Warren Buffett Hides 10 Clues in Shareholders’ Letter

By WallStreetDaily.com Warren Buffett Letter to Shareholders

On Saturday morning, Warren Buffett released his latest annual letter to shareholders of Berkshire Hathaway Inc. (BRK.B).

Just like his last 50 or so, it’s a must-read for every investor.

Not only does it contain nuggets of timeless investing wisdom, but thanks to Berkshire’s sprawling enterprise – spanning from railroads, utilities, and homebuilders to insurance, sneakers, and ketchup – it also contains timely revelations into the current state of the economy and the market.

Perhaps the most shocking revelation of all is the fact that the Oracle of Omaha was upstaged by both potential heirs to his investment management throne…

“In a year in which most equity managers found it impossible to outperform the S&P 500, both Todd Combs and Ted Weschler handily did so… I must again confess that their investments outperformed mine. (Charlie says I should add ‘by a lot’).”

So has Buffett lost his Midas touch?

Hardly! Even if we include his “underwhelming” performance in 2013 in relation to his protégés, Buffett has increased Berkshire’s book value at a staggering rate of 19.7% compounded annually over the last 49 years.

I highly doubt Mr. Combs, Mr. Weschler, or any of us will ever be able to make a similar boast. So we all stand to learn a thing or two from Mr. Buffett.

With that in mind, here’s a rundown on the 10 most shocking and important revelations from this year’s letter…

~Buffett Shocker #1: Small Caps Are Where It’s At!

If you continue to refuse to take my advice to keep betting on small caps because of their superior fundamentals, consider Warren Buffett’s words of wisdom: “Our many dozens of smaller non-insurance businesses earned $4.7 billion pre-tax last year, up from $3.9 billion in 2012. Here, too, we expect further gains in 2014.”

~Buffett Shocker #2: The End of America is NOT Nigh!

Ever since the Great Recession, fearmongers attempted to convince us that the era of American dominance is over, that our capitalistic system is teetering on the brink of utter and complete destruction.

Buffett’s response? Fat chance!

Or in his words, “Could anyone really believe the earth was going to swallow up the incredible productive assets and unlimited human ingenuity existing in America?”

I certainly can’t.

If you prefer to keep things on a more quantitative level, Buffett asks, “Who has ever benefited during the past 237 years by betting against America?”

I can’t think of anyone, can you?

Add it all up, and Buffett contends that “America’s best days lie ahead.” (I agree.)

And he plans to put his money where his mouth is, too. “Though we invest abroad, as well, the mother lode of opportunity resides in America.”

We’d be well served to do the same. Unless, of course, you’re convinced it’ll be different this time…

~Buffett Shocker #3: Tenths of a Percent Matter, Too

Too often we get caught up trying to uncover big winners – investments that go up hundreds and hundreds of percent. But Buffett reminds us not to overlook tenths of a percent…

“Ponder this math: For the four companies in aggregate [American Express, Coca-Cola, IBM and Wells Fargo], each increase of one-tenth of a percent in our share of their equity raises Berkshire’s share of their annual earnings by $50 million.”

The corollary for individual investors comes in with expenses. Reduce them, even by a few tenths of a percent over time, and the gains add up.

Or as Buffett puts it later in his letter (emphasis mine), “The ‘know-nothing’ investor who both diversifies and keeps his costs minimal is virtually certain to get satisfactory results.”

~Buffett Shocker #4: Never Be Fully Invested

Even with cash yielding next to nothing, Buffett recommends keeping a stockpile on hand.

Why? So you can put it to work to earn an above-average return when the opportunity presents itself.

Or in his words, “Tumbling markets can be helpful to the true investor if he has cash available when prices get far out of line with values. A climate of fear is your friend when investing; a euphoric world is your enemy.”

~Buffett Shocker #5: Don’t Ignore Your Critics… Embrace Them!

As I’ve warned before, we’re prone to confirmatory bias. That is, only seeking out information that jives with our own beliefs. To truly be successful investors, we need to learn to embrace contradictory viewpoints.

Buffett’s actions reveal that he agrees. When writing about the upcoming shareholder meeting, he said, “We will again have a credentialed bear on Berkshire. We would like to hear from applicants who are short Berkshire.”

Why bother? Because entertaining critics’ opinions and analysis serves a vital purpose…

It either strengthens our convictions on our investment, leading us to increase our stake and earn larger returns. Or, more importantly, it reveals the error of our own analysis, allowing us to exit the position without suffering a major loss.

