Janet Yellen: The Grinch Who Stole Christmas

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Janet Yellen:  The Grinch Who Stole Christmas
 

If you were thinking about a Santa Claus Rally, I am telling you that Santa won’t be visiting your door this Christmas season.  The previous week’s rally has taken the sting out of an ugly December for North American markets with the INDU paring half its losses for the month.  Just as Santa has been mysteriously absent this Christmas, so has the typical rally in stocks.

And there is one person you can thank for messing up markets this year… Janet Yellen.

She missed the expected rate hike in September which everyone was prepared for and instead choose to hike in December.  Hands down, she got spooked by the drop in markets in August and September and dropped the ball letting the markets and largely the talking heads on the business channels control her behavior.  If she had chosen to hike in September markets would have been oversold by December and we would have seen our typical counter cyclical rally in December.

So for the last 3 months the markets rallied on relief of continued QE with the same asset classes leading the rally which benefit most from a low rate environment.  Oil rallied.  Materials rallied.  Tech and bio tech all came back.  All the risk adjusted high growth assets shot back to life with an unexpected reprieve from Yellen.



This year has been counter cyclical in many ways because of the external forces of a weak kneed Yellen gyrating markets with weak kneed wishy washy comments about being data dependent and then changing the goal posts on data well within the statistical margin of error for revision.

Data dependent on a point or two from an estimate?

Are you seriously going to tell me the data between September and December is that much different?   I call bullshit. The US is well into their economic recovery for which many think is getting long in the tooth for diverging global markets.  

The biggest fundamental change for North American markets is the imminent rate hike.  So here we are in December battling another counter cyclical trend because Yellen had no choice but to follow through with a rate hike.  The writing is on the wall.  QE is over. We are entering into a new era of raising interest rates and you can bet that this major fundamental change will have an effect on all markets going forward. 

Yellens ineptness at managing the markets is showing when in fact Greenspan raised rates with little much as a slight correction until the sub-prime started showing its ugly head.  So it is proof markets will adjust and if there is something ugly underneath the sheets, the raising rates will help flush it out and markets will adjust to whatever that new normal is.  I think the problem in 2008 was no one understood the extent of subprime.  I don’t think there is anything remotely in the USA which could trigger the collapse of the financial markets like in 2008, but with changing conditions you can expect a bear to takeover which is necessary for markets to be able to adjust and resume a new bull.

What is key is as much as these folks think they move markets, they affect daily gyrations and that is about it.  The macro conditions are the macro conditions and raising rates in a high growth environment ultimately has only a short term effect and help smooth out problems building up in the system.   Raising rates in a low growth environment will have again, little effect.  The economy adjusts to whatever the conditions are and is just a cost of doing business.   The trucking industry didn’t collapse when gas prices tripled in a decade and adjusted.  So will the entire economy.  Raising rates will do little to affect a global slowdown or depression.  The conditions are already set for that.  The biggest thing North American financial engineers need to do is to get on a track of normalization and stop worrying about daily or even weekly gyrations in the markets.  The point is that without the conditions of subprime like in 2007 in the US.  The effects of the rate hikes are extremely over blown in the USA and in fact most would benefit from normalization.  Certainly the entire financial industry.    One asset class that looks extremely enticing over the next year is the US banks.  

1. Bank of America  @ $17.33
2. JP Morgan JPM    @ $66.84
3. Wells Fargo WFC @ $55.04

The bond market bull is at an end

So now that we have got that over, every buy fixed income!!!

Well is it over?  We got one quarter point hike.  Hell no it aint over.  It’s just the beginning…

With a series of rate hikes imminent you are entering into a new environment for investing.  What precipitated the 30 bullrun in bonds?  A trend of declining interest rates over the last 30 years to zero.   What has keep the bond market going while rates are at zero?  Seekers of yield.   The problem is that the bond market is hugely overvalued because rates are artificially low.   Prices of many bonds are a function of an equation, and are directly affected by rates.  Clearly this is a fear the FED has, engineering a collapse of wealth in the bond market.  Clearly what has been engineered for an entire generation is the run up in principle in the bond market well beyond anything reasonable.



Ask yourself this?  Should you fear the collapse of something that was artificial and unsustainable in the first place?   The bottom line is rates shouldn’t have trended in one direction for 30 years.  Certainly Keynes would be rolling over in his grave at the twisting of his economic theory into the government manufacturing perma bulls instead of smoothing out economic cycles.  And if the government wasn’t so concerned about smoothing out economic cycles, rates would have naturally bounced between 3% and 6% and not gone on a trend of dropping to zero from their peak above 10% in 1980.   Rates have been largely inconsistent over the last 40 years creating huge paradoxes on financial markets.  That is the major problem.

Irresponsible economic policy over the last 30 years.

The bottom line is we are entering into a new investing environment with a whole new set of rules and until we can figure out what those rules are and how they are going to affect global finances it is going to be a rocky ride.   You are going to see a rollover of investing themes.  One of those themes which has been imminently at risk for the last 5 years is the massive bull market in bonds.  How is it going to unfold?  Who knows, but these rates hikes will imminently hurt the bond market, it is simply a function of an equation.   Unless someone decides to manipulate with the equation to smooth out principle valuations, you will see significant loss of principle as rates rise.   We are entering into a period of normalization, rates have to raise and purchasing the appropriate insurance should help protect from a material loss in principle of fixed income without selling it.

We have a series of quarter point hikes on the way where we will eventually see a normalization of FED FUNDS rate of about 2%.  This is still artificially low, but we are in a low growth environment created in part by low rates.   I believe the trend for the next decade is increasing interest rates to a target of 3% to 4% at the end of normalization by 2025.   Clearly the world has adjusted to low rates for growth, but as boomers age and become increasingly risk adjusted, there will be increasingly more pressure from this group to create less risk adjusted income streams and we should return to a more normal investment portfolio of 60% bonds and 40% equities at the end of the normalization period. 

China, a Depression in Store?

The biggest risk for global markets isn’t Yellen raising rates.  Nope.  The biggest risks for global markets are the headwinds which continue to blow up impending storm clouds on the horizon.   The biggest threat to the global economy is the collapse of the Chinese economy.  Brazil has fallen into a depression because of loss of trade with China and China’s pains are being felt throughout the global economy.  From direct purchasing to the economic activity in Canada related to elevated commodities prices.

If you thought they manufactured data on the way up, I am telling you right now if they will do the same thing down.  There is no way China is growing at 6%.  In fact I have my doubts that China is growing at all right now with the depressed commodities prices and the trickledown effect the slowdown in China is having on direct trading partners like Brazil.  

There are not too many models to fit China in to compare its current situation because China is unique in the fact a billion person population has never experienced such growth.  One model in history does provide an example of what could be in store for China over the next decade.   USA model of the “Roaring Twenties” turning into the “Great Depression” plays to mind of a major economic power who experienced major expansion and then contraction.  China’s expansion and the growth of China’s domestic economy when matched to other periods with similar expansions, no economic unit has ever avoided similarly proportionate contraction to that expansion.  I have my doubts that China will not be able to engineer themselves out of this contraction.  They will however be able to lessen the effects with given economic policies.   The last 5 years in China has been a sputter stop start economic momentum similar with a top in any economy and declining growth indicating a cyclical top in the expansion of the economy.

How can you tell China is in a depression?  You really can’t and have to look at sum of China’s parts and certainly one of those is fuel and parts for that engine.  Commodities.  With depressed prices in just about everything including iron ore of which steel production is China’s bread and butter, and you have to figure these headwinds are ominous at best.   With iron ore dipping below $40 per tonne, prices are back to 2005 levels and could go lower as iron ore entered the millennium priced at less than $20 per tonne.   If iron ore prices aren’t any indication of the extent of China’s slowdown, I don’t know what else to show you without getting boots on the ground.



 I also see another major conflict China will have to overcome to continue to mature and expand.   There are also robotics and 3D printing trends in China which may see its workers turned obsolete over the next decade.  One of China’s main goals is to transition to a consumer oriented economy but if they can’t transition manufacturing workers into service workers fast enough, robots and 3D printers could eat up huge swaths of the labor force compounding an employment problem which could emerge as a result.  Clearly education and training workers into new areas of the economy, but if technology revolutionizes manufacturing before retraining can take hold en masse you could have compounded social problems in China with a largely out of work labor force.   If these robotics and 3D printing trends continue in Chinese industry, you may see another huge mitigating factor in China’s impending depression.  The unemployed worker.  Manufacturing has been the life source of the Chinese economy and soon you may see the Chinese worker marginalized by technology.

2016… The Year of the Short? 

Certainly in Canada, 2015 was the year of the short and it looks to continue into 2016 with the economy on the verge of dipping back into a technical recession. 

The big question everyone wants to have answered is will the US markets follow suit?

