Pot Stocks to Invest In

Cannabis Stocks: Don't Let Your Opportunity Go Up in Smoke
Here's when society expresses greater acceptance toward marijuana

By Elliott Wave International

In the 1973 song "The Joker," the Steve Miller Band sang:

"I'm a joker. I'm a smoker. I'm a midnight toker."

Of course, "midnight toker" referred to pot smoking. Back then, there were plenty of midnight tokers, but most of them feared getting "busted."

Thirty years later, in 2003, the Elliott Wave Theorist predicted:

"Eventually, possession and sale of recreational drugs will be decriminalized."

Then, in July 2009, The Socionomist (the monthly publication of the Socionomics Institute, a sister organization of Elliott Wave International) published a study titled "The Coming Collapse of Modern Prohibition," which reviewed the repeal of Prohibition during the bear market psychology of the early 1930s.

This study also shed insight as to why the Socionomics Institute's analysts were predicting greater acceptance toward marijuana use. Here's an excerpt:

"Social mood influences people's actions and their social judgments. In times of positive mood, people have the resources to enforce their social desires. They can afford to express the black and white moral issues preferred during bull markets, and drug abuse is a favorite target.

During times of negative mood, on the other hand, society's priorities change. People have other, bigger worries and begin to view recreational drugs as less dangerous, if not innocuous in offering stress relief, pain reduction and the ability to cope with the pressures of negative social mood.

Over the past 100 years, governmental activities have manifested these changing attitudes. During periods of rising mood, policymakers stepped up regulation of cannabis. During periods of falling mood, they eased those same stances.

Keep in mind that when the July 2009 Socionomist published, society had just experienced its worst "falling mood" period since the '30s.

So, analysts at the Socionomics Institute were not at all surprised by what happened in 2012. That was the year that Colorado and Washington became the first states where citizens voted to legalize marijuana for recreational use. Even though pot remains illegal at the federal level, since 2012, other states have also legalized pot for recreational or medical use.

In 2019, the investing public can choose from a number of cannabis stocks.

There are no shortage of stories like this one from U.S. News & World Report (March 1, 2019):

6 Best Cannabis Stocks to Buy on U.S. Exchanges

On the other hand, a March 20 Forbes headline reads:

Cannabis Stocks Are Full Of Hot Air

So, are cannabis stocks a good investment idea or not?

Well, from the Socionomics Institute's perspective, there's not an across the board "yes," or "no" answer. However, according to our analysis, there is opportunity.

Indeed, EWI has just published a special report titled "The Golden Age of Cannabis," which consists of 7 pages and 21 charts.

You will find analysis of the largest marijuana stocks by market capitalization in the United States, Australia, Canada and the UK.

Sign up today and get instant access to an excerpt from this "must read" special report -- 100% FREE.

Falling Trade Deficit and the Stock Market

Falling Trade Deficit is Good for Stocks: True or False?

By Elliott Wave International

A common claim from economic and stock market observers is that a rising trade deficit is injurious to the economy -- hence, bearish for stocks. On the other hand, a falling trade deficit is commonly believed to be bullish for stocks.

Sounds like common sense, but the price action of the main stock indexes often defy reason.

For example, on March 27, CNBC reported, "The U.S. trade deficit fell much more than expected in January to $51.15 billion, from a forecast $57 billion. The decline of 14.6 percent represented the sharpest drop since March 2018... ." Yet on the day the news was released, the main U.S. stock indexes closed lower.

Over the years, countless economists and investors have been baffled when the stock market has risen on bad news and fallen when the news was good. This has happened time and time again with news regarding the expansion or contraction of the trade deficit.

Consider the following news items from the past four decades and contextual comments in brackets (courtesy of Robert Prechter's 2017 book The Socionomic Theory of Finance):

March 28, 1981

The Commerce Department... reported the nation's balance of trade deficit had improved in February. [The second of back-to-back recessions began just five months later.]

March 1, 1984

"... the trade deficit is an economic disaster," said [a] chief economist. [An eight-year boom was just getting going.]

April 12, 1985

The secretary of state said, "We can break the back of the trade deficit only through...a stronger worldwide recovery...." [Precisely the opposite was true; the trade deficit rose during the strong worldwide recovery.]

May 26, 1990

The better-than-expected trade performance sent many economists scurrying to revise their trade forecasts. [A recession started a month later.]

February 22, 2002

The nation's trade deficit narrowed by 11.4 percent in December. [The stock market was peaking and collapsed to new lows in October.]

February 15, 2008

[A chief economist] said that the smaller December trade deficit will help to boost overall economic growth. [The second-worst financial crash and economic contraction in a hundred years were already underway.]

And, on July 14, 2010, USA Today said:

Rising trade deficit could drag down U.S. recovery.

But, as we know, the economic recovery continued.

The below chart and commentary provide even more evidence.

As published in The Socionomic Theory of Finance

The chart reveals that had economists reversed their statements and expressed relief whenever the trade deficit began to expand and concern whenever it began to shrink, they would have quite accurately negotiated the ups and downs of the stock market and the economy over the past 40 years. The relationship, if there is one, is precisely the opposite of the one they believe is there. Over the span of these data, there has been a consistently positive--not negative--correlation among the stock market, the economy and the trade deficit.

The trade deficit’s widely presumed effect is 100% myth.

This is just one misconception in a long list of market myths… Do earnings really drive stock prices? Can the FDIC actually protect you? Is portfolio diversification a smart move? Read our free report "Market Myths Exposed" now and find out whether your portfolio is built on flawed foundations.

the Stock Market and the Fed

Elliott Wave: Fed Follows Market Yet Again

By Steve Hochberg and Pete Kendall

Back in December, we wrote an article titled "Interest Rates Win Again as Fed Follows Market."
In the piece, we noted that while most experts believe that central banks set interest rates, it's actually the other way around—the market leads, and the Fed follows.
We pointed out that the December rate hike followed increases in the six-month and three-month U.S. Treasury bill yields set by the market.
What happened with this week's Fed announcement? Well, you guessed it—the Fed simply followed the market yet again.

The chart above is an updated version of the one we showed in our last article. The red line is the U.S. Federal Funds rate, the yellow line is the rate on the 3-month U.S. T-bill and the green line is the rate on the 6-month U.S. T-bill. The latter two rates are freely-traded in the auction arena, while the former rate is set by the Fed.
Now observe the grey ellipses. Throughout 2017-2018, the rates on 3-and-6-month U.S. T-bills were rising steadily, pushing above the Fed Fund's rate. During the period shown on the graph, the Fed raised its interest rate six times, each time to keep up with the rising T-bill rates. The interest-rate market is the dog wagging the central-bank tail.
Now note what T-bill rates have been doing since November of last year; they've stopped rising. Rates have moved net-sideways, which was the market's way of signaling that the Fed would not raise the Fed Funds rate this week.
Too many investors and pundits obsess over whether the Fed will raise or lower the Fed Funds rate and what it all supposedly means. First, if you want to know what the Fed will or will not do, simply look at T-bills, as shown on the chart. Second, whatever their action, it doesn't matter because the Fed's interest-rate policy cannot force people to borrow.
See Chapter 3 of The Socionomic Theory of Finance for more evidence.