Stocks & Equities
This Week’s Trading Lesson
“Anything worth doing is worth doing for money.” – Gordon Gecko, Wall Street
It is generally accepted that money is a motivator; if you link pay to performance, performance will improve. For that reason, many people’s salaries vary with their performance. This is most prevalent on Wall Street where bankers and traders receive most of their compensation in the form of incentive based pay.
In his book, “Drive”, Dan Pink considers whether pay for performance really works. Does dangling a carrot and threatening with a stick cause people to deliver better results? The research finds that this is not always the case.
For very mechanical tasks, incentive based pay does work. A brick layer who is paid by the brick will work more effectively than one who is paid by the hour. However, for tasks that require analytical thinking, performance is actually worse when it is linked to pay.
Pink cites research involving the solving of puzzles. The person who was told she would receive a financial reward if she solved the puzzle in the shortest time performed worse than a person who had no potential for financial reward if the puzzle was solved quickly. The person who was solving the puzzle for the sake of solving the puzzle did it quickest.
I have been teaching people how to trade the stock market for over ten years, teaching a lot of people from many different backgrounds. One constant that I have seen is those who perform the best as traders are those who don’t care about the money. They trade with a set of rules and the discipline to follow the rules, making the money irrelevant.
The market is a puzzle that we want to solve. Why does a focus on money make us ineffective traders, or puzzle solvers?
I am not a behavioral scientist and I have not done the kind of research necessary to really answer that question. However, I do have an opinion based on what I have learned from trading.
Money causes us to focus on something that is irrelevant to the problem. In doing so, it complicates the puzzle, making it more difficult to solve.
If we aspire to make money from the market, we should change our focus to find trading opportunities with a positive expected value. Money will be the determinant of success, but it will not be something that is part of the problem to be solved.
Suppose you buy a stock and it is showing you a profit of $1000. It is near to the end of the month and you need $1000 to pay your rent. There is a good chance you will sell the stock because of your need, regardless of what your analysis would tell you about the stock’s potential to move higher.
Money causes a greater problem to our trading when it comes to taking losses. A stock may remain a good hold despite the fact it is showing as a loss. The size of the loss often causes traders to exit the trade simply because the money, and the potential loss of more, causes them too much concern.
Not only can money bring an irrelevant condition in to our problem solving equation, it also tends to bring emotion which hurts our ability to make good decisions. Most people function poorly under stress and the fear of losing money brings stress. When we focus on the money, we trade with emotion and that means we make bad trades.
Every trader has to overcome their emotional attachment to money. Trades have to be based solely on the merit of the trade. Our pursuit must be on doing the right trade, doing good analysis. If we trade to make money, we will lose it! Our chances for success improve when we simply trade to solve the market’s puzzle.
The US markets had a round of profit taking last week and appear likely to stall their upward trend in the short term. While the selling pressure mid-week rattled the confidence of the Bulls, it is not yet a strong signal of a trend reversal. Instead, it is likely the start of a pullback that will take some of the emotion out of the market.
Generally I remain Bullish on US stocks but I think some caution is warranted in the short term. We are at a point where the market has a good chance to go sideways but it is still pretty aggressive to short the market for anything more than a short term trade.
Canadian markets have underperformed the US markets but that also means they have less risk right now, simply because they don’t have far to fall until they hit support. Canadian junior, which tend to be speculative mining and energy stocks, have been dismal since early 2011 and should generally be avoided. However, the TSX Venture index is trying to make a rising bottom which could be the start of a turnaround. These stocks have lots of work to do but a glimmer of hope for the juniors.
Nothing to feature this week, I would like to see if last week’s selling pressure is the start of something bigger or just another speed bump in the long term upward trend.
References
- Get the Stockscore on any of over 20,000 North American stocks.
- Background on the theories used by Stockscores.
- Strategies that can help you find new opportunities.
- Scan the market using extensive filter criteria.
- Build a portfolio of stocks and view a slide show of their charts.
- See which sectors are leading the market, and their components.
Disclaimer
This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don’t consider buying or selling any stock without conducting your own due diligence.
Spurred by fears on Wall Street about over-stretched stock valuations, global equity markets fell on Friday from Asia and Europe, as investors looked for safer havens. At least these were the headlines du jour.