Right now Brazil is in a severe recession due to the China slowdown.  China is pretending they are avoiding one.  The trickledown effect of what is happening in Brazil is going on in Australia and Canada but is less severe than in Brazil because both nations have more developed economies which provide a base making the economies more stable and resilient and dynamic to withstand a severe downturn.   The problem with Canada is the country is seeing two key area of growth decline at once.  Our oil boom which is considered much more significant than the materials boom was only partially due to Chinese demand and not solely ala the materials sector.   Canada theoretically should get hit harder concerning where most of our growth came from over the last 10 to 15 years.  It is a good thing that we have a distinct advantage here in Canada of being a key trading partner to the US where we still generate most of our economic activity and will continue to do so just because of geographical location.



Neither energy nor materials may ever come back into prominence as they have been over the last 10 years.  The only thing that may start another commodities boom is the urbanization of India which currently has an urban population of about 35%.  It was the same trend to urbanization of rates from 30% to 50% which was largely responsible for the China boom and the same type of urbanization plan in India could potentially start another commodities bull sometime down the road.   The trend is still not in place and estimating when India may decide to urbanize its population is a guessing game at best and not an investment theme for anyone to be waiting to unfold.

The TSX closed below 13,000 last week is significantly over valued and is having a problem moving above the 50MA.  It looks like a great index to continue to short in anticipation of lower lows and lower highs in 2016.  The American markets are also showing signs of a technical breakdown similar to the washout in August.   With a break in a multiyear trend back in August, it is safe to say there is much less chance the markets will continue higher in 2016.  What makes this an even safer bet is we have begun a period of normalization of interest rates in the US.  The US markets have certainly become a stock pickers market in my mind’s eye until the indexes have gone through this initial period of normalization.  There will be a period of adjustment and markets will need to correct in order to adjust properly.



The headwinds are different since the least bear market and economic slowdown triggered by subprime.  I doubt we see similar price action in 2016.

With oil at multi-decade lows, emerging markets in a protracted slump, a material change in trend to raising rates; macro conditions have set the stage for a concerted global slowdown of which no economy will be immune.  A tightening of monetary policy affects everyone.  The free money period for everyone is over and nations which continue to follow a QE policy could become extremely exposed to downgrades once the USA has fully changed course.

Zimbabwe’s and Greece’s could be the name of the game for many nations who don’t follow suit and adjust to USA monetary policy.   You don’t raise your rates… your currency will drop.  Your currency drops and it becomes much harder to pay your debt and it becomes much more unserviceable and then you enter the debt death spiral where the creditors vie to financially enslave your country. 

Or you choose the route Zimbabwe did and print money and impoverish everyone.   Fun choices ahead.

Certainly the bond vigilantes are starting to corner the high yield market which could be a signal of potential implosion.   If a lot of this high yield paper is tied to the shale gas industry then it could be just an isolated event.  The problem is yields have been compressed for so long that they have been pushed out on to the risk curve into the stock market and other places most would not normally go.  The high yield instruments could consistent of anything and like subprime re-packaged and re-sold several times.



If the global economy is truly extended, there could be significant risks throughout this sector similar to the sub-prime market when housing was over extended.   It doesn’t mean markets will implode and shut down like in March of 2009, but we are clearly entering a phase which rhymes and could send markets reeling over the next few months and maybe even years.   This economic slowdown looks like it will be much more protracted, but less volatile than in 2009; when the financial world actually stopped.

1. Risk of extended and protracted slowdowns in China
2. Australia, Brazil, and Canada showing signs of Chinese slowdown ‘trickledown effect’.
3. Europe continuing in a slow growth environment
4. A collapse of the commodities sector across the board wiping out trillions in capital and growth.
5. Entering a period of interest rate ‘normalization’.
6. The continued deflation of the price of oil.
7. US retail bellweathers significant earning misses associated with lower and mid-range spending including Walmart.

Beat the Market Top Stocks

I can’t write a year end letter without making some stock picks.  Since we are biased towards a major correction in 2016 picking stocks making new highs is a dangerous activity at this point in the cycle unless it’s a day trade.  Generally I like momentum because its easy fast money playing on investors’ emotions but the market is dictating a different type of strategy. 

Value.

If you think the market will tank in 2016 then the easiest way to deal with your 40% equities allocation is to look for value.   Look for names that have been beaten up for 18 to 24 months and you will find a name that is completely oversold in an overbought market.
 
3D Systems Corp - $10.50
NYSE - DDD
Market Cap - 1.18B
Shares Outstanding - 112,077,951
 
I started talking about 3d Printing 2 years ago at the height of the initial run-up.  I mentioned at the time that valuations were extremely generous and it was a time to do research and trade the sector at best. After 2 years of declining prices and volumes, this stock is looking extremely oversold and due for a huge bounce in 2016.  3D printing is the wave of the future for manufacturing and will revolutionize manufacturing as well as consumerism. How the landscape will change is still up for debate, but the Chinese are 3D printing entire houses, so the changes are real and significant and already in the works and indicate that this revolutionary manufacturing technique will change human life more than anything else to date.   3D Systems Corp is the preeminent company in the space in North America and is our top pick going forward.  

By no means is it the only 3D printing company.  We have mentioned many in the past, but 3D Systems Corp is a screaming buy trading off close to 70% its 52 week high and why not just buy the cream of the crop when it is trading at such a discount from its multiyear highs.  It may take a while for the 3D printing theme to gain real traction and several year to make new highs, but the trading range DDD has created for itself and the current value for one of the preeminent growth themes in investing cannot be ignored.



Stratasys Corp SSYS at $26.79 also gets an honorable mention as an excellent place to park money in 2016.   I love 3D printing and this developing theme because there is nothing more revolutionary for the 21^st century than this new production technique.  The valuations have come to a point where everything is a screaming buy and I hold 3D printing as the number 1 growth theme over the next decade.  Better than Biotech, better than tech… 3D printing is where you will want to be. 

In a short side to Biotech.  The industry has some huge overhanging issues and until they collectively fix its business model of price gouging or government fixes it for them.  The bloom has come off this rose for the next little while.  What bothers me about bio techs, is you don’t need to price gouge to make billions in what is a maturing industry where prices should be coming down and not going up.  Especially with potentially volumes of sales with gaining baby boomers.  Gouging insurance companies and taxpayers for the essential medicines will only last so long until you get legislative intervention like we are starting to see in the states with their out of control health care system and associated costs.  Now that the government is paying large portion of the bill, you are going to see even greater scrutiny of costs going forward in all aspects of this industry.   Until the biotech industry is fixed, 3D printing offers lucrative potential capital gains with most stocks sitting at 5 year lows with a human element of liberating people unlike biotech which likes to feed off of people, sick people. 


Blackberry - $12.61
TSE – BB.TO
Market Cap - $6.63B
Shares Outstanding – 525,700,706
 
Blackberry was a victim of the last of a tech cycle in which it couldn’t adapt and keep up.  The company used to dominate the business world communication platform and practically invented text messaging by making it mainstream with BBM messenger more than a decade ago.  While Apple was still making iPod’s, Blackberry was the dominant player in the mobile communications industry.

Then someone came along with the idea to turn an ipod into a phone and viola…!!! You have the iphone and the dominant tech piece for the next decade. 

Will Blackberry ever be at the forefront of mobile communications?  I doubt it.  Samsung and Apple’s market share in this space will only be chipped away at over the next few years unless Blackberry comes out with disruptive technology. It doesn’t mean there isn’t room for another solid phone franchise like the Galaxy or the iPhone, but to truly disrupt this space you will have to change it.  Which their current phone offering of a slide out keyboard is not.  Although it is a nice phone and maybe next year after a generation or two of upgrades I might switch to the Android based PRIV of Blackberry, considering the only thing ever holding me back from buying a Blackberry was their refusal to use Android and push to market a third mobile operating system the market did not want or need.

What killed blackberry wasn’t inferior devices, but their stubbornness to not use Android as the ecosystem.  5 years ago Android and Apple won the mobile operating system race.  As a result of no one wanting the BBM ecosystem sales of Blackberry devices artificially lagged as a device maker.   If you make an inferior device, you can always find a price point to sell your product.   But if you are making a device with a system no one wants to use, you want won’t sell it at any price point simply because you can’t compete on the ecosystem.  They couldn’t attract developers, they couldn’t develop a niche that the business community needed, and before long the company saw itself entirely marginalized as device marker.

Blackberry as a device maker is coming back and I predict in 5 years Blackberry will be a top 5 mobile device maker globally again.   It took a lot of eating crow, but management finally figured out what was wrong with the device making division, its refusal to adopt the Android ecosystem.  Now Blackberry is using Android and adapting its own software to the android ecosystem so  Blackberry’s extra security features and messaging ecosystem now make it a plus instead of a “but have this instead of” which was a tough sell to anyone when all we wanted was apple or android apps and games. 

