October has been pretty dull this year, which is not that uncommon for the month. Throw in the US presidential elections on November 8, and you have a public just sitting around watching the indexes reach new highs. Even if October ends in the red, the fourth quarter usually ends in the black.
The Feds (as usual) were chatting about raising interest rates one, two, and three times in 2017. From my point of view, that sounds like a stretch. There seems to be too much fear still in the public mindset. The average investor is paying $57 for every $1 of annual returns in T-bonds. On the flip side, this same investor is paying $19 to $20 for every $1 of annual returns from equities.
My good friend Mike Williams, founding partner at Genesis Asset Management, puts that into context in his morning notes. He writes, “Ninety percent of all bullish readings in the last 29 years have been higher than now.” It would also seem cash is indeed king. American saving accounts are at a all time high ($9 trillion)—and these accounts are paying near 0%.
Cannabis companies cashing in
There seems to be one industry benefiting from all this fear and uncertainty about the future—cannabis (or when I was growing up, marijuana). Cannabis stocks in general are up 50% for the month of October. For the record, cannabis is still federally illegal. That said, there are presently four states (Washington, Oregon, Colorado and Alaska) where recreational marijuana is permitted under state law. Then there’s the District of Columbia and 23 states where medical marijuana is currently legal. A number of states have a marijuana initiative on their ballots this November 8. There doesn’t seem to be any turning back on this movement to fully legalize marijuana.
How big is the cannabis industry? In California, medical marijuana sales were $2.7 billion last year. Recreational marijuana, which is on the ballot this November in the state, is projected to double that in sales by 2020. Arcview Market Research predicts that by 2020, nationwide sales will top $21.8 billion.
Picking the cannabis winners
How does the average investor navigate his way though all this noise and smoke out the real winners? This a currently a market that is quite saturated. In Colorado, there are more marijuana shops than Starbucks.
One of the best tools out there is www.cannabisstockpicks.com, which reviews the long list of small publicly-traded companies and highlights the ones that are both well-managed and well-financed. Another site is The Fresh Toast, an online magazine that caters to the lifestyle of the younger cannabis generation.
You can be sure many of these startups will fall to the wayside. Do your homework, check out the management, invest wisely. You don’t want to see your hard-earned money go up in smoke.