The Nasdaq composite, which has been hit in recent days as investors bailed out of high-flying 
technology and biotech shares, slipped anew. The index on Thursday had recorded its biggest single-day percentage loss since November 2011. This should not come as a surprise.
With the strong gains on Canadian and U.S. over the past 24-months has come a rise in the level of broader valuations. In fact, in a few specific segments including tech (social media and new tech) and biotech, valuations have been driven to lofty levels with investors chasing growth as confidence has increased.
While there are a number of companies we are very interested in buying at present, quite frankly they are not cheap. As such, this year we included 8 such companies in our Cash Rich Report which we consider to check off most of the boxes we look for in an investment including excellent balance sheets with strong net cash positions, strong cash flow generation and good to great growth in solid businesses.
The rub however, is in the fact that the valuations both individually and collectively are currently premium – and the markets are beginning to take notice. At present, we are not able to currently purchase these attractive companies on the cheap. The type of selection criteria that has led us to companies like Enghouse Systems Limited (TSX:ESL) and C-COM Satellite Systems Inc. (TSX-V:CMI) in recent years. Both technology (software and hardware) related companies that possessed strong growth and were bought at reasonable to very cheap prices. In other words, they embodied GARP.
In fact, we can reference about 15 stocks from the past 2 years that, at the recommendation date, traded at 3-10 times earnings with strong growth, great balance sheets and positive outlooks. Contrast this with the 8 companies we included in our “Cash Rich, But Not Cheap” research note to our clients where we see price earnings multiples from 50-200 times and price to cash flow which average in the range of 40, and there is reason to be wary when investing at such levels.
At times investors can be wise to “pay up” or pay a fair to premium price to purchase great companies. Many pundits will say you get what you pay for. To a point we agree, but as we have shown over time, it is possible to buy great companies at good to great value. But we do not believe in buying growth at any price or GAAP stocks. For all the Amazon’s and Twitter’s there are countless companies (tech or otherwise) who initially posted or promised growth only to fall off the proverbial investment cliff when it slowed or was not delivered. This is what unrealistic growth expectations can lead to – it is a rare company that lives up to or leaps this type of high bar long-term.
In an investment, there are often two components we are looking for to achieve price appreciation – 1) Above average annual earnings growth. 2) Multiple expansion.
You can achieve the above average earnings growth component if the company continues to grow net income at 25-100% (for example). Indeed, in recent times, the majority of the companies on this list have continued to do so which has been positive for their share prices. However, as we will noted, this can be a difficult level to sustain and when a stock trades at premium valuations, the market expectations are high and any misstep can lead to severe corrections.
For example, company A has growth of 35% and trades at 8 times earnings. Company B has growth of 35% and trades at 30 times earnings. Both could theoretically maintain the same earnings multiple and see their share prices rise by 35% (the growth in their earnings). It is far more likely that the Company A could see a doubling in the PE multiple the market awards it from 8-16 (given its growth and the fact the average stock on the market trades at 18-19 times earnings) than Company B moving from 30-60 times earnings. Remember Company B already trades at a premium to the average stock which is tough to sustain at the best of times for great companies.
We favour investing in Small-Cap Growth stocks which have the potential for both above average annual earnings growth and multiple expansion. This is difficult to do when you are paying prices that are a significant premium to the market average. While several of the 8 quality companies on our list will likely continue to grow and continue to be long-term winners. Our margin of safety on each company is less.
To give you an example of what can happen to a premium priced, albeit good company when it reports a stumble in earnings we reference the Q3 results of Lonestar West Inc. (LSI:TSX-V), which were reported at the end of November in 2013 with the stock trading at $4.00. While revenues increased smartly by 34.8% to $8.3 million in the previous year equivalent quarter, net income declined sharply to $91,981 from $664,585 in the previous year equivalent quarter. The stock subsequently lost over 32% of its market value in a few months since. When valuations are premium (PE or price to cash flow ratios are high), expectations are high. If they are not met we can see a sharp correction. Of course, when stocks with lower premiums miss expectations, they can drop as well, but there can be a floor, book or break of value at times which has the potential to hold the stock.