In addition to BB finally turning around its device making division with key strategic decisions, the software division continues to show strong revenue growth with a 120% quarter over quarter increase in software and services revenue which now consists of 29% of the company’s $550M quarterly revenue.

When looking at a turnaround in Blackberry and a move back to profitability you cannot discount the hardware division.  It consists of 40% of Blackberry’s current revenues and potentially solid launch of a franchise of phones like the PRIV could dramatically increase BB’s revenues. Key to launching Blackberry’s stock to $20 or $30 is the development of a successful mobile phone franchise and right now BB’s hopes are pinned on the PRIV.  A solid phone from initial reviews.  The development of a successful franchise even a quarter to half the success of iPhone could mean an additional $20B to $30B in enterprise valuation.   That is the cherry on everything in Blackberry’s turnaround if they launched a phone with as much demand as a Galaxy or an iPhone.

I always thought becoming a second tier phone company and sliding into the $100 to $300 range could be an option like ACER and others have quietly done, but the lucrative revenues of a successful franchise launch like Samsung’s Galaxy or Apple’s iPhone are too much to pass up to more cut and slash pricing.  I do believe that if John Chen cannot develop that franchise within the next 24 months he will most likely retreat to a lower pricing and lower margin phones. 

What looks to me is happening at Blackberry is the perfect storm for a turnaround. 

1. Expert turnaround management in place continue to deliver on vision for the company.
2. They finally got the handset right (not with the keyboard but with adopting Android).
3. They are experiencing exponential growth in the enterprise software division at over half a billion in revenue looking forward growing 120% Q over Q.

At $12, this stock has broken out and is indicating an excellent year looking into 2016.




Newalta Inc. - $3.75
TSE – NAL.TO
Market Cap - $210.9M
Shares Outstanding – 56,236,548
 
Newalta Inc. is a mess.  It is a flyer on the O and G sector at least finding a bottom the next 6 months and was only picked because it technically looks ripe for a bounce early in 2016 on seasonal strength for O and G stocks.  Fundamentally it is hard to look at this company with high debt and high production costs, but technically the company looks like it has found a bottom with a volume reversal.   So Newalta is a recommendation on trading this stock only.



Stocks rarely go to zero, yeah, sometimes they do or get refinanced at such low prices previous investors get diluted out, but generally stocks do make it out of the panic zone.  Currently Newalta is in the panic zone.  Teck Resources hit $3.50 in 2009 and then raced back to $50 and Newalta could be a similar type dog in the oil panic.  High debt loads tend to worry investors.

In Newalta’s case we have a $14 stock in July which now trades at 25% the price less than 6 months ago.   Oil may not make it much back up above $40 and Newalta looks to be impaired to the point of fundamental stock damage, but any rise in oil price or even signs of stability will benefit many names including a debt ridden junior like NAL. 

At any rate, this company looks ripe for a trade back up to $5 to $6 area given oil doesn’t collapse to $20 in January. 

Some key technical trading indicators here is the gap down in NOV.  Gaps generally will fill back up and if this is the case you can expect the gap from $7.50 to $6 in November to get filled back this spring which represents a double from current levels. Of course it doesn’t have to.  NAL could continue a downward trend but gaps are key patterns in swing trading that many successful traders use.  Another key indicator is the increasing volume in the stock as it dipped below $5.  This generally shows high interest in the stock when interest would normally be decreasing below $5 because of the stock losing criteria for many portfolios.   Similarly the Teck experienced a similar trading patterns back in 2009 and could really be a bottom fishing winner in 2016.  If oil bottoms.   Newalta is the most technically damaged but at the same time the most potentially rewarding of the 3 picks over the next 3 months. 





Christopher Pattison

Beat the Market Stock Picks

Early Warning Report: Welcome to the Great Canadian Depression

Early Warning Report: August 21, 2015

....Welcome to the Great Canadian Depression 
 

OMFG!  I SPEAK!!!  WELL… ERRRR….. I mean write.

NO I AM NOT DEAD!  Not yet anyway.   Although, I am sure after the last year and the family ordeal I have been through, some would wish I would die and are still making their best efforts to put me in my grave earlier than expected.  It just will not happen, no matter how many twists and turns my story takes.  Death is a hard activity for this individual spirit and I will not go that easy.

Kind of like these markets, paralleling my own battle… they have been on a bullish run ever since I can remember.

But just like that last spoonful of chocolate ice cream in your bowl, it seems that all good things must come to an end.  There is no more ice cream left.  The bowl is empty.  The tub the ice cream was in only has a few streaks of freezer burnt ice cream left which only increase your chocolate craving.  Until the grocery store opens in the morning..  the chocolate ice cream party  is over.



When I say the party is over… it is certainly over for many.  It’s over for the mining industry which was supported solely by the parabolic growth of Chinese cities which has now subsided.  Alberta is well on its way to a depression with the price of oil sliding to 10 year record lows.  The single focus of conservatives ramming through energy initiative after energy initiative has left the Canada perilously unbalanced and over-weight on energy which is putting a frosty chill on Canada and its economy.  To make matters worse, our import dependent economy has gone into sticker shock with the loonie further losing its shine as a petro dollar.  The Chinese stock market bubble has heard a resounding pop turning billionaire’s into millionaires overnight.  Around the world there is continued debt woes along with sluggish growth across developed economies.

The only bright spot is the USA economy which may itself be rolling over. The signs are everywhere folks, we are well on our way into a global recession, one much more severe than the 'trip up' we experienced in the financial crisis in 2008.  In places like Canada, without a complete overhaul and reinvention of industry, we could be close to tipping the scales from a recession into a mini depression over the next 3 to 5 years depending on how fast and dynamic our industries can adapt to the changing global landscape.


The Bull Market Never Stops

But it does pause….

Are we at a bull market cycle top?   

No, because we still have yet to see monetary deflation which should come with the enormous debt load built up by western nations.  This monetary deflation in itself will push up nominal stock market prices well into trillion dollar valuations by the shear fact the operating company valued in a given currency does not change value.  If the USD could reduce in value 50% to 75% in a debt crisis… the corresponding companies valued in that currency would increase in value and would most likely benefit in outlook considering a lucrative export market would open up at that time.

In January of 2012 I wrote an article for Wall Street for Mainstreet which indicated that markets would rocket to the moon in an record bull run.   100,000 for the INDU is a possibility.  The most recent run came from a sub 7,000 point index.  Triple the original starting price in 6 years.    The DOW could easily triple from its next base of 12,000 to 13,000 during the next economic cycle and then triple again from that base.  In 15 to 20 years... you could easily see 100,000 INDU.  Maybe more.  If America gets beaten into oblivion by a military alliance.  Germany style  1920's inflation could be in the cards.

The stock market bull never stops.   The fact of the matter is… for the current financial system to work on its current model… growth has to always be there and the easiest way to create growth is to inflate away.  As false as that growth may be.

Certainly this market cycle looks to push well past 3,000 on the S&P 500.  The bottom line is you can never lose money over the long run in equities as long as financial markets use inflation as a primary economic tool.   Just ask Warren Buffet.

That is the number one rule for investing…. you have to always be invested.

That being said.  If you want to avoid short term pain of margin calls, investor psychology selling stocks at bottoms and buying at tops; you can’t buy and hold like Warren Buffet.  None of us have his pocket book thus could never attain his wealth following his great investment strategy.    Not many of us have that ability to take advantage of economies of a portfolio like Buffet and thus cannot invest like Buffet.  Not if we want to catch up to Buffet anyway.

So when is it a good time to sell?  Each company will give you its own signals when to sell which is usually a mix of fundamentals and /or technical but an easy time to pick a time to sell down the portfolio is usually when you find a general market down turn.  I would say when a multi-year trend in the market is broken... that is as good a time to do some general selling as any.

Like the one that is slowly appearing on the financial markets horizons.

What is definitive is that the bull rally is getting old and the markets are definitively turning over and going negative for the fall.   The US market and Chinese markets may rally in early 2016 dependent on economic data, or we could continue into a concerted global recession and in Canada, with an absolute collapse of its major industry oil… a depression.  

Clearly one thing that could make or break the US … interest rates and their free money policy.    If you see rates go up in September through December.  Brace for major pain, everywhere.


The Crash in Oil Prices Could Trigger a Canadian Depression

Like it or not, Canada was great before oil.  Canada balanced its budget without oil.   The current government made a huge error in judgement developing its single focused oil sands energy policy.   This was a huge mistake.  It drove up the loonie and drove out manufacturing.  It made us dependent on a single industry, and after 20 years of development, most Canadians clearly don’t like what they see from space with large parts of Canada’s north destroyed for centuries to come. 

Possibly altered forever.