Stay tuned for tomorrow’s column, where I’ll share five more shocking revelations from Warren Buffett.

Ahead of the tape,

Louis Basenese


The post Warren Buffett Hides 10 Clues in Shareholders’ Letter appeared first on Wall Street Daily.

Article By WallStreetDaily.com

Original Article: Warren Buffett Hides 10 Clues in Shareholders’ Letter

NZD/USD Forecast March 3-7

Article by Investazor.com

The bulls had the upper hand last week and managed to push higher the NZDUSD quotation, gaining almost 100 pips. The indicators for the New Zeeland economy really helped this time and posted a better than expected trade balance surplus (306 million NZD). The ANZ Business Confidence continued the pleasant surprises with an improvement from 64.1 to 70.8 levels. Also, at the beginning of the week the data from the US were still weak, giving NZDUSD a solid advance.

Economic Calendar

ADP Non-Farm Employment Change (8:15 GTM)-Wednesday. This data provides an early look at employment growth, usually two days ahead of NFP, for the labor market from the United States.

Non-Farm Payrolls (8:30 GTM)-Friday. It measures the change in the number of employed people during the previous month, excluding the farming industry. This is a vital economic indicator as job creation is the major target of the Federal Reserve.

Taking into account that this week we won’t have any macroeconomic data from New Zeeland, the indicators which will have the greatest impact are the ADP report and the NFP from the US labor market.

Technical view


Support: 0.8240, 0.8050


nzdusd-daily-forecast-march-3-7-3.03.2014 resize



The post NZD/USD Forecast March 3-7 appeared first on investazor.com.

GBPUSD failed to break above 1.6822 resistance

GBPUSD failed to break above 1.6822 resistance and stayed in the trading range between 1.6582 and 1.6822. As long as 1.6582 support holds, the price action in the range could be treated as consolidation of the uptrend from 1.6252, another rise towards 1.7000 could be expected after consolidation. On the downside, a breakdown below 1.6582 support will indicate that lengthier consolidation of the longer term uptrend from 1.4813 (Jul 9, 2013) is underway, then deeper decline to 1.6400 area could be seen.


Provided by ForexCycle.com

New Spy Technology to Spawn Oil Revolution

By OilPrice.com

The future of oil exploration lies in new technology–from massive data-processing supercomputers to 4D seismic to early-phase airborne spy technology that can pinpoint prospective reservoirs.

Oil and gas is getting bigger, deeper, faster and more efficient, with new technology chipping away at “peak oil” concerns. Hydraulic fracturing has caught mainstream attention, other high-tech developments in exploration and discovery have kept this ball rolling.

Oil majors are second only to the US Defense Department in terms of the use of supercomputing systems, which find sweet spots for drilling based on analog geology. These supercomputing systems analyze vast amounts of seismic imaging data collected by geologists using sound waves.

What’s changed most recently is the dimension: When the oil and gas industry first caught on to seismic data collection for exploration efforts, the capabilities were limited to 2-dimensional imaging. The next step was 3D, which gives a much more accurate picture of what’s down there.

The latest is the 4th dimension: Time, which allows explorers not only to determine the geological characteristics of a potential play, but also tells them how a reservoir is changing in real time. But all this is very expensive. And oilmen are zealous cost-cutters.

The next step in technology takes us off the ground and airborne—at a much cheaper cost—according to Jen Alic, a global intelligence and energy expert for OP Tactical.

The newest advancement in oil exploration is an early-phase aerial technology that can see what no other technology—including the latest 3D seismic imagery—can see, allowing explorers to pinpoint untapped reservoirs and unlock new profits, cheaper and faster.

“We’ve watched supercomputing and seismic improve for years. Our research into new airborne reservoir-pinpointing technology tells us that this is the next step in improving the bottom line in terms of exploration,” Alic said.

“In particular, we see how explorers could reduce expensive 3D seismic spending because they would have a much smaller area pinpointed for potential. Companies could save tens of millions of dollars.”

The new technology, developed by Calgary’s NXT Energy Solutions, has the ability to pinpoint prospective oil and gas reservoirs and to determine exactly what’s still there from a plane moving at 500 kilometers an hour at an altitude of 3,000 meters.

The Stress Field Detection (SFD) technology uses gravity to gather its oil and gas intelligence—it can tell different frequencies in the gravitational field deep underground.

