Cannabis Stocks Post-Election Rally: Action to Take
One sector we’re bullish on was on the U.S. ballot this week: Pot.
Now, pot stocks are making a huge rally — including our recommendation ETFMG Alternative Harvest ETF (NYSE: MJ).
Another piece of action to take: Hold your stocks.
We’re going to tell you exactly why our stocks will soar in the coming months.
Watch IanCast now to see our full coverage of the post-election market and what to expect from our Fourth Industrial Revolution stocks:
Elections Sell on the Rumor…
The election happened this week. We generally stay out of politics, but we were inundated with a lot of comments. On Bold Profits people said, “The election is coming, the market is going to crash if so and so is not elected.”
While everyone is very involved in politics, the general nature of the stock market is somewhat agnostic to politics. There are different concerns the stock market is involved with.
It was sort of like sell on the rumor and buy on the finality of what happened. Election Day, which everyone feared, happened. It’s now in the past. Yes, we know the outcome is uncertain but the event is in the past. It’s going to be a less dramatic event.
We’re going to get little pieces of news and then we will know what the result is.
Investors sold on the rumors. Once people said, “OK, the election is here,” everyone clearly bought back in. A lot of stocks are actually making new highs just over the past couple of days.
Pot Stocks’ Post-Election Frenzy
One of the strongest-performing areas of the market today is pot stocks. And really on not that much specific news. Of course legalization and decriminalization of marijuana was on a lot of ballots, but there was a good chance they would pass.
After the votes went through, pot stocks kind of dropped. We thought maybe it was buy the rumor and sell the news, but today pot stocks are up huge.
There was still enough strength in enough stocks to make us think there was money moving in. It was very much in sequence to people selling off the week before with overall indices. And as we said in our previous videos, these are poor indicators of how the money is actually flowing through.
Still, those were down 5% or 7%.
Just the emotional nature of the election drove a lot of people to ask what was going to happen. With that uncertainty, people usually sell. Then that leads to stop losses being hit, which is actually a pretty major thing in the stock market.
Then panic selling on top of that. It seemed like everybody was pessimistic going into it, but clearly people are still in buying mode. A lot of stocks are making new highs.
They tried — “they” meaning people who are looking to induce a reaction. Many people may think we’re making this up. Nonetheless, people take positions. If a number of people felt the market was going to decline because of the election outcome or the process of the election, they would go short the market.
Then they would look to stimulate a reaction. If you knock the Dow down in the aftermarket and the premarket where trading action is very thin, you can use a small amount of money. You knock the Dow down, then journalists write about it and induce fear and panic.
Now you get the next futures contract and the Dow contract and the world markets to decline, now you get that snowball rolling down. You get people selling their stocks. This happened with respect to the pandemic, but you could understand there was an element to that that was real.
Pure Market Manipulation
We had not gone through a pandemic in 100 years. No one would know what its ultimate outcome would be. However, this one was completely manufactured and artificial as a way to create havoc quite deliberately. It was a pure manipulation of the market.
It’s always uncertain when things are going to snap back up, but this time it was really fast. Even the big indices are right near all-time highs.
One reason for it is there’s already an extraordinary amount of cash sitting in accounts that are allocated for investments and investing. The cash balances were all very high. Generally speaking when cash balances are low, allocations to investments are already at peak highs.
That’s when you can trigger a reaction best. When people own too much, oftentimes those are moments when the least committed traders and investors are in. They know very little about what they own. They’ve come in quite late and paid the highest prices. Also, in many cases they have borrowed money to buy on margin.
These are vulnerable investors. They are fragile. They are going to sell. They are very low commitment. Also, they generally have very little information. They are in for a quick pop or two. The presence of those investors is a danger sign. At this point in time, given we’ve already gone through a crash in 2020 — not in slow motion, a real crash.
It was a crash in all its ways. A number of investors wanted out quickly and were willing to take significantly lower prices for it. While the S&P 500 was down 33%, we had a ton of stock in March and April that were down 40% or 50%.
Some of those stocks have now rallied hundreds and hundreds of percent since then. Even with that big run we have seen since the bottom, there is still more than $1 trillion more on the sidelines in cash than there was before.
The cash reserves of the people who panic sold, a lot of that money hasn’t come back into the market. Then you have even more money or cash in money market funds and things like that that is just waiting to come back in too.
To bring this point, there was already plenty of cash on the side, then an additional number of people were inclined to get out who felt there was going to be a catastrophic result to this election also sold, increasing the amount of cash on the side.
However, given that we’ve gone through a crash, a lot of money has been raised that has not yet reentered the stock market. From our perspective, there was never going to be a second crash as a result of this.