It’s not just oil for Canada, oil is just the tip of the iceberg.  We are seeing the great commodity deleveraging in every materials sector.  Copper could fall back to $1.  Oil could fall well below $30.  Gold will spike for the traders during uncertainty like it always does, but its a short every single time and will continue its trend under $1000.



It’s over folks.

For energy and materials... when they lose their shine... they lose their shine and nobody wants them.  It's like a hot potato and nobody wants to be holding it when the music stops.

There is no rebound.

Globally we are returning to world where China doesn’t need materials and eventually, China won’t need our oil either.   So you know what Einstein said? About it being insanity hitting your head against a wall over and over and over.  So why bother when remaining in this industry is, like that, hitting your head against the wall. The song "The Gambler" keeps playing in my head.... "and know when to run..."

And if you over extended yourself at the wrong time thinking there might be a way out, here in Canada, some of us have literally chosen to blow our brains out like the stock brokers in 1929 crash, jumping out windows.   Sometimes you just gotta know when to walk away, and not double down and hold em.  Hell, I ran as fast as a could as soon as the checks dried up.  The writing was on the wall in 2012 when 50 exploration companies changed their stripes to graphite miners.

It was that bad then and it is that much worse today.

It is not just Canada.

Believe it or not record low oil prices are killing global spending from some pretty big spenders like the Saudi’s Russians, Qataris, and Canadians.  This could be a good thing.  The Saudi’s have way too much money and with that, came a military program which is creating a humanitarian crisis in Yemen and supports ISIS in Syria and Iraq.

The winds of war are in the air and a lower oil price will certainly impede growing hegemony in the Middle East.   You are going to see a price war between the Iranian and the Saudi’s… and guess who is going to win?  The Iranians of course who have had to sell discounted black market oil for 40 years.   The arrogance of the Saudi’s trying to maintain market share could kill the price well below $30.  The middle east is goign to get worse, much worse.  The Iranians are the only force capable of stopping the Saudi's.  Yemen is the first one.  UAE could be next.  I am sure the new Saudi king would love to move his new palace to Dubai.

Unlike the Middle East, a lower oil price won’t stop the Russian military complex.  Russia has an entire internal economy which supports the nation even if the entire world stops trading with Russia.  You can't beat Russia.  It is impossible so why even bother and with NATO entering the Ukraine you have undeniably awoken the Russian bear and poked it in its eye. They will still build their military might because they have the technology and more importantly, the infrastructure.

Here is the bad news.... unfortunately for Canada, we are affected the most by a crashing oil price.  Hit with a double whammy event with the oil sands producers being the highest cost producers in the entire industry.  Some companies will go under and many projects in Alberta will be the first to be put on care and maintenance.

Projects like the oil sands may never see their potential as alternative energy continues to achieve new efficiency.

Consumers continue to demand alternatives to fossil fuels.   Undoubtedly oil is a 20^th century technology and the world is slowly moving away from its thirst for this dirty form of energy.  How fast will demand move away and how long will it take, are questions none of us know and many are just hoping the time lag is enough to suck more oil out of the tar sands.  Personally I think the best days for the Tar Sands are behind her.  There is a lot of money invested in backward thinking.

A lot of money to be lost up north.  The bottom line is Keystone is dead, Northern Gateway is dead, and Energy East is going nowhere.   Alberta has done it all wrong and sold itself down the river to foreign governments and corporations on promises it could never keep.

It's time to pay the piper.

The way out for Alberta and its energy crisis is easy.   Energy will always be a huge part of Alberta’s economy and abandoning it is not the way out.   Investing into turning bitumen into value added products and using our low dollar to be competitive against other nations exporting those value added energy products is the answer. 

Investing into technology is the answer.

Whether it is creating new regulations for a hemp industry just waiting to flourish, or investing in education to develop entirely new industries, now is the time to plant the seeds that will take us into the future for the next generation.  Whether it’s in Alberta or the rest of Canada, just like the politicians keep chiming for change.  Canada needs a reset button.  This should include an entire overhaul of our industries to take us forward to  help employ our younger generations who continually get shut out of jobs kept by aging baby boomers who refuse to retire.

It is what we should have done in the first place instead of touting Canada as the new Saudi Arabia.   Develop a broad Canadian economy which included more than energy, mining, and banking to financing the energy and mining.  Canada was never meant to replace Saudi Arabia, as investors are starting to realize.  Now is not the time to focus on pipelines and raw resource extraction for a few extra WTI dollars on the spread.  Now is the time to focus on broad change across the country.

Not when consumers are ready for an all-electric alternative.  Not when abundant natural gas resources are much cleaner alternative for industry.  Not when nuclear continues to expand and thorium reactors are being planned and hotly debated.   Not when solar technology and other renewable resources are on the verge of becoming commercial including Tesla’s simple solar powered house battery.

Now is not the time to keep hitting our heads against the wall... not with the oil sands.  Its time to turn to new industries.

One thing is for sure, the over-weight nature of our industries to materials, energy and banking… you are going to see a corresponding effect on the Toronto Stock Exchange with values continuing to plunge.  You will see a huge pullbacks in industry nationwide. 

I say.....  "Welcome to the great Canadian Depression".

The list of stocks to short in the Canadian Markets is a long one. 


US markets look to top out

Not only has Canada taken it on the chin in the last 8 months with it really yet to show in the stock market.  The US recovery from the financial crisis in 2008 and 2009 is complete and is also showing signs of a top in this economic cycle.  The US market looks to correct this fall either way.    During the summer, a flat and directionless market has suddenly become much more bearish.

Even though we are in a perpetual low rate environment, you just can’t go up forever...



 And when you look to leading indicators like the transports breaking down... 



The INDU is struggling.  The Russell 200 just hit 6 month lows and the S & P 500 is starting to break its multiyear uptrend.  The technical signs keep flashing everywhere.   The bull run in US equities is looking like it is at an end.   When you combine the US charts with what is going on in China and the continuing debt woes in Western Europe.  You add in oil prices taking the steam out of some pretty big spenders... we now have conditions which are almost ripe for a concerted global recession.

How severe remains to be seen.  There are always so many variables at work.  One thing is for sure, the markets in the US and in Canada are at a crossroads and if Canada is a leading indicator of what is to come in the US because of huge shale oil expansion which is no longer profitable.  You could see a similar type decline in the Midwest and a similar effect on America's 6 year recovery.

You don’t even need to look at economic stats to tell you which way the market is going.  The market tells you that in advance of the stats.  Cheap money continues to fuel the market and the market will respond to continued quantitative easing, but there is so much negative undertones globally that is looks to me like the cycle is now over.

What could really make the recession into a doozy is when and how hard rates go up.  Normalization will happen and you will see a US market reaction during normalization of interest rates.

How hard and how severe... is everyone's question.  Some think a Greek like situation in the US, others predict a slow and steady raise over the next 10 to 15 years.

At any rate...  now might be the time to buy some calls on the VXX and short the major indices in North America.



Christopher Skidmore

Beat the Market Stock Picks 

The Journey is the Prize

What were you doing when you were 22?    Most likely graduating university and preparing for the big bad world of finance I bet. 

I spent most of mine homeless, jobless, and having mixed success and failure with my first business venture.   I remember that summer well because I never had so much fun being homeless and jobless.  I had finished selling my last ‘Impact Knife’ (an autoglass removal tool invention) for gas money and cash.  People loved my invention, I sold every last one I made, but when my standing order for 500 Impact Knives was cancelled at Autostock (the family autoglass warehouse) because of family politics, it put me in a bind having spent all my investment on moulds anticipating production.   At 22 I had planned taking on the world with my better-mouse-trap combining two proven autoglass tools into one, but someone else had other plans. 

So after realizing my business was all but dead and what little money I had from it was draining fast, I drove my little Nissan pick-up across Southern Alberta until I ended in the Crow’s Nest Pass somewhere deep into the logging roads until I couldn’t drive anymore.   I parked, grabbed my pack and a sleeping bag, and started hiking from there.  I had no destination, I needed none.  And pretty much the entire summer, I would rewind, press play, and repeat… I always ended up at the end of another high country road and would camp and hike.  I didn’t even know much about backpacking or the backcountry.  I didn’t care.  It’s not like I had a care in the world at 22 after having my dreams dashed by family and little hope of any further investment with the death of my business partner and grandfather Herbert Skidmore.

That summer I never had a destination.  It was a tough year and with little to look out for, I wound my way around the Rockies taking one winding road after another and one cragged trail to another.  No destination ever, my only home was my soul which would eventually return me to my truck, most nights nestled in the bed of the Nissan under a canopy of stars falling asleep to the sounds of a crackling fire.  