Just like a stream is deflected by a big rock, SFD detects gravity disturbances due to subsurface stress and density variations. Porous rock filled with fluids has a very different density than surrounding solid rocks. Remember, gravity measurement is based on the density of materials. SFD detects subtle changes in earth’s gravitational field.

According to its developers, the SFD could save oil and gas companies up to 90% of their exploration cost by reducing the time spent searching for a reservoir and drilling into to it to determine whether there’s actually any oil and gas still there.

“Because it’s all done from the air, SFD doesn’t need on-the-ground permitting, and it covers vast acreage very quickly. It tells explorers exactly where to do their very expensive 3D seismic, greatly reducing the time and cost of getting accurate drilling information,” NXT Energy Solutions President and CEO George Liszicasz, told Oilprice.com in a recent interview.

Mexico’s state-owned oil company Pemex has already put the new technology to the test both onshore and offshore in the Gulf of Mexico, and was a repeat customer in 2012. They co-authored with NXT a white paper on their initial blind-test used of the survey technology.

At first, management targeted the technology to frontier areas where little seismic or well data existed. As an example, Pacific Rubiales Energy is using SFD technology in Colombia, where the terrain, and environmental concerns, make it difficult to obtain permits and determine where best to drill.

The technology was recently contracted in the United States for unconventional plays as well.

Source: http://oilprice.com/Energy/Energy-General/New-Spy-Technology-to-Spawn-Oil-Revolution.html

By. James Burgess of Oilprice.com



Michael Ballanger: Junior Miners Rising from the Ashes

Source: Brian Sylvester of The Gold Report  (3/3/14)


You didn’t really think that junior miners would languish forever, did you? Junior mining stocks are starting to make a careful climb from the depths after tax-loss selling in December. But some investors, beaten down as badly as mining stocks, are still hesitant. For those investors, Michael Ballanger, director of wealth management and a certified investment manager with Richardson GMP, has a nearly win-win strategy. In this interview with The Gold Report, Ballanger talks about his investment ideas for 2014 and a less-risky twist on the balanced portfolio.

The Gold Report: In retrospect, investors should have been short mining equities and exchange-traded funds (ETFs) in early 2013. You have the opposite view for 2014. Please outline your strategy for us.

Michael Ballanger: The physical bullion silver and gold markets bottomed in the middle of last year and we thought mining shares would catch a bid soon after the physical market turned. As it would turn out, the mining shares hit new lows in December as they were caught in tax-loss selling and rebalancing. That set up a generational buying opportunity.

Additionally, I’ve never seen such black bearish sentiment numbers for gold—and I’ve been in the business 38 years. In contrast, tech darlings like Facebook, Twitter and Netflix are trading at price-to-revenue levels that would take 30 years of optimum performance to come within these valuations. That is an opposite extreme of what’s happening in the metals.

In November, I came up with a strategy for 2014 that is a very conservative equal-weighting basis to short the S&P through the SPDR S&P 500 ETF Trust (SPY:NYSE.Arca), but to go long the Market Vectors Gold Miners ETF (GDX:NYSE.Arca). It didn’t really matter to me which way the S&P or the markets went—I would see outperformance of the miners.

TGR: And the biggest advantage of that trade is?

MB: It insulates from market risk. It’s a market-neutral strategy in a hyperinflationary spiral where stocks actually do quite well. You can never underestimate the replacement value of stocks in an inflationary spiral. Warren Buffett is a great example: When he got worried about inflation a few years back he bought a big stake in Burlington Northern Santa Fe. Why? Because rails on the ground are a hard asset.

TGR: You suggest there are two ways of controlling the risk in this particular trade. Take us through those.

MB: It goes back to physical bullion. We had a double-bottom at $1,180/ounce ($1,180/oz) on bullion in June and December. That level is the first risk control. If there is a two-day close with gold below $1,180/oz, the double-bottom has aborted and it’s a new down leg for bullion. You’ve got to exit the trade. The second risk control is related to portfolio management risk. Set a stop-loss point of 15%. If you violate that point, you’re gone.

TGR: You’ve been quoted as saying, “I tried several times in 2013 to pick the top via the VIX [volatility index] only to watch in amazement as that invisible hand saves stocks every single time they looked ready to correct.” The Federal Reserve recently lowered its monthly bond-buying program to $65 billion per month. How long can this go on?

