There aren’t many investment insights that come over breakfast – at least for me anyway. But today was different.
You could say the Wall Street Journal gave it to me on a platter, alongside the toast and jam.
The front page sounds an alarm on the world economy.
See for yourself…
‘Economic output in Japan and Germany contracted in the third quarter, while in October, consumer spending in China hit the slowest pace in five months.’
We looked out the window of the hotel. Snow is falling here in Baltimore and the wind was sending the flakes swirling.
What to do with this information?
Ignore it. Its informational value is zero. Some journo could say the complete opposite next month.
It’s much better to turn to the Business & Finance section – oh, yes, more coffee please – and what do we see?
Warren Buffett went shopping in the third quarter. He’s an investor that needs no introduction.
Buffett’s buyers at Berkshire Hathaway loaded up on US$4 billion worth of JPMorgan Chase shares. They also topped up on four other major US banks they already own.
Buffett isn’t sitting around wondering about the state of the world. He’s putting shareholder money on the line.
This sticks out for multiple reasons…
One is that Buffett previously made it clear he’s struggling to find value in this market.
That’s why Berkshire also spent US$900 million buying back its own stock. But clearly, he likes what he sees in the US banking sector based off their earnings.
But there’s an implied judgement on the US economy here, too. Banks are always vulnerable to loans going bad. That’s more likely to happen in a recession.
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It’s therefore reasonable to assume Buffett doesn’t see the economic clouds darkening anytime soon.
In fact, it’s the complete opposite.
Banks grow their revenue through growing their loan book. That would imply an expanding economy that demands credit.
That’s at odds with the mainstream headlines right now.
God forbid you connect these to the recent drop in oil as well.
It’s easy to jam them together and convince yourself the world is on the rocks…
Ounces of weed for mere cents
Later, we found ourselves in a big hotel called the Belvedere. Some colleagues began presenting on investment opportunities.
One of them pointed out that the biggest gains in a bull market come at the very end. Get ready to ride this final move up.
Another, called Ray, has been following the marijuana industry since it all began to take off.
He’s been travelling down in Medellin, Columbia.
Yep – it’s the old territory of billionaire cocaine dealer Pablo Escobar.
It turns out the area is ideal for growing pot. There’s lots of sun and rain. Even better is the cheap energy and labour.
The Columbians can produce ounces of the stuff for mere cents. The crops Canadians are currently producing have costs twenty times as high.
Ray expects Columbian pot to wipe the competition in the years ahead – as long as they can get the quality right.
Your editor can’t be much help on that final point. Weed is not a taste we know much about.
A friend jokingly suggested going to Denver, Colorado while travelling in the States to try it all out.
Call it investment research.
One of the Columbian growers is just about to list on the Canadian stock exchange.
Ray pointed out the greenhouses are important for marijuana. If the plants get wet, they’re vulnerable to rot and disease.
A stock called ClearVue Technologies [ASX: CPV] sprang to mind. It’s developing technology that allows glass to convert sunlight into energy. It’s trying to commercialise it right now.
Think of the implications. A greenhouse with this type of glass could generate its own power to regulate the internal temperature and best lighting conditions for marijuana growers all over the world.
That could help those in places less blessed than Medellin compete on costs.
It’s certainly a business to keep an eye on. There are a thousand ways to benefit as marijuana goes mainstream.
Later, we turned to our publisher.
‘You really need to send me to Colorado.’