That summer made who I am today.   Some summers I don’t even remember anymore.  But that one stands out as vivid as it was 6 months ago.  It set off a passion in me for several things like hiking which I still do today, albeit not as much.  I used to love doing day hikes and overnight marathon type hikes covering 20km to 50km.  I love the gruelling tests these hikes put on your body and mind.  It not only tests your body, but puts your spirit and core through the ringer.  And what doesn’t break you, kill you, or beat you back mentally into a thumb sucking baby… just makes you that much stronger.

I don’t hike so much these days because it’s an all-day activity you have to set aside the time for and I have kids, but I still very much enjoy burning up the Grouse Grind, BCMC, 5 Vistas, or any one of the numerous trails that populate our North Shore Mountains.   Name a trail or peak from The Lions to Golden Ears and I have hiked it.   And in any condition too, from winter trails to summer runs… there really isn’t anything I personally enjoy more.  

Hypothermia on 'The Camel'

Once my hiking partner and I got caught in terrible conditions fording a swollen Lynn Headwaters and hiking up past the snowline to ‘The Camel’ in October.  To make matters worse I had fallen on shale scrambling up scree and was bloodied, but we still pressed on. By the time we reach the lodge on Grouse Mountain, my partner and I both had hypothermia, we had to strip down to our underwear to warm up and dry out by the fire in the lobby at the lodge.  You would think we might call it a day at the lodge?  Nope. Down the BCMC to the Baden Powel and over to the Lynn Headwaters to complete one of the most gruesome day hikes ever endured in just over 12 hours.

All I can say about hikes like that and what keeps me going in spite of 100% rottenness for 100% of the time… aside from the fact that stopping in the middle of nowhere would be certain embarrassment for a North Shore rescue.

What keeps me going at the worst point when all I want to do is give up?  Over and over and over I repeat this phrase in my head…

“The Journey is the Prize”

I may not be having fun right now this moment fearing I may never find civilization and die of hypothermia behind Grouse Mountain in a snowbank, but when I look back and know I fought the fight all the way and didn’t quit.  That I preserved during the worst conditions just to exist that day means more than just a summit of a peak.  I won more than just a day’s worth of exercise.   In a sense, each hike was like a ‘Right of Passage’ pushing body, mind, and spirit past what you should normally be able to endure.  Each hike adds up to a collection of trials each with a different set of tests that eerily parallels life.  

It is so much more than making a summit.  You look back and you can see the history of your life.

It wasn’t attaining the Camel in a rainy, snowy late October day through Hanes Valley; or any other peak that I may have hiked.  It isn’t even the magnificent 360 degree view giving you the feeling you are indeed on top of the world.  Ruler of all.  After all the summits and peaks and views.  It wasn’t any of it.

It was all of it and more. 

It was the journey that was the prize. 

Saved by a Branch

One of the hikes of have done quite a few times and still love to do every so often is “The Lions”.  It is not a hike for the faint of heart and I find whenever I go up I am free climbing areas others are roped into.  At any rate, we used to drive out to Lions Bay to ascend from sea level instead of driving up Cypress and then hiking across for a photo shoot.  Obviously for myself, the tougher the journey, the more satisfying the prize.

At one point we had made it to the first peak on the Lions back and were dropping down to climb the Lion’s head when I caught a rock on my toe and hurtled forward off the ledge I was standing on to the ledge directly below.  I landed on my feet, but landed on loose, dry dirt and my feet started sliding off the ledge as I tried to brace myself from the fall.  What seemed like hours, but must have only been seconds; my foot stuck to a pine branch not more than 18 inches long growing out of the side of the ledge which stopped my foot and my momentum from going over the second ledge I had fallen on to. 

I peered over what I had almost fallen off.  It was a 1,000 foot drop to the reservoir below.

It is times like those when you realize that it could all end just like that and really, if it wasn’t for a freak of nature, would have.  It shouldn’t take near death experiences to ‘wake you up’ (or in my case several) and realize you were meant for more than a drop off a cliff.  But I knew from that day on, after almost becoming another stat on The Lions  that I could never live life in fear death knowing I am already living on some else’s clock.  I should not be here.  So I relish in the struggle that is placed before me because without it, it would not make me into the person who I am or who I am going to become.  Since these three life altering experiences I have always viewed the world a bit differently, not in cherishing the conquest of victory, but in fighting the good fight until there is no fight left.  That is ultimately where I want to derive life’s riches and lessons from, from struggle each one of us endures each day to make ourselves before our death.  The struggle to ultimately make as much an impact and difference on others while living yours.

That is the real prize. 

5 Holy Grails of Medical Marijuana

 

If you have been underneath a rock for the last year or out in the bush hibernating, there has been a mainstream development in investing, medicine, and in societal acceptance medical marijuana.  Society is finally realizing the benefits of this versatile plant which is about to kick start a revolution in modern medicine as cannabinoids are turning out to be one of the best and most versatile forms medicines, from nature or man.  

Science and medicine have ignored cannabinoids and the endocannabinoid system for the last 40 years primarily because of the drug war.  As a result of ignoring this critical system in the human body, cannabinoid medicine is now the last low hanging fruit in the biotech sector.   We are a generation behind in cannabis science creating a sub theme in biotech investing playing more than 40 years of catch up in this area of medicine.

The Endocannabinoid System

The Endocannabinoid System is one of the body’s great re-balancing mechanisms.   It is the system that regulates other systems in the body.  It regulates your blood sugar, cholesterol, circulation, immune system, brain function, nervous system and metabolism.   Cannabinoids target the CB1 and CB2 receptors of the endocannabinoid system whose receptors exist in the central nervous system, the brain, the immune system, gastrointestinal tract, and peripheral nervous system. 

Within the emerging opportunity of medical marijuana there are at least 5 ‘Holy Grails’ of cannabis medicine within reach of the pharmaceutical and natural medicine industries. 

• Immune & auto-immune diseases
• Cancer
• Pain & inflammation
• Metabolic diseases
• Neurological disorders

Immune and Auto-Immune Diseases - $100B

Speaking from experience, one if the best medicines for HIV, is cannabis.  It is so powerful; 'Cannabinoid therapy' can even become an alternative to HAART therapy and ARV medication.  CBD interacts with CB2 receptors stimulating the immune system and CD4 cell count production while THC slows down transcription of the HIV virus.  Even after almost 9 years of diagnosis, the more cannabis I put into my system, the better I feel with the caveat I don't smoke it.

Who knows what an ideal dose is for a person with HIV like myself or even what that ideal dose will do to someone with HIV.  Currently I do about 1,500 mg of THC a day and want to increase this dose at least 10 fold and show no signs or symptoms of HIV or AIDS.  At a high enough dose; a theory is cannabinoids may be able to shut down the virus similar to HAART. 

There is also an emerging problem in the US where HIV patients are outliving HAART cocktails whose virus is becoming resistant to available drug cocktails.  What is an HIV patient going to turn to when drug manufacturers refuse to make any more HIV drug cocktails?  The logical conclusion is cannabis of course.  My health strategy is the opposite, use cannabis to delay the onset of AIDS and then use HAART cocktails as a last resort after I have exhausted all other options.  If I am correct in my approach, I should outlive most other HAART patients by the period before I started using ARV medication, which so far is 10 years. 

There are over 30M people in the world who live with HIV and only 8 million of those use HAART medication.  In 2014 this is still an under-served market simply because drug manufacturers refuse to sell HIV patients in 3^rd world countries affordable medication.  The HIV drug market is estimated at $20B with $13B of this market spent in the US.  Cannabis could conceivably take a huge chunk of this market as HIV patients start running out of ARV options.

As little as 400mg of THC per day is enough to delay the onset of AIDS for years.  If 35M HIV patients took half a gram of 80% THC cannabis oil a day at a long term price of $5 per gram, at minimum, that is a $30 billion market.  In my opinion, every HIV patient in the world should take at least half a gram a day irrespective of their drug program.  For someone in Africa, $2.50 per day is much more affordable than the outrageous programs for ARV medication. 

It is not just HIV; cannabis works on many different immune and auto-immune diseases such as rheumatoid arthritis, type 1 diabetes, and multiple sclerosis.   Auto immune diseases affect 50 million Americans, 50 times the amount of Americans infected with HIV.

A stand dose for cannabis oil seems to be between 0.5 grams and 1 gram of 80% THC oil...  clearly the potential market just in this category is staggering.

Cancer - $150B

The biggest revolution in oncology in the last 5 years is the discovery that cannabis can cure cancer.  I say that with a grain of salt because I believe cancer is a chronic disease caused by the body being out of balance from both external factors like asbestos exposure and/or internal body factors like having a poor PH.  The facts are the facts, people are beating cancer with cannabis.  So maybe you can’t say cannabis cures cancer, but what it does do is kill cancer cells and hundreds of people throughout North America are on a version of Rick Simpson’s Phoenix Tears.  What people can no longer deny is that concentrated cannabis kills cancerous tumors and will stop the spread of cancer if taken in high enough doses.

