Marijuana And 2 Other Investment Manias To Make (Or Lose) You A Fortune
AUG 29, 2017 @ 08:31 AM
It doesn’t matter how bad the economy or the market is, the is a simple golden rule: There is always a party going on somewhere.
Love them or hate them, investment manias make people fortunes. They also lose people fortunes. Most ‘traders’ only play the manias, which is why they fly so high and then crash so low.
Over the years the role of the solo investor has fallen in the market. They have gone to ETFs and funds, and many have left for good carrying their scars from 2001 or 2007. The bulk of the remaining people are gamblers. Not you, of course, you are different.
Everyone, well almost everyone, is looking for the next big thing or hot stock. I know this because running ADVFN and Investors Hub for many years gives me a peek at three million private investors around the world. If only they would invest properly the market would grow back, but sadly the vast majority want the kind of trading action that ends in tears.
I’ve written enough books on investing, one of which was number one on Amazon several times, to know ‘traders gonna trade.’
Never mind. The good news for traders is there are currently three parties going on. One has been underway for some time, one is slowly but surely building and one is only starting.
This is where the ‘fast markets’ are current and future. They are:
1) Medical Marijuana
Investment in medical marijuana stocks has been ongoing for some time, but there seems to be no let up to the interest. Back at base we have experienced so much interest that we have successfully filled a LA Hall next weekend for MJAC 2017, a medical marijuana investor conference. We aren’t an exhibition company at Investors Hub, we are a financial web site, but the interest was so strong, we bit the bullet and jumped in. Medical marijuana companies are busy with their IR outreach and there is a huge audience of investors deep diving this new segment. Right now medical marijuana is the hotspot for private investors. It is the new ‘mining sector’ when it comes to interest and it continues to grow as the tide of global liberalization rolls on.
Lithium is a no brainer, at least to me. The governments of the world are set to banish the internal combustion engine is the next 20 years or so, which means the world needs a lot of big batteries. Those batteries are going to need a lot of lithium. Lithium is not exactly rare but it’s not exactly common either. It is currently $8,000-$10,000 a ton in its various incarnations. Lithium will be a pinch point and its price will rise and rise. This will set off a flurry of lithium mining stocks all touting zillions of tonnes of lithium just below their lump of wasteland, all ready to make everyone rich. It’s a story so old Mark Twain coined a quip for it.
My favorite is Sociedad Quimica Y Minera (SQM), a real lithium miner and in my judgement the purest play producer. I admittedly just sold the stock for a fat profit but my investor pulls rank on my trader and can’t stomach a 40 P/E versus a 70% profit. (It then shot up a further 10%.)
There will be plenty of minnows swimming this way in the lithium segment and many will zoom and crash, making lithium increasingly a trader heaven.
The SEC has just halted three OTC companies touting their cryptocurrency chops. This is just the beginning of an explosion and uproar that will see a new stock market pandemonium.
In one short sentence, Blockchain is the new ‘dotcom.’ it deserves to be. (I’ve already written about it here and here.) This is a bubble being driven by a tremendous breakthrough in technology, a hoard of genius nerds and a series of global financial logjams that Blockchain solves. There is already a giant boom going on off the regulated markets.
As I write, the Blockchain has created $150 billion in value and that value is real and will only grow, subject to truly grotesque volatility. (Which of course traders love.)
This breakthrough is spilling into the stock market but it is just the beginning. While medical marijuana is great and the world needs a lot of batteries, the Blockchain is a financial ‘Mars attack.’ You could forget the stock market entirely and this runaway train will still take on massive proportions. But Blockchain is not going to stay penned in its bleeding edge world, it will crash into global exchanges and there will be a headlong charge by traders and investors to jump on this revolution via equities.
Personally I will play some of this, but carefully. Risk equals reward of course, but at some point risk becomes certainty of loss and the curve collapses. But even the most conservative investor should snap a couple of percent off their portfolio and use it to sprinkle some alpha on their returns via these extremely risky themes.
However, the investor must not get suckered in by initial easy profits, they will turn to ashes at some point if they stay too long.
There is always a party going on and the trick is to get to it early and leave after its been in full swing for some time. If you hang around to the end you will experience, like many before you, why no one loves a bubble. They all end in tears; they always do but the ones who sell out comfortably before the end are the ones that get to keep the benefit of the madness.
This article originally appeared on Forbes.com.