Another example from the list is Kelso Technologies Inc. (KLS:TSX-V), a railroad equipment supplier that designs, produces and sells proprietary tank car service equipment used in the safe loading, unloading and containment of hazardous materials during transport. This is a solid market at present and the company has posted strong revenue, cash flow and earnings growth this past year. The balance sheet is strong as well. We like the business and the growth, but in the $5.00 range at present it trades at over 100 times last year’s earnings. This multiple can shrink with further growth as we expect, but with the average stock on the TSX trading somewhere in the range of 20 times earnings the premium we are asked to pay for this growth is high. Good company, but it might not be at a price which gives us both the growth or margin of safety we are looking for long-term.
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Signs Of The Times
“Runs on rural Chinese banks as rules ease”
“Regulators more tolerant of defaults”
– Financial Post, March 26
“In one corner of the U.S. equity market, investor enthusiasm is exceeding the frenzy of the Internet Bubble. Small-cap shares [Russell 2000] have rallied for seven straight quarters, the longest stretch ever.”
– Bloomberg, March 24
“Too much volatility for emerging-market currencies – and not enough in the developed world – is stinging traders – wiping out profits in the carry trade.”
– Bloomberg, March 25
“Investors just can’t get enough of exchange-traded funds that buy junk-rated bonds.”
– Bloomberg, March 27
“Is Michael Milken the buyer of $100-million Westside estate?”
– Los Angeles Times, March 31
It is worth looking at the pictures.
Like civilizations, bull markets are born stoic and die epicurean.
* * * * *
Stock Markets
The above line on bull markets is a modification of an observation by the historian Will Durant, who had many acerbic quips. And as anybody knows there is a great need for acerbic these days.
Janet Yellen has no special abilities to determine the level of interest rates. But a couple of weeks ago she mused about increasing rates some six months from now.
Markets had a one-day hit.
Then on Monday she mused about keeping the booze flowing. Being assured of continued official recklessness, risk again has become fashionable. There is an Italian proverb about what happens to the flock when the shepherd goes mad?
OK, we have had a target of S&P 1885, “or thereabouts”.
Last week’s view was that it could go further, but as it did the action would become more precarious.
Equity markets are now entering the “sweet spot” on the calendar year; more specifically with the US Mid-term Election Cycle. This calls for a tradable high in April and an equally tradable low in late September.
This is based upon the DJIA from 1888 to 2010, and is a refinement on the old “Sell in May” routine.
Of course, the distinction is that at this time of year “silly season” events are possible. And these are only possible because of “animated spirits”. Such spirits have reached levels only seen at cyclical peaks and were not a factor in the last two springs.
Very good “May” trades were evident in 2010 and 2011, well before the advent of today’s one-way-market.
The big leader on the way up has been the NDX and the zoom has generated the highest Monthly RSI since the mania that completed in March 2000. On the next bull market, the low was 1019 in March 2009 and the high was 3738 in early March. The first hit was to 3543 last week and the bounce made it to 3676 at yesterday’s open. It up-ticked to 3676 at today’s opening and slipped to 3637 at the close.
Taking out the 50-Day ma at 3620 would be interesting and taking out the last low at 3543 would turn the action down.
Within this Biotechs (IBB) have been fabulous. The high was 275 set in late February and the initial low was 229 last week and the rebound made it to 245 yesterday. Today’s close was 234.
There is support at the last low at 229 and taking this out would be a major breakdown.
And as we have been mentioning, hot action in credit spreads at this time of year has a tendency to reverse.
Commodities
Crude oil can rally into May, but it will need to stay above the 50-Day ma.
Agriculturals (GKX) enjoyed and outstanding rally, reaching a Weekly RSI of 72, which we took as enough to end the move.
ETF’s we have been using are JO and DBA.
Coffee (JO) did the huge blow-off to 42. The initial decline was to 33 and the bounce was to 36 last week. Taking out 33 resumes the downtrend and it is not oversold.
DBA soared from 24 in January to 30 two weeks ago. The Weekly RSI reached 82. This matched the big drought rally of 2012.
The initial break was to 27.82 and the rebound was to 28.58. Now at 27.80 any slip would resume the decline. There is support at the 50-Day ma, which is around 27.
In November this was very depressed and we thought it had the best chance for a rally. Commodity bulls who know the Fed is evil, but think inflation only occurs in commodities, climbed aboard. As if it was the second coming.
On the CRB, sentiment became the most bullish in two years, and the COT numbers became the most bullish – ever. That was after the very low numbers set last summer.
The overall rally became fully expressed and is correcting.