Cannabis performs several anti-tumor functions …

1. Anti-proliferative  – prevents cancer cells from reproducing
2. Anti-angiogenic  – prevent the formation of new blood vessels needed by tumor to grow
3. Anti-metastatic -   prevents cancer from spreading to other organs
4. Apoptotic – induces cancer cell to seek its own death hastening death of cancer cell

THC and CBD are proving to be a very powerful one two punch against many forms of cancer.  THC has powerful anti-tumor properties and acts to kill tumors directly while CBD helps induce cell death and helps stop the cancer from spreading.  The ratio of THC to CBD is different with every cancer at every stage and could be 100% THC all the way to 100% CBD; but it is generally thought a 3:1 THC to CBD ratio is a good shot gun approach, although GWPH’s cancer drug has a 1:1 THC to CBD ratio.  What I am finding is people are prescribing THC oil to attack the cancer directly and CBD's to supplement the therapy.

There are a few studies out there using CBD's to kill cancer cells, but by no means is CBD the primary cancer killer, THC is. There seems to be a strong correlation with tumor-less cancers requiring higher CBD concentrations while tumor heavy cancers responding to high THC concentrations.  Another major factor for cancer seems to be tissue content.  If the cancer is in a high fat tissue/cell area or made up of fat cells, THC seems to bind to the cell better and be much more effective. 

The most revolutionary part of cannabinoids and their anti-tumor properties is they target cancer cells while leaving healthy cells completely untouched.   Cancer is a $100B plus industry and cannabis is poised to take a huge bite out of this market.   All the following cancers have been beaten with cannabis oil like Rick Simpsons Phoenix Tears or FECO made in the US, even big name celebrities like Tommy Chong using cannabis oil to beat prostate cancer.   

• Brain cancer
• Lung cancer
• Breast cancer
• Thyroid cancer
• Prostate cancer
• Skin cancer
• Leukemia

Cancer cells have even been reverted back to healthy living cells by encapsulating them in cannabinoids.  This work is being done right here in the MMAR clubs in Vancouver by doctors volunteering their time for research.    

Metabolic Diseases - $125B+

Cannabinoids play a major role in regulating and re-balancing the body’s active metabolisms such as weight, cholesterol, blood pressure and blood sugar levels.  Cannabinoids have the potential to play a key role in preventing and maintaining type 2 diabetes as well as many other metabolic related diseases, many of which stem from poor health.  Cannabis cannot only help stimulate appetite and increase weight in those who are underweight; but it can also help signal to the body a decrease in appetite in those that are overweight or even suppress appetite.  In short, it helps re-balance the entire body.

The endocannabinoid system is the body’s greatest mechanism in regulating and fixing the bodies other vital systems.  Cannabinoids stimulate the endocannabinoid receptors which then tell the body what it needs or does not need and then rolls out a response system appropriate to the ailment.  Diabetes is a major 21^st century epidemic and cannabis could play an important role in helping to stabilize a person’s body in a variety of metabolic disorders.  Diabetes alone affects 25M Americans who spend close $130B annually on the disease.
 

Pain/Inflammation - $100B

$35B is spent every year managing pain.  The anti-inflammatory market is nearly double that at $70B per year.  Combined, this $100B plus US market represents a major market segment for cannabis.  Cannabinoids are more effective pain management mechanisms for many types of pain than opiates, and CBD’s have been found to be 50 times more effective at calming inflammation than Ibuprofen in some cases.  Inflammation medicine is another area in medicine which could be greatly improved utilizing receptors in the endocannabinoid system.  Most effective anti-inflammatory medications are steroids which are not safe for everyday consumption,  certainly not for most patients, who deal with chronic inflammation.

It doesn’t matter what type of pain it is or what is causing the inflammation, cannabis is one of the most effective medicines for both pain and inflammation.  Again, it’s the one two punch of CBD and THC that combat to dull pain, and decrease both localized and general inflammation in the body.  Chronic pain, migraines, inflammation related pain; cannabis does not discriminate and works on it all.  As science begins to understand how cannabinoids interact in our body, the next generation of pain and inflammation medicine derived from cannabis should make most opiates a distant second choice to cannabinoid pain killers.

Managing pain and inflammation is another area I receive immense benefit from cannabis having endured 3 knee surgeries including a broken tibia plateau with 7 screws and a plate inserted into the left knee.  Without cannabis, running 1000 km per year at a 4:30/km clip with a screw still inserted through the width of the base of my knee would be impossible.

Neurological Disorders - $100B+

This might be the biggest category in cannabinoid medicine simply because it encompasses so many conditions from migraines to epilepsy and everything in between, many which remain unsolved and untreated by the science and medical communities.   3 million Americans live with epilepsy and it is estimated 65 million people live with the disease worldwide.  ALS is another disease recently in the limelight for whom most would greatly benefit from cannabis including slowing down the progress of the disease similar to how it works on many other diseases.

What is clear and is not a coincidence is that because we ignore the one thing that has the greatest impact on our neurological system, we continue to struggle to solve many of these ailments.   The irony is cannabis has been rejected because it causes a ‘high’ and we fear how it may impact our brains, but the reality for many of us, it will save our brains.

Someone once told me my greatest enemy was fear, we fear the unknown which keeps us from embracing truth.   What we do know is that both CB1 and CB2 receptors affect the nervous system indicating regulating the central nervous system is a primary function of the endocannabinoid system.

 

1. Brain damage/dysfunction
   • Alzheimer’s
   • Dementia
   • Concussions
2. Spinal cord disorders and injuries
   • Spina Bifida
3. Peripheral neuropathy
   • ALS
4. Seizure disorders
   • Epilepsy
   • Cerebral Palsy
   • Alcoholism
   • Brain Hemorrhage
   • Stroke
5. Movement disorders
   • Parkinson’s
   • Multiple Sclerosis
   • Muscle Spasms
6. Sleep Disorders
   • Narcolepsy
7. Neuropsychiatric illnesses
   • OCD
   • Tourette’s
   • Huntington’s
   • PTSD

Cannabinoid Medicine

Cannabis is poised to revolutionize both natural and pharmaceutical medicine.  Cannabinoid medicine has much potential because it can make nutraceutical health plans more effective by helping the body absorb and distribute nutrients where it is needed.  Cannabis has the potential to open up a new class or even several new classes of drugs in the pharmaceutical industry.

Cannabinoids like THC and CBD have little potential to be synthesized on their own or this would have been done already.  Products like Marinol have had little success against naturally derived THC.  The real potential is to combine pharmaceutical drugs with different cannabinoids to make the pharmaceutical drugs more effective.  One example of this is THC and its ability to cross the blood brain barrier.  Combining THC with other drugs that haven’t been able to cross the BBB may open the door to help solving and eventually curing diseases like dementia.  Certainly for diseases like dementia and Alzheimer’s the blood brain barrier is a major issue and combining cannabis with drugs that to carry them across would provide immediate synergies.  THC also acts to protect the brain so there are other synergistic activities THC performs on the brain as well making this area of medicine extremely promising.

I have serious doubts synthetic cannabinoids will replace the cannabis plant.  Natural medicine continues to grow and become an increasingly popular source of alternative medicine.  This includes cannabis and the ‘whole plant medicine’ that many patients source from their plants.  In fact, synthetic cannabinoids are far less effective.  What will emerge, is a new class of drugs based on combining natural cannabinoids with pharmaceutical medicine which will help revolutionize many programs from chemotherapy to pain medication.

This is where most biotech companies will fit in.  Not in growing MMJ or selling it like a MMPR company, but sourcing raw cannabinoids for production in their own medicines.   In effect this is where COC Cannabis Oil Corp wants to fit in.  Not in your traditional selling buds to the public, but producing a concentrated raw THC and raw CBD product for use by drug manufacturers, MMPR suppliers, gourmet kitchens, nutraceutical companies, and other retail medical marijuana outlets that may be allowed to exist in the future similar to the 40 or so ‘compassion clubs’ clubs active in Vancouver. 

That is our primary focus.  To produce a raw THC and CBD product you can infuse in any product or take straight in a gel cap.  So when you think of medical marijuana, most envision an individual smoking a joint to relieve pain or some weird disease under-served by the medical community.  That is part of it, and it will continue to be a large part of medical cannabis… but the horizon of this emerging industry is much more than that.

 Medical marijuana has the potential to revolutionize medicine and could help eradicate many 21^st century medical epidemics like cancer and diabetes.


Christopher Skidmore

COC Cannabis Oil Corp

Summer Stock Picks

 



There are two cycles to the Beat the Market investing/swing trade year. 

Beat the Market Cycle 1 (October to May)

This is the meat of the investing season during most typical cyclical bull markets which run from October/November through to May in the US.  There is a very simple adage to follow…

“Buy in September and remember, sell in May and go away.”