MB: I’ve been monitoring investor sentiment numbers in Barron’s magazine since I was a young broker in 1983. If there are four or five weeks where sentiment is above 65% bullish, I’d know it was time to start being conservative, raising cash. Last year, there were six consecutive months ABOVE 70%.

How long do I think this can last? It can last until the market decides that it’s not working anymore, which I believe is going to be 2014.

But the magic hand still continues. It’s called the Plunge Protection Team—the working group on capital markets established under President Ronald Reagan in the 1980s. After the crash of 1987, the government put together a group to prevent market crashes, which is against the free market philosophy that I’ve lived all my life. It has continually—day in, day out—made sure that that market stayed well bid. I have never seen a market that has hugged the 50- and 200-day moving averages with such amazing symmetry as it has 2013. It sets up the trade for January.

TGR: Juniors have performed well in January, a rebound from tax-loss selling season. Is it a seasonal bump or the turn of a corner?

MB: Juniors are turning a corner, but there is also a great seasonal effect. Look at the volume in the Market Vectors Junior Gold Miners ETF (GDXJ:NYSE.Arca) for November, December and January, compared to the last 18–24 months. There’s a great expression: Volume precedes price. Those volumes, evidenced by the Market Vectors Junior Gold Miners ETF, are massive. That spells big, sophisticated money entering a trade. This was taking profits out of the blue chips and moving it into the massively depressed miners.

If you ask me where we’re going to be at the end of the year, I think we entered into a new bull market in the junior mining sector in December at tax-loss selling. I think that bull market was artificially delayed by tax-loss selling and year-end portfolio rebalancing. I’m looking for an up for the junior miners—one that could be quite substantial—but one that demands selectivity and discipline.

TGR: What’s your advice on how to navigate the illiquidity of many gold and silver stocks?

MB: Clients that need to maintain liquidity in taking large positions should consider ETFs. They usually won’t have the $0.20 stock that goes to $3 or $4 because the junior mining company that gets included in an ETF is usually one that has already been recognized. Put the bulk of your assets in ETFs and reserve a little capital for one or two specific junior companies. It’s a rifle approach as opposed to a shotgun approach.

TGR: What are some juniors that you’re following?

MB: Rather than “follow” any particular name, for 2014 I have chosen to look at the junior miners in the context of sector versus specific company. And after a three-year, brutal bear market, the greater challenge will be to be proven correct in moving into the sector—period—rather then picking the individual name. Through the Market Vectors Junior Gold Miners ETF you own exposure to a basket of the most-advanced juniors while getting the liquidity of the ETF.

There are two companies that are currently recommended by our wealth managers. One isEldorado Gold Corp. (ELD:TSX; EGO:NYSE), trading around $7.35, which recently received a $40 million equity injection for a 20% interest in the Eastern Dragon mine in China. This removes the logjam that has impeded Eastern Dragons’ development and advancement. GMP’s analyst has a $12.25 target price in his Feb. 24 report.

The other is Rio Alto Mining Ltd. (RIO:TSX.V; RIO:BVL) that trades around $2.30. With the release of the revised resource estimate of 1.08 million ounces for La Arena in Peru, the stock looks undervalued. GMP has a $4.90 target as of Feb. 24.

MB: After the three-year bear market, the good guys are coming out of the ashes. You’re going to be surprised how well some of these gold companies perform. Manage your portfolios so you have liquidity and diversification. The Market Vectors Junior Gold Miners ETF is an excellent way to put together a balanced portfolio in that area.

TGR: Is that your top pick for 2014?

MB: If I’m going to do an unhedged trade, 75% would be an equity combination of the Market Vectors Gold Miners ETF, which is the senior miners, and the Market Vectors Junior Gold Miners ETF, which is the junior miners, leaving 25% for other special situations.

TGR: Parting thoughts for us, Michael?

MB: As a wealth manager, my job is balance risk versus reward potential. The most important thing for 2014 is going to be risk management. It’s going to be a rollercoaster year if I’m correct in my assessment. Going long on miners and short on the S&P 500 is an excellent augmentation to the balanced portfolio approach.

TGR: Thanks, Michael. I’ve enjoyed speaking with you today.

Originally trained during the inflationary 1970s, Michael Ballanger, director of wealth management at Richardson GMP, is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.


1) Brian Sylvester conducted this interview for The Gold Report and provides services to The Gold Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: None. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Michael Ballanger: I or my family own shares of the following companies mentioned in this interview: Market Vectors Junior Gold Miners ETF. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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Should You Invest in the Marijuana Boom?

