Cannabis stocks soar; Twitter long and Tesla short; Poker tournament; Funny meme on the housing market
1) I've gotten a lot of calls right this year, but my biggest mistake was being way too early recommending cannabis stocks. On December 29, I cited the AdvisorShares Pure U.S. Cannabis Fund (MSOS) as my top pick for 2022 and, through yesterday afternoon, it was down 65% since then.
Ouch!
The hardest thing in investing is figuring out when you're wrong – in which case, you should pull the plug – or just early – in which case, you should hang on or even buy more.
I'm convinced that the latter is the case and that the sector has 300% upside in the next couple of years, as I outlined in the "Market Reversal Summit" I recently hosted, which you can watch right here. (During the summit, I also explained how to get access to the name and ticker symbol of a small, well-positioned stock poised to soar as the cannabis sector takes off.)
In addition, here are highlights of a presentation I did in April at the Benzinga Cannabis Capital Conference:
I would give the exact same presentation today – I would just need to update the last two slides to reflect the even cheaper prices and lower valuations right now.
My investment thesis got a huge boost yesterday – as did MSOS, which soared 34% – thanks to this unexpected news: Biden Pardons Thousands Convicted of Marijuana Possession Under Federal Law. This is the key part for investors:
said his administration would review whether marijuana should still be in the same legal category as drugs like heroin and LSD...
Mr. Biden also said Thursday that he has asked the attorney general to review how marijuana is legally categorized, which helps determine what kind of penalties are involved.
"The federal government currently classifies marijuana as a Schedule 1 substance," he said, "the same as heroin and LSD and more serious than fentanyl. It makes no sense."
In summary, I think we'll look back on yesterday's big jump as just the beginning of an incredible move...
2) In Wednesday's and yesterday's e-mails, I said that Twitter (TWTR) investors are better off selling at $52 per share rather than holding out for another $2.20 given the financing and "Musk-is-totally-flaky risks."
Sure enough, Musk moved to delay the closing until October 28 and the judge agreed to postpone the trial, which has knocked TWTR shares down to around $49: Twitter, Elon Musk Trial Postponed as Deal Talks Stall.
I didn't think this was an interesting arbitrage situation with a mere $2.20 spread, but at more than $5, it's very attractive because there's a very high chance you earn more than a 10% return in three weeks.
At this point, Musk has no choice but to close. So why doesn't he do so immediately? A friend has the likely answer:
There is only one reason: He doesn't have the money.
He needs to sell Tesla (TSLA) shares – like over $5 billion – and he can't sell now because he's locked up until the company reports earnings on October 19. Then the 10-Q will be filed no later than the morning of October 20, at which point he can sell shares in the few days that follow – say, on October 21, 24, 25, and 26 – to raise enough money to close the Twitter acquisition on October 28.
I think everyone and his brother will be shorting Tesla stock into Musk's likely fire sale.
Another friend agrees, but has a slightly different perspective:
I think Musk needs to raise double that, $10 billion, which means, assuming 35% taxes, that he's going to sell $15 billion of Tesla stock right after earnings.
But I wouldn't short it now, because he's going to pull out all the stops to pump the stock into his forced sale. It's already happening – just look at what he just tweeted:
So I would wait to short it until closer to earnings...
To be clear, I think the vast majority of investors should never short, for reasons I outlined in my September 23 e-mail. But for those who do short, this is a very interesting setup.
3) Last night's poker tournament was great fun – I caught up with a lot of old friends and, as I mentioned in yesterday's e-mail, the networking was superb. Here's a Bloomberg article about it: Boaz Weinstein Protege Bests Hedge Fund Titans in Charity Poker. Excerpt:
Tyrone Davis, who has worked at Saba Capital for a month, made it to the final table at the Take 'Em to School charity poker tournament early Friday morning at Gotham Hall in Manhattan.
By that point, the 21-year-old, who started playing poker as a student at Massachusetts Institute of Technology, had outlasted hundreds of players, including David Einhorn of Greenlight Capital, Mo Grimeh of Point72, and his own boss, Boaz Weinstein...
Even though he came up short, Davis said there was satisfaction in how far he'd advanced among the 300 or so players who paid a $2,500 entry fee. "It was more than I imagined for this night," Davis said. "Being able to keep my cool and control my breath, and to realize where I am and to try to my best, it's a great start."
The event raised almost $2 million to support Education Reform Now, a nonprofit that, among other things, advocates for charter schools, according to organizers Michael and John Sabat. Weinstein said it would have been "insane" if Davis had won, since he attended an Icahn School in the Bronx and Beacon High School in Manhattan – both charters.
4) This cracked me up:
Best regards,
Whitney
P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.