It works remarkably well although I like to start the meat of the year in November as opposed to September because that time period can historically be quite volatile.  Waiting until November to make the majority of your purchases will help you avoid some major market corrections which tend to occur over that time.  November also times well with the beginning of tax loss selling season so you can get some pretty good value at this time of year.   Lastly, November is usually when the market gets direction.

The caveat to this rule is that in Canada this season usually ends around PDAC which is March/April.  Although this year crude is on a tear which has the TSX and many energy stocks breaking out at what is normally a peculiar time of year for momentum in energy.  Considering MARCH is when most commodities peak out and Canadian Stocks are commodities weighted, it is no surprise that the TSX tops out before US indexes, but the eve of WW3 and recent events this Sunday in Ukraine speak to the continued escalation of the conflict and not de-escalation in Eastern Europe.

Ukraine Conflict Continues to Escalate

Apparently some Kiev controlled ‘Right Sector’ militia gunned down an unarmed citizen controlled checkpoint in Eastern Ukraine.   This is obviously going to increase tensions considering one of the men gunned down was an unarmed 53 year old bus driver father of 2.  Several others were hit with bullets in the back fleeing the melee after the initial man was killed by an assailant.  In spite of the recent de-escalation talks in Ukraine between Russia, US, EU ad Ukraine, I feel it necessary to include this conflict in my macro analysis.  I see only lip service from both sides and Russia will protect its interests which include a major Russian population in Ukraine.

I really haven’t said much because I hate war and hope it will just go away, but it is clear that we are escalating towards a global conflict since Syria and Ukraine is the new front.  Up next is Turkey and the Kurdish movement to organize in SE Turkey.   A new power block of states is emerging including China and Russia forming a geopolitical and economic alliance that could bring the traditional Silk Road economic route back to major economic prominence.   A part of this will be the establishment of Kurdistan by the Silk Road Alliance which will help stabilize the Middle East with a progressive nation that the west has refused to help establish.

War trade to help establish a bottom in POG

I am a nervous short on POG.  I would be covering in the first few days of June, considering POG like oil, will carry a war trade.   As much as WW3 is about the establishment of trade in USD in every country the US decides to destabilize called the Petro Dollar.  Gold is going to play a major prominence in the WW3 as an assault on the USD will be part of the plan to cripple the US.  The Eastern Financial block that is emerging is cash rich, resource rich, and has slowly bought up all the world’s physical gold the last few years.   WW3 will be about establishing financial trade around the globe among money other things for Western powers because the Central Bankers have the ultimate monetary tool as long as the USD stays the Petro dollar.

Debt Monetization. 

So one way the Silk Road is going to do this is set up their own economic system and simply stop trading in USD.   Recently a bock of countries announced they would no longer be trading oil in USD so we are on that route.  The biggest thing you have to realize is that Western Powers represent a minority of the population so unless the West beats the East with its military might… the cash strapped western system will decline while the Eastern financial system backed by cash, gold, assets, above ground commodities and below ground natural resources will rise in prominence over the next century.

Like it or not… this is the beginning of the end of the USD as the Petro Dollar which in my opinion will at some point mark POG’s second leg up.   Is the Ukraine conflict the catalyst that finally puts the bottom in gold?  We are going to find out this summer.   If things truly de-escalate then I expect gold to naturally track lower in anticipation of a fall correction and washout type action.

Atypical Season

We are already shaping up to be somewhat of an atypical year which may mean the market continues to grind higher this summer with no May selloff.   In addition to markets grinding higher is the extra cold winter which has delayed spring in North America.  This could serve to be a launching pad for improving economic data the next few months as winter savers turn into summer spenders and boost retail economic spending.

Normally March/April/May is the time you want to be taking a profit on the investments you made back in October and November.    Because this year might be atypical with markets thrashing about in a directionless manner, we may go higher this summer into a serious correction this summer fall.

Beat the Market Cycle 2 (May to October)

Typically the second part of the Beat the Market season happens when the general market sells off in May.  You don’t want to be buying too much in May because it can mean you being under water in your investment for a long time, that is why the philosophy about Summer Stock Picks changes.  If you happen to be under water on any stock… you want to be under water in the cream of the crop, so in the summer you plan out the best companies you can find. 

And when I say best companies, I don’t mean Apple, or Google or even TSLA.  Double digit returns suck!!!  I mean the cream of the crop stories.  The AAA of the group, the companies you don’t mind buying at 52 week highs or 52 week lows. 

So unless you are extremely optimistic about a company’s future like in Poet Technologies PTK.V  or are buying what you believe will be a “World Class’ company 50 years in the future like Plandai Biotechnology PLPL, you want to be at cash during this period for the most part. 

The majority of stocks I picked way back in November…  you probably should have cut the majority loose unless you are absolutely in love with the story… and in that case… the summer period is when you buy more and accumulate.  In the worst case scenario… that is all it ends up being… an accumulation period if you are wrong and your pick doesn’t take off.

So what do PTK and PLPL have in common?  Certainly not their charts!!!  PTK I might be selling to buy PLPL.  Since our last technical indication to get back in PTK.V it has nearly doubled while PLPL has dropped 50%.  Not only that but PLPL has made a definitive turn at $0.50 and looks to bounce back to $1.  The PTK.V chart on the other hand looks like it is topping out and probably one I would avoid until June.




What these two companies have in common is I feel these companies will be billion dollar market cap companies one day.   

 In PTK’s case… it could even be this year and a potential bidding war for the company once their expected prototype successfully tests on third party’s platforms.   PTK is obviously closer to realization than PLPL, but within these two stocks you should be able to trade them back and forth and now I would be heavily weighted in PLPL and very light on PTK over the next month even though I am leading with PTK in my summer stock picks category.

Do you see the psychology I am getting at when I am looking for summer stock picks? 

I am looking for ‘Balls to the Wall Buys’ that you can’t refuse in any season.  That is why if in the doggiest dog days of summer you made a bad buy in the May June July season; at least you get to buy your favorite stock even cheaper.  
 
That is when you want to average down… and about the only time.  When you pre-ejaculate with a beautiful lady, you don’t turn tail and run away.  Hell no.  You try again.  It’s a beautiful lady and you keep on trying until she kicks you to the curb or robbed you of your last dollar!

You were so attracted you couldn’t help yourself.  The same goes with the best stocks.  We all pre-ejaculate with them and buy them when we shouldn’t.  The worst case scenario in Beat the Market Summer Stock Picks… is you end up accumulating the cream of the crop stories.   It is generally these stories that will turn first if the market doesn’t go your way.

It’s all I really try and do in summer… look for the best stories.  No hard thinking.  No number crunching. Just look for a good read.


Poet Technologies PTK.V



Share Price… $2.54
Shares Out… 150M
Market Cap… $375M

So what has this stock pick flying? 


Quantum Computing. 


When the company announced a patent March 31 around quantum computing, the stock has taken off and not looked back.

I have no idea what quantum computing is, but it sounds pretty cool and POET chips will allow quantum computing to happen.  Actually I kind of do know what quantum computing is and it represents a major leap forward in technology allowing computers to theoretically break or decode any algorithm or encryption.   NSA is going to love this technology but it also means the opening up of doors to science and technology allowing computers to perform functions and test theories that man could not possibly calculate even with the aid of today’s most powerful computers.

Quantum computing is definitely a major leap forward in tech and it makes PTK that much more desirable as a stock and why the company has nearly tripled in the last month. 

Optical chips are almost here.  Finally.

PTK has a pretty certain future locking up another patent and why this stock has flown past all my expectations and tapped on the $3 door in April.    I hate telling you to buy stocks that have gone 500% in 4 months and then include it in my summer stock pick selection like PTK is going to keep on chugging along… but I cannot put any other rating on this company other than STRONG BUY.



Plandai Biotechnology PLPL



Share Price… $0.635
Shares Out… $125M
Market Cap… $71M



The marijuana boom is as over is a fast as it started.  NOT!!!  But the stocks have come back to the prices they were pre-pot boom.  Well most of them anyway.  This gives an excellent second chance for stragglers and investors caught unaware and it has also allowed me to review the sector and the companies that I want going forward.  Undeniably PLPL after surging to $2.50 and back to $0.50 has me drooling all over this company.    Unlike the rest of the companies with suspect management and pump and dump credentials, PLPL stands out above the rest as a premiere POT stock.

If you notice I have made major renovations to my Beat the Market Mock Portfolio so you might want to check out who I dropped and who I maintained and who I added to the list among Pot Stocks.

If I were to pick slam dunk billion dollar pot stocks I would pick Medbox MDBX, GW Pharma GWPH, Plandia Biotechnology PLPL and Tweed Marijuana TWD.V.  

Why Plandai Biotechnology?