By Dan Steinhart, Managing Editor, The Casey Report

I was planning to explore the investment landscape of the burgeoning marijuana industry today, but it looks like the party’s already over.

Appearing before the Maryland Legislature, Annapolis Police Chief Michael Pristoop testified that 37 people died in Colorado on the first day of legalization from overdosing on marijuana.

What a damn shame. With morbid stats like that, the government can’t possibly allow the legalization trend to proceed any further. People’s lives are at stake!

Except they’re not. Chief Pristoop got those stats from a tongue-in-cheek story in The Daily Currant, a satirical newspaper à la The Onion. He believed it to be legitimate, so he cited it during testimony. Despite the fact that exactly zero people in history have died from overdosing on marijuana.

As you surely know, Colorado and Washington recently became the first states to legalize marijuana for recreational use, joining 18 other states that have legalized it for medical use only. Legalization is gaining steam across the US, and that’s unlikely to change—if only because, other than citing fake facts, opponents of legalization have no argument.

Opposition to legalizing marijuana is dwindling for the same reason that opposition to gay marriage is dwindling: there’s no intelligent reason to oppose either one. Unless, in the case of marijuana, you’re concerned with its potential to cause more car accidents. But if those are your standards, we should criminalize beer, cellphones, and makeup, too.

One thing’s for sure: the investment world is enamored with the idea of a brand-new green industry. As an illustration of exactly how hot this infant sector has become, take a look at this screen shot of an email received by a senior Casey Researcher this week. It’s a news release from a mining company, announcing its intent to “diversify” into the legal marijuana business:

An interesting business decision. I’m not sure what synergies exist between mining and marijuana, nor do I have any particular insight into how Next Gen’s management plans to enter the green business. But I applaud its forward thinking.

Apparently, so does the market. Here’s how Next Gen’s share price reacted to the announcement:

It soared over 300%, transforming from a penny stock into a dime stock in one day. Again, Next Gen didn’t grow earnings, discover a new gold deposit, or accomplish anything tangible. It tripled its valuation simply by announcing its entry into the marijuana business. That’s what I call a scorching industry.

So, should you put some speculative money into the hottest cannabis stock? Let’s take a quick tour around the burgeoning industry to get a picture of its investment prospects, focusing on five factors…

1) Profits Will Plummet

Had Al Capone been born in any other era, he would not have amassed a $100 million fortune. It was Prohibition that allowed him to earn extraordinary returns in the otherwise standard business of providing alcohol to people.

Likewise, legal purveyors aren’t going to earn anywhere near the spectacular returns that criminals enjoyed when marijuana was illegal. Drug distributors can become filthy rich because dealing drugs requires taking extraordinary risks. One misstep and you go to jail. Or worse, the rival Mexican cartel mows you down. That risk premium is why illegal drugs are so expensive, and why marijuana costs $300-400/oz in the US. But it won’t for long.

How can I be so sure? Because we already have a glimpse into the future. Uruguay legalized marijuana in December, and an ounce of the stuff costs $28 there, less than 10% of what it costs to obtain it the US.

It’s true that the Uruguayan government controls the marijuana industry tightly and set that $28/oz price. But the cost to produce marijuana there averages just $14/oz. So $28/oz is a reasonable guess as to where the price of marijuana would settle if the market were allowed to clear.

Going forward, profit margins won’t be nearly as fat as they were in the past.

2) The Government Will Be Heavily Involved

At least one guy will unquestionably make a killing from marijuana’s legalization. His initials are “U. S.,” and he wears a star-spangled hat.

We’re just two months into legalization, and taxes are already hefty. In Colorado, marijuana is subject to a 2.9% sales tax, plus a 10% tax on retail marijuana sales, plus a 15% excise tax based on the average wholesale price. Washington is no better—it plans to exact a 25% excise tax, plus an 8.75% sales tax.

All told, taxes in these early-adopting states will be in the neighborhood of 30%. And that’s before the feds get their cut (more on that momentarily). Further, taxes are the one exception to the rule, “What goes up must come down.” Someday, tokers might look back longingly at that 30%. After all, the average tax on a pack of cigarettes in the US is 42%.

Last, the marijuana industry isn’t going to be the Wild West. Colorado is working to control pretty much every aspect of the market, as evidenced by its 144-page marijuana Rule Book. You can be sure that other states will follow suit.

