Sjug’s Latest Thoughts on the 'Melt Up'
More big news for legal cannabis… Banking reform could be just weeks away… Sjug's latest thoughts on the 'Melt Up'… A brand-new catalyst for Chinese stocks…
We'll begin today with some more positive news for the burgeoning legal-cannabis industry...
Following a week that saw the U.S. Food and Drug Administration hold its first-ever public hearing on cannabis, this week brought another first...
For the first time in history, the House of Representatives' powerful Appropriations Committee has included protections for cannabis businesses in its annual spending bill. As Forbes reported on Sunday...
Federal officials would be blocked from punishing banks for working with marijuana businesses under an annual spending bill released by congressional Democratic leaders on Sunday...
Although a growing numbers of states are moving to legalize and regulate marijuana – with Illinois lawmakers becoming the latest to pass a bill ending cannabis prohibition on Friday – many banks remain reluctant to work with licensed businesses in the industry out of fear of being subject to ongoing federal penalties.
Those hesitations could be at least partially allayed by the new House bill, which includes language barring federal regulators from punishing financial services providers for maintaining accounts for state-legal cannabis businesses.
Now, this particular provision only applies to U.S. Treasury Department spending...
As a result, it would not fully protect banks from potential federal enforcement carried out by the Justice Department, which is funded under a separate bill.
In addition, because this measure is included in the annual appropriations process, it would need to be renewed by Congress each year.
Still, it's an important first step, and would represent a big win for the industry if enacted.
Better yet, an even more important bill continues to move through the House as well...
As we noted back in March, the so-called Secure and Fair Enforcement (or "SAFE") Banking Act would go even further. It would allow banks and credit unions to work with virtually with any marijuana-related business that operates legally under state law.
According to a tweet from Representative Ed Perlmutter of Colorado this morning, the SAFE Banking Act now has 206 cosponsors in the House, including 26 Republicans. It could now be brought to the floor for a vote within the next several weeks.
Meanwhile, in addition to growing bipartisan support in Congress, there has been a groundswell of support from individual states. In just the past couple of weeks, we've seen 12 governors, 38 state attorneys general, 17 state treasurers, and the state bankers associations of all 50 states and Puerto Rico call on Congress to reform cannabis laws.
We continue to believe it's simply a matter of time before federal cannabis regulations are loosened significantly.
Switching gears, regular readers know our colleague Steve Sjuggerud remains bullish on Chinese stocks...
While he is still optimistic the U.S. and China will reach a trade war resolution, his research suggests the U.S. actually has far more to lose if things get worse from here.
Given these facts, you might assume he's no longer as bullish on U.S. stocks. But as he explained in this morning's edition of our free DailyWealth e-letter, that's simply not the case...
I've been bullish on stocks for the last decade. It was March 20, 2009, when I told readers a major bull market was underway. Since then, I've stayed bullish consistently. And every time we see a crack in the armor – every time the market falls, even just a little bit – I hear questions like the ones above.
Folks want to know what I expect to happen next. They know me as "Mr. Melt Up"... And they want answers when times get tough.
Tough times are here now. The escalating trade war has had a major impact on the U.S. market. Stocks fell in a big way last month. Folks are getting worried. But I'm not.
As he noted, the recent pullback has been sharp...
But U.S. stocks really haven't fallen that far to date. More from Steve...
Stocks hit new all-time highs at the end of April. Then they fell throughout most of May.
We're now down around 7% from those all-time highs. And the speedy decline has folks scared. But let me repeat that last part again... U.S. stocks are just 7% below all-time highs!
This hasn't been some major crash. And to me, it's no reason to panic. It's completely normal market action.
Yet, based on some measures of investor sentiment, you might not know this...
In particular, Steve noted that professional money managers are as worried about stocks as they've been in years...
Investors are nervous about what's going to happen with the U.S.-China trade war. And that's true of professional investors too, according to the most recent Bank of America Merrill Lynch Global Fund Manager Survey...
This survey asks a couple hundred professional money managers what they're doing with their money, what they're worried about, and what they're excited about. It's a fantastic indicator of what the pros think. And the May edition gave more great insights into current investor fear.
The professional investors are scared. And that has caused them to hedge their portfolios at one of the highest levels we've seen since the Great Recession. Roughly a third of respondents say they've taken out protection against a sharp fall in the stock market over the next three months...
That negative sentiment is powerful. But again, stocks are only 7% below all-time highs. This means we have a major opportunity... When the fear blows over, prices should reverse in a big way.
We here at the Digest have been far more cautious than Steve in recent months...
But we can't disagree with this argument.
U.S. stocks ran nearly straight up for the first four months of the year. And investors became as giddy as they've been since the broad market's peak last fall.
Yet despite plenty of bad news over the past several weeks – including the most severe escalation of the trade war to date – the market remains well above its December lows. Meanwhile, some measures of investor sentiment have already fallen to levels typically seen at significant lows.
Make no mistake, this is not a recommendation to go 'all in' on stocks...
The serious debt problems we've been covering have not suddenly disappeared. And most stocks remain extremely expensive today. Conservative investors should continue to hold plenty of cash and gold, while keeping the bulk of their equity portfolios in only the highest-quality stocks.
However, history suggests Steve is right... and the recent rally will continue awhile longer. For now, we continue to give this long bull market the benefit of the doubt.
Speaking of Steve's bold calls...
As our colleague Chris Igou noted yesterday, Steve recently revealed new research on Chinese stocks... It involves one specific catalyst that he says could set off a "buying frenzy" unlike anything we've seen since the dot-com boom.
But if you're interested in learning more about this opportunity, you must act soon. This catalyst is set to begin as early as June 15 – less than two weeks from today. Click here to get the details now.
New 52-week highs (as of 6/4/19): Hershey (HSY), Invesco Value Municipal Income Trust (IIM), Kirkland Lake Gold (KL), iShares iBoxx Investment Grade Corporate Bond Fund (LQD), MarketAxess (MKTX), Motorola Solutions (MSI), Nuveen Municipal Value Fund (NUV), Under Armour (UAA), and W.R. Berkley (WRB).
A relatively quiet day in the mailbag. Are you feeling bullish or bearish today? Let us know at feedback@stansberryresearch.com.
"Just wondering where I can access the New Money movie, please. I can't find it on the website. Is it free for Alliance members? Thanks in advance" – Paid-up Stansberry Alliance member Mike T.
Brill comment: Hi Mike, you can access Steve's new feature-length film on China right here. As we mentioned following the premiere last month, Steve wanted to make this movie available to as many folks as possible. So rather than requiring a subscription, we're asking for just a small rental fee of $4.99 to help defray some of the production costs.
Regards,
Justin Brill
Baltimore, Maryland
June 5, 2019