Our view is that history is in another post-bubble contraction which will be a chronic depressant to most commodity prices. The bubble in lower-grade bonds and bull market in stocks has been the “inflation” in response to Fed excess. Actually it’s more the other way around. Speculation in financial assets has assisted the Fed’s recklessness.
When the bond bubble collapses will the baton of “inflation” be picked up by commodities and other tangible assets?
In the meantime, copper’s long bear market is getting interesting.
The latest washout to 2.88 was associated with unwinding of unusual Chinese “investments”. We should look beyond this.
Momentum Peak Forecaster, which does not register all that often. But when it does a big speculation is close to ending. In that example it was in base and precious metals. In 2006 it was the housing boom.
This model does not have a built in signal for a major bottom, so we use other tools.
With the recovery in commodities copper increased from the low of 3.14 in November to 3.45 in late December. Then it weakened until it plunged in March from 3.20 to 2.88 in the middle of March.
As noted, this drove the Weekly RSI down to only 29. A rebound became possible and the price has recovered to 3.05. If it gets through this then 3.25 is possible.
With this, base metals (GYX) have recovered from the three-year low of 322 to 336.
How far can it go?
Back to where it failed at 340 seems possible, but not much more.
Financial history is close to the end of the first business expansion in a post-bubble deflation.
Link to April 4, 2014 Bob Hoye interview on TalkDigitalNetwork.com:
http://talkdigitalnetwork.com/2014/04/beware-nasdaq-loses-steam/
BOB HOYE, INSTITUTIONAL ADVISORS
E-MAIL bhoye.institutionaladvisors@telus.net
WEBSITE: www.institutionaladvisors.com
to profit from the investment process.” – Benjamin Graham
That’s so true. I’ve always thought that if things didn’t work out for Mr. Spock at Starfleet, he would have made a killer value investor. Once again, emotions boiled to the surface on Wall Street this week. Most specifically, the emotion of fear. On Thursday, the S&P 500 lost 2.1%, and the Nasdaq Composite dropped 3.1% for its worst day since 2011. Those two got off easy compared with the Nasdaq Biotech Index, which plunged 5.6%.
Having heard those numbers, you´d probably think the economic news on Thursday was terrible. Not at all. The Department of Labor reported that initial claims for unemployment insurance dropped to their lowest level in seven years. In other words, the jobs market is getting better. On Tuesday, we learned that jobs openings climbed to a six-year high. So why are traders so upset?
In this issue of CWS Market Review, I’ll walk you through Wall Street’s latest panic attack, and more importantly, I’ll tell you what to do about it. I’ll also cover the disappointing earnings guidance from Bed Bath & Beyond, and I’ll preview IBM’s earnings report for next week. This is a crucial time for the market; U.S. corporations are sitting on $1.64 trillion in cash, the Federal Reserve is winding down an unprecedented experiment on the economy and earnings season is upon us. But first, let’s see why Value is beating the stuffing out of Growth.
The Current Sell-Off Is about Valuation, Not the Economy
If it feels like it was less than a week ago that the S&P 500 touched an all-time intra-day high, that’s because it was. From the big-picture perspective, the drop in the past week hasn’t been that much — just under 3%. But what makes it interesting is that the pain hasn’t been evenly distributed.
Here’s what investors need to understand: The current sell-off has been focused on valuation, not on economically sensitive areas. This is important. Many of the richly valued, raging-bull stocks have been clobbered, while their more reasonably priced cousins have barely been touched. Stocks like Gilead and Amazon are more than 20% below their 52-week highs.
Some observers have said that that the tech sector has been hit hard, but that’s not quite right. It’s been the big-name and richly valued tech stocks like Facebook, Twitter and Tesla that have been taken down. But more sensibly valued names like Apple or Buy List favorite IBM have done just fine. Some of our favorite tech stocks like Oracle, Microsoft and Qualcomm have outpaced the Nasdaq over the last several sessions.
We can also see the effect by looking at the environment for Initial Public Offerings. That’s probably the most emotion-based part of the market. Not too long ago, investors were eager to snatch up whatever IPO Wall Street was throwing their way. Not anymore. La Quinta, the hotel franchise, was recently priced below expectations. Ally Financial flopped on its first day of trading, and King Digital, the Candy Crush people, was another disappointment.
We have to remember that the stock market has rallied for five straight years, so naturally investors grow complacent. As the bull market rages, we typically see shares in companies long on promises and short on results grab most of the gains. Now we’re witnessing a swift reaction.