3) It’s Still Illegal

Though marijuana is now legal in two states, it’s still illegal under federal law. The Obama administration has said it won’t enforce marijuana prohibition in states that legalize it, as long as those states keep it under control. The federal government maintains the same position on medical marijuana, which, somewhat surprisingly, is also still illegal under federal law.

The feds are moving in the right direction, albeit slowly. Two weeks ago, the Treasury Department issued new rules that open the door for banks to do business with legal and licensed marijuana dispensaries.

Of course, once the feds do get on board, they’ll want a piece of the action. So be ready for even higher taxes.

4) Unsavory First Movers

It’s an unfortunate fact that, because the industry was just decriminalized recently, those best positioned to jump quickly into the marijuana business are those who were already in the marijuana business. In other words: people who were classified as criminals just two months ago.

Not that they were necessarily doing anything wrong by growing and distributing marijuana before it was legal. I’m sure plenty of growers and sellers are good people trying to earn a buck, just like those who grow and sell any other crop.

But as with any emerging industry, the first movers will be those who already possess an intimate knowledge of said industry. And in the case of marijuana, that means people who were running illegal businesses. So if you invest in their companies, you’re entrusting your capital to someone who’s willing to break the law.

As an investor, that should give you pause. Tread carefully, and dial your skepticism up to maximum.

5) Weak Candidates

The investment options in this infant industry are, understandably, limited. We’re a ways off from being able to buy a bushel of hemp on the futures exchange. If you want to invest, you’ll have to go with one of a handful of public companies. And unfortunately, none of them looks compelling.

The six companies in the chart below are the purest plays in the marijuana space. Their performance in 2014 is the stuff of legends—the worst performer gained 243% in the last three months:

But dig into their businesses and you’ll soon find that their value comes from their scientific-sounding names, and not from actually making money.

First, the companies are tiny and only trade on the illiquid over-the-counter markets. Before the share price run-up, only one, CannaVEST, had a market cap above $60 million.

What’s worse, most of them don’t have any revenue. And the ones that do generate revenue spend much more than they earn. Not that this is surprising—hardly any business could become profitable in just two months, so we won’t hold that against them. The problem is their valuations: CannaVEST is worth a staggering $1.8 billion today, and most of the others are all in the hundred-million range.

Let’s put it this way: if an entrepreneur walked into the Shark Tank seeking a $1.8 billion valuation for a company that doesn’t make money, Mark Cuban would laugh him out of the room. Speculative money already took these stocks to the moon. By buying one now, your only hope of profiting is for a greater fool to come along and buy it from you at a higher price.

As I see it, because of sky-high valuations, the risks in this blossoming industry far outweigh the potential reward, at least for a retail investor. I’m sure there are some fantastic private deals out there, and if you’re willing to press the flesh and meet some marijuan-trepreneurs yourself, you could make money.

But for non-full-time investors, you’ll want to watch this trend unfold from the sidelines, waiting for either (1) the speculative bubble to pop, so you can pick up some shares for fractions of a penny; or (2) a leader to emerge and demonstrate it can turn a profit.

Here’s a tip, though: If you’re looking for an investment with potentially spectacular gains, I would like to point you to another drug, this one perfectly legal once it’s FDA-approved. What I’m talking about is an impressive biotech startup my colleague Alex Daley, Casey’s chief technology investment strategist, has dug up.

The company is well on its way to launching a breakthrough Alzheimer’s treatment—which, if successful, is sure to be a game-changer for the medical industry. Clinical trial results are due out in early March, and should they be positive, the stock could easily double on the news… so right now is a great time to get in. Find out more about the company and its revolutionary product in this report.


The article Should You Invest in the Marijuana Boom? was originally published at caseyresearch.com.

Could The Ukraine Crisis Be The One That Sticks?

By MoneyMorning.com.au

If you’re a medium- to long-term Money Morning reader you’ll know we’ve thumbed our nose at every so-called crisis for the past two years.

There have been a wide variety of crises too.

From interest rate crises, to currency crises, to political crises, to banking and emerging markets crises…you’ve seen them all.

But what you haven’t seen is the event that all these crises are supposed to result in – a wholesale crash in financial markets and an accompanying localised or global economic recession.

Could that change if the ‘Ukraine Crisis‘ turns out to be a much bigger one than anyone currently thinks?

Well, it’s got all the hallmarks of a crisis.

There’s the threat of war…the threat of sanctions…the threat of a debt default…the threat of energy supply disruptions…and the overall economic impact if these issues flow through to financial markets.