There were no more sellers after a month and half — everybody was out.
America 2.0 Stocks Are the Stocks to Watch!
All the stocks in the big indices are up today. However, there are a ton of small stocks that are up. The small-cap indices are up.
Looking based on trading patterns and what is going on with the 52-week high list, you can see what is being bought and bid up. It tells you the strength of the buyer underneath it.
As usual, it’s the America 2.0 stocks being bought. It’s biotech, solar, housing, software — all these new tend, high growth, innovation companies are once again leading the pack in terms of the bounce back we’ve seen in the past couple of days.
Last week the stocks making 52-week highs, which for us is an important thing, it tells us there are a lot of buyers and the buyers are willing to pay rising prices. Our way of looking at it for all of our services is this is an important signal for us.
It tells us people are willing to take money and willing to allocate it into the stock market. Also, they’re willing to pay rising prices. That is the thing we desire as speculators. I have made videos before telling people how we do what we do. We are not day traders and we are not Warren-Buffett-style investors.
We are somewhere in between. For us, rising prices is the benefit we desire. There was strong buying yesterday and it showed up again today.
Signs a Rebound is Coming…
Last Monday was the bottom of call activity. More people were buying calls, which is essentially betting on a rebound at that point. It’s a great sign that you don’t always see in the stock market.
On those days, those stocks were still down, but you could see the rising activity in call option volume. It was definitely a great sign and a good predictor of what was going to happen.
If you think about it, the stock market in terms of the indices is going down. For someone to be buying using calls, which are levered up and there’s a time element to it and you have to make a price prediction on it, that’s a sophisticated buyer.
That’s a buyer that has some sense of what they believe is about to happen, has information, has enough money to withstand a loss and is willing to accept some loss. These types of signals are very good because they are going against the price action that the MarketWatch, Yahoo! Finances and all these things that provide surface level data.
In today’s world, they actively look to mislead people and lead people to believe there is always something horrific, something panic oriented, some disaster or catastrophe that is on the edge of happening. This seems to be their entire reason for publishing anything today.
And then what has the market done? Especially America 2.0 stocks have gone up basically straight for the past 8 months.
It’s interesting that once the market does the opposite of what they say, which has now happened for many years, they have been wrong about this month in and month out. Every time they predict a catastrophe, the opposite happens. Then you never really hear about it.
There’s no reconciliation. No, “We got that wrong,” or “Here’s why we got that wrong.” No, there’s absolutely none of that. The sophistication today of the average person who writes about finance, the stock market and investing is generally very low.
I have definitely noticed that. Sometimes I don’t know how a person is allowed to write it.
Many times it’s written purely to get clicks because of the advertising model that drives all newspapers. It’s subscription based. In other words, you want to pander to your subscribers so that’s one model. You are only going to feed them what you understand you want to hear.
The second one is driven by trying to extract some extreme of emotion and get people to click on it.
I don’t think I’ve seen one ever point out supply and demand, at least on the mainstream sights. And that’s the core of what drives any market. Right now, there is so much supply of cash and so much demand because there is not a huge supply of stocks, although a lot are coming public now.
The Demand is High for Innovation Stocks
There’s demand for innovation. You can see the clear divergence between old and new. Banks, oil and a lot of brick-and-mortar stores are crushed. Meanwhile, the innovative and new is going way up. That’s what’s been leading now for a couple years.
This is a good moment for us to plug our free e-letter, which is Bold Profits Daily. It gets you on the list so you are informed when the Iancast is published and our incredible team that writes on America 2.0 and the Fourth Industrial Revolution exclusively.
You are never going to hear about value investing. You will never hear about when to buy these old, obsolete banks or insurance companies. We focus exclusively on Fourth Industrial Revolution stocks, crypto, Tesla, cannabis. This is our gig and what we are focused on.
There is also a complete shift going on in stocks for about 15 years post the 2000 top. The stock market went all in on Warren Buffett investing. In other words, give me a sure thing, give me a thing with zero risk. It’s kind of a backward-looking view.
Anything that looked forward that required some period of time where the technology needed to develop, the market needed to develop and it needed some support, they were unwilling to do that. Everyone went all in on value-based investing, no-risk investing, dividends. There is now a dramatic shift away from that.
You can see it in the Nasdaq. It broke above the 2000 peak in 2016. That was the moment that spurred demand in new stocks when Microsoft and some of the other big companies made all new highs. Then there’s been an explosion since then.
A lot of stocks are up hundreds of percent — tech related and innovative related. The whole thing has changed and it has confused a lot of people. It’s not like it was before at all.
