Monday Revisits Highs

Highs

Today is the first time in 15 years that the NASDAQ has finally crossed 5,000, revisiting highs last seen 15 years ago. Broad markets rose in sympathy as investors either ignored soft economic data or took that weakness as further signs of a Fed that will be forced to remain on hold. We can’t help but be reminded of the Wall Street saying, “Don’t short a dull market” or “Don’t fight the tape.” Regardless, we continue to push higher with the S&P 500 gaining 0.59% to 2,117 for the day.

Cannabis stocks begin a new month with a long awaited new ticker, Indoor Harvest (OTC Pink: INQD). Despite the new shiny toy, the market remained quiet.

Daily Positive: Two Rivers (OTCQB: TURV) came out with news confirming the GrowCo dividend to TURV shareholders. Greenhouse growing is a technology that is largely ignored by this space. However, we see opportunity for lower costs associated with greenhouses. Time will tell.

Daily Negative: The lack of enthusiasm continues for the sector despite the ongoing bull market in the broad markets.

About this time last year, cannabis stocks were experiencing the heights of the bubble. Stocks were exploding north by double and triple digits daily. Market caps were reaching levels of insanity on nothing more than press releases. Investors were flocking to the sector at dizzying rates. It is hard to imagine that euphoric and manic behavior, as the market seems to be drifting endlessly lower despite the sector’s massive progress and growth.

It is interesting to draw parallels to other bubbles in history and today is of interest with the NASDAQ eclipsing 5,000 for the first time in 15 years. Looking at other bubbles in time is not a predictor of the future but can be a good tell of investor behavior. In the depths of the tech bust, investors left in droves, and the outgoing tide exposed the low quality and/or fraudulent tech companies. Sound familiar yet?

Bubbles usually retrace the bubble upside move, which is what we are seeing in the cannabis industry. Also remember, few of the bubble companies go on to survive into the future market. How many tech stocks in the market today survived the tech bubble? Which bubble is which below:

Chart 1

 

Chart 2

 

The discussion above is provided for informational purposes only and does not constitute an offer of, or solicitation for, any investment services or products offered by the author. The author is not making any investment recommendations and the opinions above do not constitute investment advice. Reference to above indices [and companies] is based on information provided by sources the author believes to be credible. Investing in the cannabis industry, as with other industries, presents certain risks including the risk of loss on an investment.

Morgan is a Founding Partner and Managing Director of Poseidon Asset Management. He is the Chief Investor of their Cannabis Focused Fund. Morgan previously worked for a privately owned Registered Investment Adviser and earlier was at UBS Financial Services focusing on wealth management. Morgan believes in the potential of the cannabis industry and likes having an active involvement as it develops. You can follow him on Twitter @PoseidonAsset.

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