With all the so-called crises that have gone before, we’ve quickly dismissed them as not even a storm in a teacup – more like a breeze in a thimble. They were nothing.

But what about Russia making trouble in Ukraine? That’s got to be worth at least a short pause before we dismiss it out of hand.

It’s not the first time Russia has turned up on the opposing side to the West. Most people have doubtless already forgotten about the last international crisis that almost led to war – Syria.

That was Russia on one side and the United States on the other side.

The outcome? Erm, nothing of any consequence. Certainly nothing that has caused lasting damage to stock market valuations.

Some may say it’s inappropriate to talk about such things when the world is perhaps on the edge of another war. But isn’t that why you’re here? To find out the impact of these things on your wealth?

If you want war analysis, we’ll suggest you go and watch SBS or the ABC. Or even the supposed intelligence experts who pop up on CNBC and Bloomberg to bang on about that sort of thing. But us, we’ll stick to what we know: stocks.

Another Faux Crisis or Real Deal?

The world’s stock markets went into sell-off overdrive overnight.

The Euro Stoxx 50, an index of leading European stocks, fell 3%. The UK’s FTSE 100 index fell 1.5%. And the German DAX index fell 3.4%.

The Russian MICEX index slumped 10.8%.

The bad news carried over into the US markets, where the Dow Jones Industrial Average fell as much as 1.5% before recovering some of the lost ground in the afternoon.

Will this flow through to the Aussie market today? It’s possible. The question for Aussie investors is whether this is just another faux crisis, or if it’s the real deal.

It would be easy to lump the Ukraine crisis in with others such as Syria, Libya or even the recent but now forgotten Argentinian debt crisis. But it is fair to say that what’s going on in Ukraine is more important than those events from an economic standpoint…especially for Western Europe.

You should remember that Europe gets around a quarter of its natural gas supplies from Russia, via a pipeline that happens to go through Ukraine. So should a full-scale conflict break out between Russia and Ukraine it’s likely that the Russians would shut down this pipeline.

That’s potentially a real problem. However, as serious as it may be, markets have a funny habit of quickly solving problems. That’s why markets work. For instance, there are other potential pipeline routes that avoid Ukraine. It’s hard to imagine that Europe would refuse to accept Russia’s natural gas supplies even if Russia declared war on Ukraine.

So, is it time to panic?

This Isn’t The Crash They’re Looking For

There are some commentators out there who seem to talk out of both sides of their mouth. They’ll tell you something could be a real problem, and then when it all calms down they say they knew it would be fine all along.

Yeah, sure.

That’s not how we roll.

Sure, you should always take some precautions with your investments. That’s why for the past four years we’ve recommended that you have a healthy holding in cash and gold (by the way, the gold price has done pretty well the past few days).

But that’s something you should constantly monitor, not just when trouble brews up to the surface.

And when it comes to stocks, we’ve long said that most investors shouldn’t have more than 50% of their wealth tied up in a combination of growth and income stocks anyway. We don’t see any reason right now to change that advice.

Yes, you could see the Aussie market fall by 5% or so, as it did in January. But like then, we would see that as an opportunity to buy into unfairly beaten down growth and income stocks.

Bottom line: we’ll go on record again and say that there are far too many investors and so-called experts fighting to be the hero. They’re desperate to call the next full-scale market meltdown.

So far, they’re up to about their 30th attempt at picking it. They’ve got it wrong each time. The law of averages says they’ll get one right, but this just isn’t it.

Our advice is to use the opportunity (if it arises) to buy stocks from those senselessly selling in a blind panic.


From the Port Phillip Publishing Library

Special Report: Three Aussie Miners Set to Lead the Resource Sector’s Epic Comeback

By MoneyMorning.com.au

Why You Need A Strategy For Selling Stocks

By MoneyMorning.com.au

Last week, I explained the importance of managing your risk and buying at the right price, but this is only half the story when it comes to successful investing.

Not long ago, a subscriber to my resource investment newsletter Diggers & Drillers wrote to say:

The main issue for me is that stocks go up and come down, buying is a lot easier than selling. It would be great to get some idea as to DD’s strategy in selling.

You need to know when to sell.

This means that you have to have a sell strategy in mind from the get go, which also means managing your risk.

It may sound boring and repetitive but risk management is everything in the investing world – and yes, it involves knowing when to buy and sell.

The alternative, emotional investing, is never a good idea and often ends in heartbreak.