We talk about technology megatrends but equally, when we look at demand and supply, it’s who is the new trader coming in? Who is the new speculator coming in?
Follow The Rules of the Game
Let’s bring the stock market discussion around. We would say that while it might be tempting to want to say, “I’m going to get in when the election is decided.” Generally, we have told our readers to stay in and to use what we call Rules of the Game.
If you fear volatility, keep cash in your investment account as a volatility buffer and emotional security blanket. It’s a buffer to doing exactly what a lot of people probably did, they cashed their accounts out and somehow felt they were going to get some opportunity or some bell would ring when the perfect, exact bottom was going to be to get back in.
That’s what people want. That would be amazing, but it would have no value if everyone knew when to buy in. It’s pointless to try to time things perfectly. Holding through and waiting patiently has always lead to way bigger profits for me and people I have talked to.
Generally, just looking at the main trend and staying focused on that. That’s what we’re doing. We are exclusively focused on Fourth Industrial Revolution stocks, America 2.0 stocks, stocks of the megatrends of our time.
However, it will be a long run. It will be punctuated by volatility. Some of it will be very sharp. However, it is something to be endured rather than to get out and try to get back in. Once you start to sell it gets you in the wrong mindset.
If you sell and it keeps going up you are going to regret it and buy back higher. Who knows what happens after that.
You get in the wrong cycle after that. You are constantly buying in somewhere near the top and selling out near the bottom. It’s hard to get out of that cycle, which is why we devised the Rules of the Game.
Bottom line is that as we have been consistently telling you for about four years now in our publications and our YouTube channel and on our Twitter, we are bullish, optimistic, positive. We see this as a once-in-a-lifetime opportunity to buy into a moment and the Fourth Industrial Revolution.
You will look back, whether it be 10 or 15 years from now, and say it was so obvious.
Literally every industry is being disrupted right now and a lot of them are able to be traded in the stock market.
The End of the Cannabis Prohibition
We are definitely seeing a huge sign that the direction of cannabis is 100% clear.
It’s taken longer than expected for the sector to bottom out, but there’s been numerous spikes of 20% to 50% with huge volume and huge buying. We have seen this at least three or four times since May. It’s looking better than it ever has.
A lot of these stocks in marijuana are making new all-time highs and a lot of them are off the lows. It’s only going to get better from here.
Today, nearly every cannabis stock I looked at is up.
Aurora Cannabis is now up 50%. Yes, we know that it’s been absolutely devastated. Nonetheless, this is a small company. Even at the old high it was a relatively small company. We have told our subscribers that we probably got the timing wrong, but that’s just within the time scale of a couple years.
At this point I don’t see much convicting selling in pot stocks and I haven’t for a while. Every time they rally you can see in the volume that it’s way more shares being bought than on the down days being sold.
At this point, given where a number of states are going in for full legalization, it’s simply a matter of time before this is a federal mandate to be legal. We will have legislation at the federal level that will make it legal across all 50 states. With that, you will start to see mass development of cannabis.
Then really the development of the commercial market where this will be sold like all other things before it. The packaging will come, the advertising will come — all these things that really help develop the commercial market.
We are already seeing that. A lot of them are doing things like edibles and THC-infused drinks that are easier to market. I would say it’s way more consumer friendly. A lot of them have been invested in by bigger companies. They have huge cash balances to continue to grow.
They can continue to use all that money to fuel their operations. In the midst of all that, they have been focusing more on their core markets. What happened is that a lot of them tried to grow too fast. So they found out where they are growing the most and they consolidated to that.
Some of them still have a lot of cash left. At this point, there is no reason to sell. These companies have been way oversold. At this point they are still going to see huge growth — growth in the company and growth in the stock in the future.
From our perspective, this is like the ending of Prohibition in terms of history. Alcohol was illegal for something like four years, it was completely banned. Then it was legalized and it was a state-by-state thing. For example, in North Carolina you can only buy spirits from the government store.
There are many legacies of Prohibition still today. So three or four years in the grand scheme of things we believe is going to be small relative to the massive upside given how young this market is, how much development is there and how much bigger this is going to be.
Some people will say it’s a terrible thing and people are getting buzzed on all this stuff. However, many of the same criticisms can be leveled at alcohol. We would say this is largely a matter of social acclimatization of understanding what it is. Many people will use it as a substitute for things that already exist.
That’s what we are seeing. It’s taking away market share from alcohol and tobacco.
And that’s what we are also expecting in the stock market. There are still hundreds of billions in spirits, wine and tobacco. All that market capitalization we believe is going to start to pour into cannabis stocks. This is why we continue to be bullish, optimistic, positive on cannabis stocks.