What’s been happening is that the market is shifting from favoring Growth stocks to favoring Value stocks. (One effect of this shift is that large-cap is beating small-cap, but that’s the tail, not the dog.) This shift didn’t surprise me, but its pace and magnitude did. As a proxy for Growth and Value, I like to look at the ETFs run by Vanguard. Since February 25, the Growth ETF(VUG) has lost 3.8%, while the Value ETF (VTV) has gained 1.2%. That may sound small, but it’s a dramatic turn for such a short period of time and for such broad categories.
Now investors have been flocking to areas of safety (dividends, earnings, strong brands). For example, the S&P 500 Utilities Sector (XLU) has been one of the top-performing market sectors. This is a direct reaction to the Fed’s policies because folks want to lock in those rich yields before rates go up.
Speaking of which, probably most surprising to many market watchers has been the strength in the bond market, especially at the long end. The yield on the 20- and 30-year Treasuries recently dropped to their lowest levels since July. The Long-Term Treasury ETF (TLT) has been beating up the stock market this year. The long-term yields were already low, and they’ve gotten lower. The TLT is up 7.8% this year, while the S&P 500 is in the red.
A stronger shift from Growth to Value doesn’t worry me. On balance, it’s good for our Buy List. I would be much more concerned if I saw a rapid deterioration in many cyclical sectors. For example, the Homebuilders (XHB) have been down, but nowhere near as severely so as the biotechs. The S&P 500 Industrials (XLI) are also down, but largely in line with the rest of the market. That’s important because the market doesn’t see a broad industrial decline (at least, not yet). Some cyclicals, like our very own Ford, have actually led the market in recent days.
Overall, I think this newfound skepticism is healthy for investors. They’re questioning some of these rich valuations. Later on, I’ll talk about the news from Bed Bath & Beyond, but let’s put this in its proper context. BBBY’s bad news is that their earnings would be as high as we expected. Still, they have no debt, lots of cash and a strong cash flow. Compare that with Twitter, which is expected to make a total profit this year of one penny per share. Twitter´s profit margin for Q4 was -210%. In other words, they spent three times what they took in. So you can understand why investors might have second thoughts about that valuation. As Mr. Spock might say, “it’s only logical.” Now let’s look at some opportunities for bargain hunting in this market.
What to Do Now
Obviously, the first thing investors should do is not panic. For disciplined investors, times like this are your friends. This is also a good time for investors to focus on fundamentals. Not only are dividends in demand, but I think they’re going to be more demand as the year goes on.
We have several stocks on our Buy List with strong dividends, and prospects for even higher dividends. Let’s start with Ford Motor (F), which increased its dividend by 25% earlier this year. The sales report for March was quite good. The earnings report for Q1 might not be so good, but that’s due to environment, not Ford. The company is improving its operations in Europe. Plus, General Motors has had some high-profile issues of late. The stock is going for eight times next year’s earnings. Ford currently yields 3.2%, and I rate it a very good buy up to $18 per share.
Another solid dividend Buy Lister is Microsoft (MSFT). Thanks to their new CEO, for the fist time in a generation, Microsoft is hip. The last two earnings reports were quite good, and I’m looking for another one later this month. Last September, Microsoft increased its dividend by 22%. We should see another healthy increase later this year. The stock currently yields 2.8%. Microsoft remains a solid buy up to $43 per share.
I’m writing this to you on Friday morning, ahead of the first-quarter earnings report from Wells Fargo (WFC). The bank just won approval to raise its dividend by 16.7%. They have plenty of room to raise the dividend even more next year. Wells currently yields 2.9%. WFC is an excellent buy up to $54 per share.
McDonald’s (MCD) was one of the few stocks that rallied yesterday. That probably has a lot to do with its rich dividend. MCD currently yields 3.3%, which is a good deal in this market; that’s more than a 20-year Treasury. The fast-food chain is working hard to revamp itself. Look for a good earnings report the week after next. MCD is a good buy up to $102 per share.
Bed Bath & Beyond Is a Buy up to $71 per Share
On Wednesday, Bed Bath & Beyond (BBBY) reported fiscal Q4 earnings of $1.60 per share. The home-furnishings store had said that earnings should come in between $1.57 and $1.61 per share. Clearly, this was a weak quarter for them. BBBY estimates that the lousy weather took six to seven cents per share off their bottom line.
