I am featured in the November 2014 issue of Men’s Journal magazine in an article entitled “Buying High: How To Get Rich On Pot Stocks” and while I wish they would’ve edited out my excessive swearing (lay off me, I’m passionate!), it’s a comprehensive, entertaining and greatly educational article. Here are three of the key takeaways:
Lesson #1: The dot-bong bubble is no dot-com bubble
Potheads everywhere believe the legalization of marijuana in more and more states opens the door to a dot-com like bull market, but just because weed is going mainstream does not mean the sector is suitable for investment just yet. Marijuana stocks have already boomed in early 2014 and now have dropped 75-99 percent not due to a lack of demand in the product, but because nearly all the businesses in this sector are run by questionable characters with very questionable business models.
Do not make the classic mistake of thinking that just because a business is booming short-term that the underlying company’s stock price will boom long-term. This newly legalized sector faces a mountain of obstacles before being ready for the investing public.
Lesson #2: The naive blames short sellers
The Men’s Journal article is told mainly through the eyes of long-biased investors in marijuana stocks who think I’m the devil for hinting that their run-ups would not last and worse, the stocks would inevitably crash. The reporter wrote this article over several months during which I was proven 100 percent right, but even now some will wonder if I somehow conspired to make the marijuana stocks crash.
In every boom and bust, the naïve look for a scapegoat and it’s short sellers who take the fall every time. To be clear, whether I shorted these stocks or warned against holding them or not, they all still would have crashed and burned in the exact same manner since contrary to lies spread by the promoters (who are the real ones to blame), there are barely enough shares to short for a few hundred short sellers, nowhere near enough supply to influence the stock prices in any way given these marijuana stocks traded in excess of 10 to even 50 million shares per day during their peak.
Lesson #3: Booms and busts happen to every sector
Marijuana stock investors, like Chinese stock investors, like alternative energy stock investors like Ebola stock investors and investors in other hot sectors like to believe their sector is “different.” They’re not. They’re all the exact same, and if more people watched my instructional DVDs where I compare the various booms and busts of the past, they’d see that.
So marijuana is becoming legal in more places; potheads everywhere you have my sincere congratulations. Your sector, like every other hot stock sector in history, got hot for a few weeks and months and then crashed and burned. I’m sure it’ll bounce again sometime in the future too. Don’t shoot the messenger, don’t lie about short sellers being the ones to blame, study stock market history, adapt to this surprisingly repetitive and learn to profit in the future. The longer you resist history; the worse is it for you, as you will remain in a constant state of doubt.
I am not the enemy as I use historical patterns to help predict the future; it’s ignorant and dangerous newbies like “The Wolf Of Weed Street” (the other main character in the Men’s Journal article) who are to blame as they spread misinformation based on naivety, hype and propaganda.
Things I Liked:
1.Peyton Manning became the NFL’s all-time touchdown leader, a well-deserved honor, but I wish his baby brother Eli could do better!
2.The US stock markets came roaring back from recent losses proving the bull is alive and well after some healthy consolidation.
3.A heroic teacher tried to stop the shooter in the Washington state high school shooting; we need more teachers like this!
A potential Ebola outbreak and the always dangerous month of October combined to put some fear into US investors which we sorely needed this late in a bull market.
While we worry about a few cases of Ebola in the USA, the outbreak in Africa is out of control…that’s the real problem.