• Has a history with Diego Pellicer with branding power and instant recognisability
• Has management with Jamen Shively with investment connections including Microsoft
• Has recognizable products and formulas.
• Recognizes international importance as legalization of cannabis is a global issue setting up shop on the horn of Africa.

Why not Plandai? Is what you should be asking yourself.

This is a company that is beyond reproach and has already put in place the necessary arrangements to succeed on a global scale.




Tweed Marijuana Inc. TWD.V



Share Price… $3.15
Shares Out… 35M
Market Cap… $110M



Is Tweed Marijuana Inc. going
to be the best Canadian Marijuana company?


Probably not, but they are the first legitimate story in Canada.


Looking at Tweed has got my thinking and evaluating marijuana companies at a different level from investing and looking at the industry, where it’s going, and what MMJ patients’ need.  Bottom line is in Canada there really are none when it comes to real medical opportunities as only MMPR can sell and they can only sell cannabis which I don’t consider medicine for the majority of MMJ applications.  For me Tweed is a recreation stock under the guise of a medical program.  Is weed medicine?  It is.  But when compared to concentrated products you get from marijuana like cannabis oil and tinctures and waxes.  There is no comparison.  And then there is one of the keys to Cannabinoid Therapy, that many diseases, including mine theoretically require massive doses of cannabinoids.  Something I am still not on and just barely getting by on a minimal dose.  For myself, I could take 5 to 10 grams of Cannabis Oil a day and live a great healthy life and never have a problem with HIV.   One of my theories is that maybe just maybe if I take enough cannabinoids, I might even kill HIV like some people are doing with cancer once they get on massive doses of up to 5 grams of oil per day.

So speaking as a MMJ user who is still massively underserved bit being on a proper treatment of a minimum of 5 grams of oil per day… The vast medical needs of patients are not being met with the old or new programs.    Especially when there is product that most people would benefit a lot more form taking orally than smoking a joint…. It frustrates me and makes me angry that everyone is scrambling to sell pot to the public and lost in whole thing is Medical Marijuana and the science behind it.

Cannabis Oil is a product at I would drop vaping shatter in a heartbeat to use.  But I can’t get it and the amount 5 to 10 grams orally is ten to 20 time the amount I currently use and is beyond anything I could ever reasonably afford until after prohibition.   I am mad.  You got a bunch of filthy greedy dirt bags populating this industry that don’t have care about the patient or don’t even understand cannabinoid therapy, the endocannabinoid system, or even know how to make products from cannabis for MMJ patients.

They just want to sell Canadians POT.  And it pisses me off even more when I see LOSERS AND DEADBEATS POPULATE THIS SPACE.   People are going after the cash grab while ignoring patients.

 I am designing a plan to develop a company that develops key concentrated cannabinoid products for people with HIV, cancer, and diabetes.  That is it.  I don’t want to sell pot.  I want to help people get their lives back like cannabis has done for me.  I have two products; Cannabis Oil (HIV and Cancer) and a unique diabetic Massive Dose Cannabinoid Therapy product I have designed for my JV partner with type 2 diabetes.   Is Cannabis Oil unique?  Nope.  But Cannabis Oil will be the number one cannabis product aside from raw marijuana and the first movers will take over this niche market.  First movers like myself who are using my status to take advantage of an injunction to get a 18 month head start on everyone else when it comes to making Cannabis Oil in Canada are going to establish a supplay chain in Canada that will hard to supplant.

No one else is doing Cannabis Oil... so why not me?

This is all I am going to say for now on this, but I leave you with a couple calculations why everyone is going gaga for marijuana….

From a study of 77 illegal grow ops in the Netherlands; a typical indoor growing system will yield 0.1 pounds per harvest per square foot.  Assuming four harvests in a year, you are looking at (4) 1,000 pound crops from every 10,000 feet of growing space.  Can you see why you should be GAGA over Tweed and why the first mover status is huge?

170,000 sq. ft is a massive facility which should be able to produce 68,000 pounds of cannabis a year which is $150M selling cannabis at $10 per gram.  That is an average indoor illegal grow op and not a massive commercial grow-op where the company can take advantage of significant economies of scale to maximize yields and reduce costs.  68,000 lbs. of cannabis times 454 grams times averaging selling price of $10 per gram…   $308.72M revenue per year once fully operational.   What are the operating costs you say?

Maybe $100 per pound.

And again, I would fully expect TWEED to blow this number out of the water when it comes to production once they have fully utilized their capacity.

Even at wholesale prices of $1600 per pound… TWEED would do $110 with gross margins exceeding 80% to 90%.    These huge gaps in profit are why prices will drop as legalization happens and competition enters the market.  There is no way the prices will stay that high.

But until we have full legalization, Tweed has a licence to sell direct making them unique in the Canadian public company landscape.   Tweed is not the only company who has or will have massive Canadian operations.  Bedrocan plans on ipo’ing in Canada soon; Cen Biotech and Medican are also building massive marijuana grow op facilities as well.



Fission Uranium FCU.V



Share Price… $1.40
Shares Out… 332.4M
Market Cap… $465M



Fission has been a good pick.  The SP hasn’t done anything lately, but the company has done so many spinoff your cost base on Fission should be negative or near negative over the last few years.   The big problem with Fission in spite of having the greatest discovery in the Athabasca Basin; is that the shares outstanding has tripled over the last year.  This is where most of the growth in the company has come from being valued at nearly half a billion market cap.  That being said, Patterson Lake is undeniably shaping up to be the greatest discovery anywhere in Saskatchewan. 

How big is big?  Well let’s look at the meat of the zone from 495E to 1080E.   If you can do math and understand mapping, that is about 600 meter strike length of the main zone which 150 meters to its widest to about 75 meters at its thinnest.    The biggest significance of this winter’s drill program is two holes that extend the PLs to the east another 500 to 600 meters.   There is big time potential to extend continuity to the east which will make PLS a true monster.

Let’s do a little math.  Let’s say 100m average width by 100m of the mineralized zone plus  times 600 meters in strike length times a 2.5 density and just in the meat of the PLS zone you have 15 million tonnes of open pit high grade uranium grading 2 to 5 percent.

Just with in this small zone which looks like it is expanding significantly to the east.  Another 600 meters of similar resource to the east will bring PLS to 30 million tonne high grade deposit which is INSANE.

Just to give you an idea… 30Mt @ 5% U3O8 is 3 BILLION POUNDS of uranium.   Not that I think PLS is 30Mt @ 5% U3O8.

That is the upside of PLS.  So when you think of HAT being a relatively small resource and much deeper than PLS and the size of PLS will potentially dwarf Roughrider… Undoubtedly I believe a buyout of PLS will be in the billions and not hundreds of millions like Hathor.

My initial target for a PLS resource is 5Mt to 10Mt @ 2% to 3%.   They announced these massive intervals but most of the resource grades are lower outside of the flashy high grade lengths.   If I had time to throw all of PLS drill info into excel I could come up with a better number, but that is a project for the summer.  Dumping PLS results into excel and analysing them.  



At any rate…

 FCU is a solid buy despite of the massive shares outstanding as I believe this deposit is a one of kind and will yield a massive open pit uranium mine.  I cannot see this ever NOT getting the go ahead as this mine will be the lowest cost producer in the industry once in operation.  Uranium sells off in March so May/June could be an opportunistic time to buy FCU as uranium is increasingly starting to come back into favor in spite of all the bad press.

FCU remains my top pick.   The coming fall correction will be an excellent time to review uranium stocks in earnest, but for now, Fission is a top story transcending any specific sector.    I will never ever be able to let go of materials completely as the gains are always breathtaking… I am always game for a world class discovery.

Haven’t seen too many in the Gold sector… but here is one from the Uranium sector.


3D Pioneer Systems DPSM



Share Price $0.60
Shares Out… 75.4M
Market Cap… 445.8M




DPSM is an early pick.  Despite the rest of the 3D space continuing to consolidate, DPSM has shown some life so we will continue to go with it through the summer.


If it goes back to $0.40…YAY!  Buy more.

That is the attitude you have with the summer stock picks, you are buying stocks you think have the best stories and 3D Pioneer Systems is a company I believe is on track to making major market penetration in roads in the consumer 3D printing market.

Since the recommendation, the company announced the build of ‘Appaloza’ which is a proprietary e-Commerce Cloud Marketplace and 3D Printing application.   It will allow customers and designers a place to store, edit, buy, and sell original 3D designs.   The site so far is not much more than a homepage, but the concept for consumer 3D printing is amazing and what I think is a big part of making 3D Printing a reality in the home.  Bringing in the everyday developer to designs 3D prints like an APP developer for apple store of android would.  It is brilliant because you are offloading everything to do with product offering and selection.  If someone wants it, they will design it, upload load it and print it and sell reprints to others.

http://www.appaloza.com/





Christopher Skidmore

Beat the Market top stocks