The details weren’t encouraging. Quarterly sales dropped 5.8% to $3.203 billion. Comparable-store sales, which is the key metric for retailers, rose 1.7%. For the full year, BBBY made $4.79 per share, which is up from $4.56 in the year before.
As I’ve mentioned before, the poor Q4 numbers were expected, but I was curious to hear what they had to offer for guidance. For Q1, BBBY expects earnings to range between 92 and 96 cents per share. The consensus on Wall Street was for $1.03 per share. For the year, they expect earnings to rise by “mid-single digits.” If we take that to mean 4% to 6%, then their guidance works out to a range of $4.98 to $5.08 per share. Wall Street had been expecting $5.27 per share.
I’m not pleased with this guidance. The shares took a 6% cut on Thursday. Still, we should focus on some positives; BBBY is a well-run outfit, and they’ve been in tough spots before. The balance sheet is very strong, and they’ve been buying back tons of shares (though at higher prices). I’ll repeat what I said last week: don’t count these guys out. Bed Bath & Beyond remains a good buy up to $71 per share.
Expect Good Earnings from IBM
IBM (IBM) is slated to report earnings after the closing bell on Wednesday, April 16. In January, Big Blue beat consensus by 14 cents per share, but a lot of that was driven by cost-cutting. Quarterly revenues fell 5.5% to $27.7 billion. That was $600 million below forecast, and it was the seventh-straight quarter of falling sales.
Here’s how I see it: IBM is at a crossroads right now. Much of the world is shifting to cloud-based networks, and a lot of people think IBM is being left behind. But IBM isn’t sitting still. The company is moving towards the cloud, and they’re getting rid of their lower-margin businesses. For example, they recently sold their server business to Lenovo for $2.3 billion. This may surprise a lot of people, but IBM’s cloud revenue rose by 69% last quarter.
For 2013, IBM earned $16.28 per share. They made a bold prediction saying that they expected to earn at least $18 per share this year. Still, Wall Street seems dubious. The consensus for 2014 earnings has slid from $18 per share a few months ago to $17.85 per share today.
For the first time in a long time, the stock is doing well. On Thursday, IBM came close to trading over $200 per share for the first time in nine months. For Q1, Wall Street had set the bar low. Very low. The current consensus is for earnings of $2.54 per share, which is a decline of 15% from last year’s Q1. My numbers say IBM should beat that. I also expect IBM to raise its dividend later this month. The current dividend is 95 cents per share, and I think Big Blue could bump it up to $1.05 per share. The stock is going for about 11 times their own estimate for this year’s earnings. IBM remains a good buy up to $197 per share.
That’s all for now. Next week we’ll get important reports on inflation, industrial production, plus the Fed’s Beige Book (by the way, that’s a great resource for looking at the economy). The stock market will be closed next Friday for Good Friday. This is usually the one day of the year when the market is closed, but most government offices are open. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!
– Eddy
P.S. Live long and prosper.
The markets haven’t had a classic correction — down 10% or more — in two years (and only that recently if we count a 9.9% drop in Spring 2012). Five years into the bull market Randy Frederick argues it is time to remove some “exuberance” and “frothiness” from the market.
Frederick, Managing Director of Trading and Derivatives at the Schwab Center for Financial Research, warned of a coming correction encouraging traders to consider profit taking and adding hedges. He wrote, “For the past month, economic indicators have been flashing clear and consistent warning signs that a correction—or at least a sizable pullback—is coming
SEC Halts Trading in GrowLife As Pot Stocks Get Crushed
The Securities & Exchange Commission appears to be waging a limited crack down on the trading of so-called pot stocks that has caused some of the most popularly-traded stocks in the controversial sector to crash on Thursday.
“Perhaps the most incredible part of the pot stock boom: Even though the Obama Administration says it will not enforce the Controlled Substances Act in states with a robust regulatory regime, marijuana remains illegal under federal law. “You can’t have an industry where they say, ‘We can put you in jail for the rest of your life, but we probably won’t today,’?” says Sam Kamin, a University of Denver law professor. “Who would invest in that? Who would put their money in that in terms of raising capital?”
continue reading HERE (you will find 2 articles on the same page. Scroll down to read another titled “Inside The Pot Stock Bubble”
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