This is a massive market that is still very low relative to its future upside. We have talked about cannabis and where the election has mattered to the stocks and the speed at which this opportunity can happen which is now accelerating faster and faster.
Money and Mindsets Shifting to Crypto
There is so much momentum, pushing of money and mindsets shifting in terms of crypto.
Bitcoin earlier today hit $15,000. That’s the highest it’s been in years, since late 2017. The outlook for crypto is good in so many ways. One is supply and demand, which is what drives any market. The demand for Bitcoin is extremely high. You can tell that by the enthusiasm, the rising price, Square buying in, PayPal adopting it.
The amount of Bitcoin on exchanges has dropped to a level it was over two years ago. So it’s at a two-year low of supply on exchanges. The supply and demand imbalance is probably ever than it’s ever been. With everything going on, it’s also a driver of crypto in general.
What’s bigger than that is the development of crypto infrastructure with DeFi and things like that that is bound to take market share from banks in the next few years for sure. There’s already $11 billion in DeFi systems. People are trading crypto on decentralized networks and putting their crypto in savings accounts on decentralized networks to earn interest rates.
The development of crypto started with the idea that you could fault the central banks of every major currency. They have generally done a poor job of being a store of value, especially in development markets.
Gold has been the store of value for a very long time. Now we are starting to see Bitcoin become a high-conviction alternative store of value. It’s still so small compared to gold. The value of all the gold in the world right now is $10 trillion. Bitcoin is only around $280 billion.
The transfer of market cap from gold to Bitcoin is going to be a huge driver of price per Bitcoin. It’s just getting started and it has a long way to go from here. Bitcoin was the 12th-largest kind of money in the world. There are nine currencies that have more value and then gold and silver.
The crypto market, if you look back, in hindsight people are going to say it was so obvious. Decentralized finance was so obvious. Bitcoin was so obvious. Smart contracts were so obvious. Ethereum and putting things on various blockchains was so obvious.
Other countries are implementing blockchain voting. It’s just a matter of time.
Pretty much everything that is currently embedded in what we would call the America 1.0 financial system could be done better, cheaper, more efficiently and with a lot less of the hassle factor that makes your life miserable while you apply for a mortgage, a loan or anything you need in your life.
The biggest criticism of banks is they are not accountable or transparent. Anyone can go on the blockchain and look at any Bitcoin transaction that’s ever happened. I see stuff about it all the time. Recently someone found out that some old account connected to Silk Road just transferred a ton of Bitcoin.
You’d never be able to know that if it was a big bank doing that. And it was a lot of money too.
Bottom line is we are bullish, optimistic, positive on the existing major coins that are out there.
Once it gets going it’s hard to stop the momentum.
There’s the ratchet effect we’ve talked about for a while when the Halving happened. There’s a market supply shock that takes a little while to figure out. Then, as supply is shrunk down, demand starts to increase because transaction times start to go up.
It makes people want to asset a little more. That whole thing takes a little bit to get going. However, now it’s in play. People are likely to give us a little bit more likelihood of achieving what we mentioned for this year, which is Bitcoin hitting $50,000.
It’s gone up around 50% in five weeks. It’s definitely possible.
It’s hard to believe in March of this year Bitcoin was at $3,800 and today it’s around $15,000.
It’s quadrupled since then. It can get going fast. Once it breaks all-time highs, it’s going to draw a new crowd of demand.
Remember, the supply of this is limited. No one can manufacture it. Yes, there are alternatives in Bitcoin Cash and you could buy Litecoin, but Bitcoin is at the very top of the pyramid of crypto that everything is structured around and used as the medium of exchange within crypto.
It’s a critical element of the crypto infrastructure.
Bitcoin 2021 Price Prediction
By next August, we think Bitcoin is going to hit $115,000.
We believe we are going to go past that and there’s an outside shot, based on past patterns, Bitcoin could be at $250,000 by next year. That seems completely unreasonable at this point in time, I know. Nonetheless, just understand at the very end the run is parabolic like it was in 2017.
If you’re just thinking this is a smooth function, just look at 2017. It’s smooth and then it’s a straight line up. If it were to replicate that in some way it would be possible. However, by 2023 we will have $250,000 per Bitcoin. That’s our general prediction.
However, just across the board we see so much going on in the crypto space in general.
There’s the whole DeFi trend we discussed. Ethereum is basically like the Android of crypto. You can program all kinds of apps onto it. They are improving their whole network in Ethereum, allowing for more scalability so more people can develop more things on it, have more transactions in a shorter period of time.