Let me give you a recent example of a sell recommendation to illustrate my point. When I came on board as the resource analyst for Diggers & Drillers last year, I immediately recommended a sell on Swala Oil & Gas [ASX:SWE].

At the time I issued the sell recommendation on Swala, I thought it was one of the most promising small-cap oil and gas companies on the ASX. So you may think it was a strange decision for me to issue a sell recommendation.

The thing is, as good as Swala’s Tanzanian story may seem, the biggest mistake any investor can make is to become emotional about a stock.

One of the greatest investors of all time, Roy Neuberger, figured out that the stock market is like the shoe business: you buy the shoes, you mark them up, and you sell them. You do not sit around holding them for decades. When a stock price goes up in price, you sell it.

Coming back to Swala, I came to the conclusion that for its current stage of development, the price had run too high. In other words, the risk of holding the stock outweighed the reward of selling it.

So at the time, I wrote to Diggers & Drillers readers,

Management says, The 2014 work programme intends to add to the joint ventures understanding of the unexplored portions of the basin.

Reading between the lines, I take that to mean that the company will focus on running additional seismic surveys over the region. In fact, I wouldn’t be surprised if they spent most of 2014 trying to map the fault line and gain a better understanding of the geology.

This will cost the company time and money, but for any explorer it’s always better to be safe than sorry. The likely impact is that the company will need to go through additional capital raisings and that the share price will drift through 2014.

Now successful selling involves two characteristics:

  1. Thinking logically – Swala has already done a lot of seismic but when it comes to drilling a well, you want to hit the juiciest spot. And this will require more evaluation, time and money. And on top of this, the company is focusing on numerous regions and projects – this means more time and money.
  2. Be disciplined – based on the original entry price of 14.5 cents, it was time to lock in the gain of 127.5%.

It may even run further in the future, it may even come to a point that I would recommend buying it, but don’t make the mistake of getting sucked into the long term story because it sounds good.

That said, let’s go deeper into the Swala story.

Swala’s management later told the market that they ‘may need to raise capital later in 2014 if it decides to progress with the contingent work programme.

And more recently the company announced, ‘the work commitment in this next period includes additional seismic acquisition and the drilling of 1 exploration well in each of the two areas to be completed before the end of February 2016.

My thoughts remain: how will Swala fund these development programs and drill a well with less than $10 million in cash (as at December 31, 2013)?

Sure the share price may go up, but with these concerns I was more than happy to have my readers take a profit.

It’s better to take the money off the table and put it into a company that’s more sustainable and that will likely make you yet more money.

The true art of investing is taking your profits – don’t be afraid to do it. As the wise man says, ‘you can never go broke taking a profit’.

Whether to hold or sell a stock basically comes down to the following:

  • Is the company growing at a reasonable and sustainable rate?
  • Is management hitting their targets?
  • What are the foreseeable capital investment requirements and are they manageable?
  • Do the project economics continue to stack up?
  • Is the share price significantly technically overvalued?

At the moment, all the companies on the Diggers and Drillers buy list stack up well. But this doesn’t mean my readers should rush in to buy them at any old price. We can’t forget about managing your risk when buying into the stocks, as I discussed last week. And as long as my readers buy in at the recommended buy-up-to prices and sell when my analysis says it’s the right time, they have a great chance at making solid gains.

Jason Stevenson+
Contributing Editor, Money Morning

Ed note: The above article is an edited extract from Diggers & Drillers.

Join Money Morning on Google+

By MoneyMorning.com.au

Non-Manufacturing PMI Data: Eur/Usd Scenarios

United States ISM Non-Manufacturing PMI data is due at 15:00 GMT on Wednesday. High volatility is likely in the financial markets if the actual reading comes better or worse than expectations. EUR/USD is expected to be the most affected pair because Eurozone’s growth data is also due on the same day. A higher reading means there was expansion in the US services sector, the largest economic sector for the United States. This translates to a rise in the US stock market and strengthening of the US dollar.

Therefore, EUR/USD will likely be the most volatile pair on Wednesday. For the week, 1.3891 and 1.3524 are the two resistance and support levels, respectively, for the EUR/USD for this week. If Eurozone GDP comes in higher than expectations and US non-manufacturing PMI misses its forecast, then it could possibly prove to be a good strategy to buy EUR/USD at 1.3891.

Written by Daniel Elo, Independant Analyst for www.EconomicCalendar.com