to end federal prohibition entirely "within the next several weeks."

While this proposed bill would stop short of fully legalizing cannabis in the U.S., it would essentially exempt state-approved cannabis sales and use from the federal Controlled Substances Act. As McGovern explained...

We're in a new day. We need to make sure that our federal laws don't obstruct what states are doing, especially with regard to the banking issues, where everything now is being done in cash and this is not the way we want this to go. We need to make sure that the federal laws respect what the states are doing...

That's going to happen, and I feel really confident that we'll pass it in the House and I think that there is bipartisan support in the Senate on this as well.

If you attended our first-ever Cannabis Investing Event last night, you shouldn't be surprised...

You know the rapidly changing political and regulatory environment is one of the biggest reasons we're bullish on the industry today... and why we just launched a brand-new service – Cannabis Capitalist – dedicated entirely to cannabis investing.

Unfortunately, we're not able to offer a full replay of this event. But if you missed it, you're not entirely out of luck...

For a limited time, you can still access a brief recap, which includes a written summary of the most important points, as well as a few short clips of the actual event. Click here to see it now.

In other news, consumer-electronics giant Apple (AAPL) surprised its fans last week...

The company quietly sent out separate press releases announcing updates to its Mac computers, iPad tablets, and second-generation AirPods wireless headphones.

Typically, these product updates are a part of a bigger event... where CEO Tim Cook paces the stage, working the crowd into a lather... before he reveals a brand-new innovation. So this was far out of character for the company.

But during its latest highly anticipated event on Monday, we learned exactly why Apple shook things up...

You see, instead of discussing the company's hardware, Cook talked almost exclusively about its content instead.

Specifically, he spent much of the event discussing Apple Services – which includes digital content and services like Apple Music streaming service, AppleCare support, Apple Pay digital wallet, and licensing services.

Cook highlighted a handful of services in particular...

This fall, the company is rolling out its brand-new Apple TV+ streaming service. Apple TV+ will deliver original video content, similar to Netflix (NFLX) and Amazon (AMZN) Prime.

Next, Cook announced the Apple News+ service, a subscription-based news app. For $9.99 a month, readers will get access to more than 300 newspapers and magazines, including the Wall Street Journal, the New Yorker, Esquire, and National Geographic, among others.

Apple also revealed its first dip into the mobile gaming ecosystem, called Apple Arcade. It's not nearly as big as the Microsoft Xbox and Sony PlayStation (yet)... But it's a start. It's ad-free and you can play the games without an Internet connection.

Finally, the company introduced the Apple Card – a physical and digital credit card in partnership with Goldman Sachs (GS). The card will offer up to 3% cash back and has a few other perks, including additional security measures to prevent fraud.

Now, this news was certainly not as exciting as a brand-new device for tech fans to 'geek out' over...

But as our colleague Christian Olsen – editor of the Stansberry Innovations Report – pointed out in a private note to us earlier this week, there is a "method" to Apple's "madness." As Christian explained...

It's no secret that Apple's iPhone sales are slowing. These days, people are holding on to their expensive iPhones for longer before they upgrade. Between 2012 and 2017, iPhones accounted for 86% of Apple's revenue growth. That number is expected to drop to 22% from 2017 to 2022.

To make up for that lost growth, Apple is building out a content revenue engine.

Consider this... in 2018, Apple Services brought in $37.2 billion in platform-based revenue – an environment where customers can easily make transactions, like Amazon and Microsoft's Xbox. That made up just 14% of its annual $265 billion in revenue.

That's a good thing for Apple. It means its services division has a ton of room for growth going forward.

In other words, Christian says Apple is now clearly making a major change to its business...

It's moving away from its traditional growth model tied to product-replacement cycles... and it's shifting more to a monthly, subscription-based services model. That's why Cook spent so much time talking about a $9.99-a-month digital newsstand, a digital arcade, streaming digital content, and a digital credit card.

While this model isn't as "sexy" as its hardware business, Christian believes it could ultimately be even more lucrative. Not only do services come with higher margins than manufacturing iPhones and iPads... they're also a lot "stickier" for the consumer.

The iPhone has driven the company's growth for the past decade. But on Monday, Apple showed us a glimpse into the company's future... And that's in innovative content and services.

Christian just returned from his latest research trip to Silicon Valley...

For the rest of today's Digest, we're turning things over to him to share a little "boots on the ground" perspective on the latest developments in artificial intelligence ("AI") technology...

What I (Christian) saw was eye-opening... I was in San Jose, California attending tech giant Nvidia's (NVDA) annual conference.

Nvidia is the industry leader in developing AI today. Every year, this conference is the premier venue to learn about the progress being made in AI and see for myself what companies are doing with it.

