The Pot of Gold at the End of the Rainbow

Editor’s Note: What is Day Zero?

You’ll have to wait until Tuesday to find out!

It’s a small, but subtle, shift in the direction of our financial publishing business.

And, while that may sound indulgent, it very much involves you.

In fact, we’d like to mail you something very special to commemorate this shift…

Our primary goal since 2005 has been to challenge you, make you think, and give you useful ideas that can make you safer, smarter or richer.

Sometimes, to do that effectively, you need to take stock. Reassess your goals.


That’s kind of what Day Zero is about.

But, as you’ll see on Tuesday, it’s also about coolly assessing what kind of Australia we’re going to be living and investing in between now and 2025.

The events of 2008/09 were a great example of how massive, complex and far-away monetary events can adversely impact Australian investors. Even if, economically, we got off comparatively lightly.

Yet with all the talk of the ‘Australian economic miracle’ avoiding a recession, it’s easy to forget that Aussie stock investors and retirement savers were hit hard during the Global Financial Crisis.

The ASX still has ground to make up on its October 2007 high, and that was nearly 10 years ago. By comparison, the US S&P 500 index is up 46%, and the UK’s FTSE 100 is up 6%. Aussie stocks have suffered more than any other major index from the subprime bust — that’s despite a domestic commodities boom that has raged until recently.

Now imagine what might happen when the exponentially-larger global debt bubble bursts. And when there’s no mining boom to shield the economy.

We’ve been imagining. And we’ve come up with a plan. All will be revealed on Tuesday…

And now, on to today’s Markets and Money…


When there’s money to make, nothing in life is off limits.

Hell-bent on taxing everything you own, the federal government knows this better than anyone.

Take marijuana, for instance.

In late February, the government loosened importation laws on medicinal marijuana.

This followed the approval of domestic medicinal marijuana use and cultivation last October.

But with domestic reserves low, the government has had to look overseas to meet demand. In order to do so, it will need go-betweens. The government now expects to announce approved importers to handle distribution in the next few weeks.

For people suffering with chronic pain and illness, this is welcome, if long overdue, news.

But we’re not here to sing the government’s praises. It’s caught the whiff of an opportunity to make money. And now it’s seeking to squeeze out millions in tax revenues.

That said, at least common sense is prevailing. This is another important step towards legalising marijuana in Australia.

The advantages of legalisation would be manifold.

For the healthcare sector, it would improve how we treat and manage many chronic and terminal illnesses.

For the economy, it would birth an industry that could add billions to annual growth.

And for the government, it would boost coffers, while lowering spending on policing marijuana-related offences.

Debunking the marijuana hysteria

The debate over marijuana draws striking parallels to the 1920s Prohibition Era.

This was a period in which Americans lived under a government-imposed ban on alcohol sales.

By all accounts, it was a popular measure. But it didn’t stop the widespread consumption of booze. It merely swept money from government hands into the black market.

Despite public approval, prohibition saddled the nation with a host of new problems.

For one, it fuelled mass incarceration. Organised crime sprang up, too, replacing businesses that had sold alcohol legally.

The chart below shows the US annual prisoner population dating back to 1880. Notice the marked spike during prohibition. And the mountainous rise since President Nixon’s ‘War on Drugs’.

US imprisonment rate
[Click to enlarge]

Things were no better for the US economy during prohibition.

On the one hand, the US government went 13 years with nary a drop of alcohol tax revenues. At the same time, imprisonment for alcohol-related offences cost taxpayers serious money.

If this sounds familiar, it should. Marijuana-related offences are one of the common reasons people face prison time today.

Between 1997 and 2007, 60,000 people a year were incarcerated for marijuana possession in Australia. That’s three times the rate of heroin and cocaine arrests.

As a taxpayer, the money to police recreational use of marijuana comes of out of your pocket. Imagine if your taxes were going towards putting every Tom, Dick and Harry drinking on the town behind bars. That’s the reality facing marijuana use today.

