February 03, 2021
🩺 Trivia: A physician born in Monrovia, Liberia, who completed his college education and medical degree in the United States, this man was best known for his pioneering work on Alzheimer's, but was also a psychiatrist, neurologist, pathologist and professor.
1 big thing: Pot stocks boom as industry sees prohibition ending
GameStop and the "meme" stocks have attracted much of the market's attention in recent weeks, but cannabis stocks have been the market's real standout in 2021 thanks to renewed expectations of U.S. legalization.
- Many have quietly doubled their stock price in less than a month of trading.
Why it matters: Pot stocks have been volatile over the past year, but have boomed since Joe Biden was elected president and could see a run similar to 2018 following Canada's decision to fully legalize.
What's happening: Momentum has grown so strong that the CEO of a marijuana company that counts Jay Z, Rihanna and DJ Khaled as investors and just went public via the industry's largest-ever SPAC says he's "100% certain" the U.S. will see the decriminalization of marijuana in the next two years.
Where it stands: "We do believe that prohibition is essentially over," Michael Auerbach, chairman of The Parent Company, tells me on the latest Voices of Wall Street podcast.
- "I'm 100% confident that prohibition of cannabis will end within the next 12 to 24 months and over a period of two to five years it will be regulated like alcohol and tobacco with interstate commerce and the ability to grow, manufacture, distribute, create brands and be able to ship them across state lines."
Driving the news: Earlier this week Senate Majority Leader Chuck Schumer announced a plan to roll back marijuana prohibition laws in the U.S.
What they're saying: "The War on Drugs has been a war on people — particularly people of color. Ending the federal marijuana prohibition is necessary to right the wrongs of this failed war and end decades of harm inflicted on communities of color across the country," Schumer, Sen. Ron Wyden and Sen. Cory Booker, said in a joint statement announcing forthcoming legislation.
- "We are committed to working together to put forward and advance comprehensive cannabis reform legislation that will not only turn the page on this sad chapter in American history, but also undo the devastating consequences of these discriminatory policies. The Senate will make consideration of these reforms a priority."
By the numbers: The marijuana ETF MJ rose 9.8% on Tuesday and has gained 47.9% year to date. Individual companies have seen even more impressive bounces so far this year.
- Cannabis medical research standout Tilray's stock jumped by 23% on Tuesday and is up 184.4% year to date.
- Cannabis medical supply company Aphria rose 18% Tuesday and has gained 114.3% since Jan. 4.
- Cannabis production and distribution company Cronos gained 11.3%, bringing its year-to-date rise to 64.1%.
2. Catch up quick
Treasury Secretary Janet Yellen will convene the heads of the SEC, the Fed, New York Fed and the CFTC to discuss market volatility driven by retail trading in GameStop and other stocks. (Reuters)
The Senate opened debate on a budget resolution that would pave the way for Biden's $1.9 trillion stimulus bill to pass with a simple majority. (Politico)
Ant Group, whose shelved IPO was set to be the biggest in history, reached a deal with Chinese regulators to turn the fintech company into a financial holding company, according to anonymous sources. (Bloomberg)
Italian President Sergio Mattarella will meet with former ECB president Mario Draghi about becoming the country's prime minister and forming a government. (Reuters)
3. Big Tech made big profits in 2020
Four of the biggest technology companies — Apple, Alphabet, Facebook and Amazon, aka the FAANG stocks, minus Netflix — had their most profitable year on record last year.
- Both Amazon and Alphabet delivered earnings results Tuesday that far exceeded Wall Street expectations and Amazon announced that it had earned $125.6 billion in revenue last quarter, joining Apple in delivering $100 billion quarters.
4. Amazon's next act
Axios' Ina Fried writes: As big as Amazon looks at any given time, it is always bigger than anyone outside the company can see, and a new CEO won’t change that.
Between the lines: In choosing top lieutenant Andy Jassy as his successor but staying on as executive chairman, Jeff Bezos is guaranteeing that the culture he built, powered by ambitions that exceed the public's imagination, will live on.
The big picture: When people thought Amazon was building earth’s biggest bookstore, it was actually building the everything store.
- When people thought it was focused on that, it was expanding to web services and then advertising.
- When people thought it was laser-focused on all things online, Amazon moved into physical retail, buying Whole Foods and launching the cashier-less Amazon Go convenience stores.
Between the lines: In Jassy, who runs Amazon's AWS cloud services unit, Bezos is picking a man who helped give Amazon a key profit engine to fuel its outsized ambitions. Web services boast profit margins that significantly outstrip retail's.
- Bezos stepping down is a major milestone, but former executives say it doesn't indicate a major change in direction or in Amazon's culture of endless hunger.
- "I doubt that the audaciousness will slow down at all," Charlie Kindel, a longtime Amazon executive who left the company in 2018, told Axios.
Be smart: Remaining executive chairman means things will still be run to Bezos' liking and he can weigh in as much as he feels he needs to.
- Amazon CFO Brian Olsavsky said on an earnings call Tuesday that Bezos will remain involved in many "large, one-way door" issues such as acquisitions and planning new lines of business.
5. The real silver rally
The price of silver remains largely within the same range it has been in since June, as prices on futures markets tumbled by nearly 8% on Tuesday.
- Media outlets have devoted a lot of ink to the "silver rally," even though the precious metal's price has held between $22 and $30 since August.
Reality check: Markets have not yet seen a sustained upside move in prices, but silver has been seeing extraordinary physical sales for some time, with dealers and even the U.S. Mint saying they're struggling to keep up with demand.
Driving the news: The U.S. Mint said on Tuesday that it had been unable to meet demand for gold and silver bullion coins in 2020 and through January, blaming pandemic-driven demand and plant capacity issues, Reuters' Devika Krishna Kumar reported.
- Gold is still seeing much higher demand, with sales of U.S. gold bullion coins up 258% last year and silver coin demand up 28%, according to the Mint.
- That heavy buying has continued in 2021, squeezing already-tight supplies.
The intrigue: U.S. bullion brokers like Apmex, JM Bullion and SD Bullion are warning of delays in processing silver transactions because of surging volumes, Reuters' Arpan Varghese reported.
Yes, but: The shortages are expected to be temporary, as dealers say that it's been shipping rather than supply constraints that have caused the shortages.
- Every year the world consumes and producers about 1 billion ounces of silver, and supply has been in surplus for most of the last decade, precious metals research consultancy Metals Focus told Reuters.
- "There are no signs yet of a broader physical squeeze across silver and we would not expect any at this stage," Frederic Panizzutti, managing director at dealer MKS, said in the article.
The bottom line: Much of the demand for silver and gold has come from increased worries about the rapidly rising U.S. money supply and fears of fiat currency destruction at the hands of central banks and government policymakers.
- That has pushed physical sales through the roof over the past year, but whether there is still room to run on precious metals prices remains to be seen.
Thanks for reading!
Trivia: A physician born in Monrovia, Liberia, who completed his college education and medical degree in the United States, this man was best known for his pioneering work on Alzheimer's, but was also a psychiatrist, neurologist, pathologist and professor.
Answer: Solomon Carter Fuller, who spent the majority of his career practicing at Westborough State Hospital performing ground-breaking research on the physical changes that take place in the brains of Alzheimer's patients.
- Fuller was instrumental in recruiting and training black psychiatrists for key positions at the Tuskegee Veterans Administration Medical Center after World War I, which operated with an all-Black staff.