Most importantly, they can reduce the fees because that’s what hindered growth so far. Keep in mind, Ethereum has only been around for four years and it’s already done all of this. We are going to see exponential development from here. They have been working on big projects this whole time.
It’s only a matter of time before those really get implemented and allow Ethereum to do everything it is capable of.
Ethereum is currently around $400. The old high is about $1,400. We believe Ethereum will get to $4,000 or $5,000 in a the next three years or so because of the number of projects sitting on this blockchain. At some point in time, the price is going to have to reflect the extraordinary level of demand imbedded into the blockchain as it is.
Just think of it as something where there’s a number of slots and already something like 2,000 projects on it. Each project itself is growing at very rapid rates. As they grow, their demand for Ethereum rises.
That’s one of the things all these new developments is going to allow for is these projects to grow. It’s crazy how high the fees for Ethereum have gotten. If you are developing a project on there, you are not going to want to spend a ton of money on fees.
By lowering the fees and allowing more transactions, they are going to attract way more attention and developers to put new apps on Ethereum.
Bottom line, it’s super bullish for Ethereum. The conditions are super bullish for crypto across the board. This is why this is one of the signature elements of the Iancast. We always talk about crypto, Bitcoin, Ethereum and other cryptocurrencies.
Tesla’s Self-Driving Beta Analysis
Let’s close off cryptocurrencies and talk about Tesla. We have been watching more and more videos of their full self-driving beta. It’s kind of amazing. Go on YouTube and look for FSD beta. It’s amazing.
It’s attracting all the attention that used to be on Waymo and other self-driving companies that have been doing it for a long time but haven’t gotten as far as Tesla. Tesla has put out cars that can basically driven themselves. It’s incredible.
Just think, this is their first core rewrite of the Autopilot software — full self-driving beta as they are calling it. Just imagine, they’ve got thousands and thousands of cars around the world and they are recording all these driver behaviors for things we no longer think about.
Like how do you make a left turn in a certain situation? It’s got all of this data. It’s the first wide scale neural network implemented. You are generating information, which is generating behavior, which is then generating more information.
That self-looping nature means this is iterating at a faster and faster rate. Its rate of self improvement is only going to increase as there are more cars and more information comes in. I feel like people are going to get it and start pricing that into Tesla stock.
That robotaxi vision, we can start to see that a year out or two years out.
It won’t be long. To think they didn’t even have a mass-production car three years ago is hard to believe. They have gone all that way and now they have the Model 3, by far the top-selling EV in the world, Model Y and Cybertruck coming out and the Semi coming out.
Now they can use this new self-driving technology on their vehicles. The more cars they have out on the road, the better it gets. It’s kind of a compounding effect and they are going to get better and better at this over time.
As extraordinary as it sounds, Tesla is about a $300 billion company and it still has significant upside. It’s going to have volatility. Nonetheless, we have said this is now the signature company of America 2.0. It represents the future in so many industries all at once.
Transportation with self driving. Solar and battery storage with their energy storage business, which is actually one of the best in the world as well. They have utility industry covered because with Autobidder technology you can sell excess energy back to the grid.
It’s a self-balancing utility technology. Of course with electric vehicles they are the top seller in the world. It’s impressive what they have done.
They are disruptifying at least three industries. The automobile industry makes it seem small. They are really recreating mobility and transportation because of the mix. They make the car, but then there’s this neural network of transportation which is going to reform the way we move together without doing anything.
Then there’s the traditional energy market represented by the ExxonMobils of the world and all the elements of the infrastructure — pipelines and storage — that’s also going to be disruptified. Then there’s the utility industry they are disruptifying with their battery and solar business.
It’s trillions and trillions of dollars of value that this one single company is going at. It’s astonishing.
And they have plans of possibly starting their own lithium mining operation too. They are going to disruptify that too. They said they have new technology for that because the demand for lithium is going to skyrocket as the demand for electric cars grows exponentially.
This is really the element of what we talk about week after week. This is a moment of astonishing opportunity. However, on the flip side it is a moment of incredible peril for the ExxonMobils, the General Motors, the Wells Fargos — all that America 1.0 mass of assets and investments where there is still trillions and trillions of dollars of market cap that is going to empty out.
The crash in March accelerated a lot of that. A lot of these stocks tanked along with the rest of the market but never really rebounded. That market cap has completely shifted into newer companies.
We are bullish and optimistic on all the things we discussed today — America 2.0, cannabis stocks, Fourth Industrial Revolution stocks, crypto and Tesla.
Editor, Rapid Profit Trader