As it happens, Franklin D Roosevelt ended alcohol prohibition in 1933. It was the right tonic for a country mired in the middle of the Great Depression. With new revenue streams harder to come by, legalising the sale of alcohol made fiscal sense.

It’s a similar story in Australia today.

Recreational marijuana is illegal. Marijuana-related crime is high. The government is sitting on $166 billion of debt. And taxpayers are footing the bill for policing this ‘problem’.

Weed: A massive boon to the economy?

According to Arcview Market Research, Americans spent $54 billion on marijuana last year.

You can see why the Aussie government is licking its lips at the prospect of taxing ‘weed’.

This kind of money is too colossal to ignore.

But it’s an even bigger opportunity for you than it is for the government.

You’re at ground zero of what could be the next breakout industry in Australia.

There are tiny companies today that could become the market darlings of tomorrow.

And it’s all thanks to pot.

The government is now deciding who gets to grow, cultivate and sell medicinal cannabis. Their landmark decision could arrive at any point in the next few weeks.

The announcement is likely to send one lucky company’s stock soaring skywards.

We believe we’ve discovered that company. Go here for all the details.

This week in The Markets and Money

Australians are falling over themselves to obtain loans to climb the property ladder. But no matter how low interest rates fall, your income can only support so much debt.

That seems to be the lay of the land, as Vern explained in Monday’s Markets and Money. The level of credit in the system has never been higher. How else would you explain Snapchat’s US$34-billion IPO, a company that lost US$600 million last year?

The ‘best ever’ credit conditions are making billions for companies who lose money hand-over-fist.

Yet savvy European investors are doing the opposite. They’re dumping credit by the bucket load. And Vern’s taking note. He’s avoiding credit altogether, staying in cash instead. Click here for the full story.

If you don’t invest in stocks, there’s still time to make money from the current bull market. As Jason explained on Tuesday, the Dow Jones could surge to 30,000 points this year. That may sound outlandish, but there’s little stopping the Dow right now. The Dow took 42 days to go from 19,000 to 20,000 points. Yet it took just 24 days for it to break 21,000-point barrier.

As Jason says, now is the time to embrace the rising market. Click here to ready why.

On Wednesday, Jason turned his attention to gold. With the US government set to hit its debt ceiling on 15 March, we’re entering a potentially lucrative buying opportunity for gold stocks.

Jason expects President Trump to pressure Congress into raising the debt ceiling. He’ll probably get his wish. The ceiling’s been raised almost 100 times over the past century.

What will this mean for gold?

If gold pulls back towards US$1,200 into mid-March, it could be a great time to consider ‘penny gold’ stocks.

Click here to read Jason’s full analysis.

‘Tread carefully in markets’ was Callum’s message in Thursday’s Markets and Money.

As Callum explained, the market is always moving. You have to catch the trends where you can, but be prepared to hop off if the wind changes.

Right now, lithium is the hottest commodity on the market. Electric cars, fuelled by lithium-ion batteries, represent one of the biggest technological trends unfolding right now.

But the lithium-battery revolution faces a threat.

One Aussie company is hoping to smash the economics of lithium by using silicon instead. What’s more, the man who played a role in inventing the lithium-ion battery is working on new technologies to make it redundant. For the full story, click here.

‘Doing something over and over again and expecting a different result…’ That’s Einstein’s definition of insanity. Central bankers, wielding PhDs, probably ran into this definition during their academic lives.

As Vern astutely noted in Friday’s Markets and Money, that makes them clinically insane. Click here for the full story.

Finally, before we leave you, a reminder to tune into this week’s Financial Anarchists podcast.

In this week’s episode:

How to ask your boss for an $84 million pay rise…

Why Australia needs some economic anarchy….

How Americans spent an unbelievable $54 billion on cannabis in 2016 and why you should take notice…

The future of Snapchat after its IPO dust settles…

And more…

Click here to listen to the podcast.

Until next week,

Mat Spasic,
For Markets and Money

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors.

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