It's a great chance to talk to experts and engineers. It's also perfect for my research on a big idea I'm working on – smart robots. Going straight to the source helps cut through the marketing hype.

There, I got the chance to talk with engineers and developers, academics, and representatives from companies putting AI to use, like Google's parent company Alphabet (GOOGL), automaker Ford Motor (F), and social media titan Facebook (FB).

I flew in early Monday and hustled over to the conference for the keynote speech...

I'm glad I got there when I did. Minutes after I arrived, the 12,414-seat arena was almost at maximum capacity. The crowd listened to a two-hour speech on driverless cars, AI, and the latest developments in video-game technology from Nvidia CEO Jensen Huang.

Afterward, thousands of attendees descended upon the conference hall, which was jam-packed with tech experts.

I talked with engineers from one company that creates sensors being used in driverless cars. Its products work great in sunny California. But its engineers are hard at work trying to make its technology operate flawlessly during a harsh New England winter.

While we're still a decade or more from highways full of completely driverless cars, we're seeing some of this AI technology on the roads already in driver-assisted cars. If you've been in a newer car lately, you may have noticed many come with accident-avoidance features like automatic braking and lane-changing alerts.

I also got to see up close how AI is being used in medical devices...

Medical technology is one of the most cutting-edge uses for AI. Many of the presentations focused on how AI has improved the technology behind X-rays and MRIs.

Doctors already use machines to spot tumors... But AI can help determine whether tumors are benign or malignant... and how fast they're growing.

Another presentation I attended showed how AI can detect small defects in a beating heart that would have been otherwise missed in the past.

The most interesting part of my trip was getting to see how far AI has come along in robots...

I saw the Agrobot – a robotic machine that's using AI to determine ripeness in strawberries. It works well enough to not crush picked berries in the hot California sun. You can see the Agrobot in action in this 90-second video.

All in all, I spent my time at the four-day conference mingling with experts, sitting in on presentations, and watching live demonstrations that centered around Nvidia's hardware and software. I was surprised to see how quickly AI is developing for medical tech and smart robots and walked away optimistic that we're on the verge of several exciting breakthroughs.

I've long known that AI would begin to show up in everyday life. And my job is to steer my Stansberry Innovations Report subscribers into the companies that will benefit the most.

Stay tuned for more updates in the Digest about this developing tech megatrend.

New 52-week highs (as of 3/27/19): Automatic Data Processing (ADP), iShares iBoxx Investment Grade Corporate Bond Fund (LQD), MarketAxess (MKTX), Nuveen Municipal Value Fund (NUV), Wheaton Precious Metals (WPM), and W.R. Berkley (WRB).

In today's mailbag, several readers share their thoughts on last night's Cannabis Investing Event. As always, send your notes to feedback@stansberryresearch.com.

"Welcome to Tom Carroll and Cannabis Capitalist! Casey Research was the first in this space and I've done very well such as 500% on Canopy. I also was [a] private investor in Pharmacielo – the Canadian/Colombian company that just went public.

"As Doc Eifrig has clearly explained, THC is the only part that is addictive. Easiest way to avoid it is to use hemp-derived CBD instead. Hemp/CBD has helped me with reducing pain and inflammation and get off the deadly and expensive drugs..." – Paid-up Stansberry Alliance member E.H.

"Porter and crew, thank you for the Alliance deal, been paid-up for years. Every morning I hop (ok, crawl) outta' bed, put the dogs out to go, well, you know, then read the most recent Stansberry.

"After watching the live event [last] evening, [this morning] will lead off with Stansberry Cannabis Capitalist, followed by regular breakfast of multi-grain toast, meta-musil, and vinegar (with 'the mother' of course). Old Baby Boomers will get it, you young whipper snappers may not..." – Paid-up Stansberry Alliance member Randy W.

"I was unable to submit my question in time for the Q&A on the Cannabis Investing Event. My question: With all the compounds that are available in the cannabis plant to be used for medical purposes, will you be covering this side of the industry? My question is particularly about the manufacturing of the compound in a lab, and which companies would be best in that industry. Thank you for your response." – Paid-up subscriber Jerry T.

Thomas Carroll comment: Yes! In fact, in my view, the compounds are the ultimate value in the business. Companies that can produce them, at scale, with predictable results will be a low-cost provider.

This is early stage. But one company in particular – which is currently on our Cannabis Capitalist watch list – has an interesting arrangement with a U.S. biotech firm to do just that. This is probably the easiest way to keep tabs on this trend. Thanks for the question.

Regards,

Justin Brill
Baltimore, Maryland
March 28, 2019