Get High With Your Stocks

Pot stocks are getting real high… could they get higher? May 10, 2024 | Peel #707 In this issue of the Peel: - 🤔 How does the U.S. Monetary Policy impact other global economies? - ⁉️ Airbnb’s not only fleecing customers, but investors as well?! - 🍀 Pot stocks are getting real high… could they get higher? Market Snapshot 📸 Banana Bits 🍌 - Meta and Apple are leading the charge on [insane levels of buybacks]() - 14 years and a few broken planes and murdered whistleblowers late, Boeing is facing further delays but appears [set to head to the ISS](=) - Google just released AlphaFold 3, a potential generational [breakthrough in biotechnology](=) Hey Friend… it’s me—your bladder! I’m trying to help you out here. I’ve noticed less water coming through lately… and you might think that will make leaks and urges better… But the truth is, too much water is NOT the cause of your bathroom struggles… In fact, it’s the opposite. Once you hit 50, a few things got out of whack. Kidneys stopped filtering fluid as well as they once did - causing concentrated urine that irritates your bladder and causes spontaneous urges. Thirst signals slow down, causing you to drink less- making bladder muscles lazy and leaks more frequent. Luckily, US Army researchers decoded a shockingly easy water trick that can improve muscle strength by 36%, reduce UTIs by 58%, and give you control back… All by targeting the true cause of bladder problems in as little as 2 hours. PLEASE… Try this simple Army water trick to strengthen me and reduce my constant nagging. We’re going to be feeling GREAT soon, Your Bladder [This Army Water Stops Urges](20Street%20Oasis///) Macro Monkey Says 🐒 Hold Me Back Sometimes, it’s hard being the best. Now, I, of course, know nothing about that. But the United States sure does when it comes to economic development. As inflationary trends broadly continue to recede in most of the world, the global interest rate environment is continuing to diverge. For some, it’s no big deal. But for others, the U.S.’s “higher for longer” rate narrative is causing their economies to also be “poorer for longer.” Let’s get into it. What Happened? Central banks around the world have held more meetings in the past two weeks than Bill Ackman has started Twitter fights—and that’s saying a lot. It’s kinda beautiful, isn’t it? Not necessarily the chart, but a diverging global rate environment should—in theory—create a more robust global economy better able to withstand shocks given more diverse economic conditions. That said, what’s good for thee may not be good for me, as the old saying goes. There is no global central bank (yet), but the Federal Reserve is just about as close to global as it gets. Because of the Fed’s reluctance to cut rates now and potentially throughout 2024, economies looking to cut their own are facing a Catch-22 worse than choosing between Charmander and Squirtle (sidenote: f*ck Bulbasaur). Japan is a good example of this. Not only do U.S. rates determine liquidity in financial markets domestically, but they also play a huge role in determining the exchange rate for global currencies. Quick explanation: Currency pairs show the value of one currency in terms of another. Above, you see the value of JPY (Japanese yen) per 1 USD. Like stocks, there’s a plethora of factors determining their relational value. But, one of the biggest is the rate environment of the two countries/regions. That’s because a global investor could invest in USD via treasuries and earn >5% as opposed to the >0.1% in Japan, which is just one factor. Where this becomes a good thing is for export-driven economies. Sweden, Switzerland, much of the Eurozone, Canada, Mexico, and even the U.K. count more than 1/3rd of their GDPs from exports. That’s because, for example, a Japanese business selling to the U.S. and receiving USD will then exchange that USD back into JPY once received. When the value of USD spikes, the amount of JPY the USD converts into is more than prior. This increase is known as a gain in relative purchasing power, beneficial for exporters but costly for importers. Keep in mind—in the GDP calculation, exports are offset by imports to create “NX,” which pulls in the opposite direction. Trading partners matter a lot here when it comes to the impact of forex rates on GDP, but the overall theme is that the Fed’s newfound hawkishness has created a slight problem in global central banks. At 11.77%, the U.S. has the 10th lowest export/GDP ratio in the world, right in between that of Uganda and Pakistan. Plus, with an economy roughly as large as the next four largest GDPs in the world combined, frankly, JPow doesn’t give a damn. The Takeaway? There’s a lot more going on behind the scenes, but the relationship between interest rates, forex rates, and exports/GDP is one of the most prevailing for a country like Sweden—which just cut rates yesterday—and Mexico, which first cut in March. Inflation and GDP growth rates are the other two most important factors here, but we’ll need a Daily Peel book to cover global rate wack-a-mole in that much detail. What matters here is that global interest rate policy is continuing to diverge. As the world’s largest economy and most impactful central bank responsible for the global reserve currency, high U.S. rates may be holding back global growth, but the idea is that hopefully, these high rates are holding back inflation too. And you know what they say about big economies… = What's Ripe 🤩 Warby Parker (WRBY) 📈18.0% - Safe to say that the bears didn’t see this one coming (sorry for that). Shares in the online nerd-maker I mean glasses company popped on a great quarter. - This online DTC firm is seeing the opposite trend as most others—accelerating growth post-pandemic. Sales grew 16.3%, the fastest since 2021. - $200mn in sales beat the $193.6mn estimate while gross margins expanded 1.6% as the firm approaches profitability with a loss of $0.02/sh vs $0.09/sh expected. Cronos Group (CRON) 📈10.5% - In the past few years, we have come dangerously close to seeing the first deaths from weed. Not from the plant but from share price collapses. - Not on Thursday, however. After falling ~85% before yesterday’s pop, strong earnings and the potential reclassification in the U.S. led to strong gains. - Sales of $25.29mn beat the $23.8mn expected thanks to strong growth in Canada and Israel. Shares in $CRON(ic) are up almost 40% YTD. What's Rotten 🤮 Roblox (RBLX) 📉22.1% - Kids are in a depression, according to Roblox’s earnings report, as the gaming firm with 60% of users under age 16 and 83% under 25 disappointed. - Q1 was fine and dandy, delivering a loss of $0.43/sh on gross revenue of $923.8mn vs expectations for a $0.53/sh loss on just $919mn. - But, Q2’s outlook soured the mood. Roblox expects a QoQ revenue decline to $870mn-$900mn, while analysts were looking for $929mn. Airbnb (ABNB) 📉6.9% - After fleecing their customers with borderline-criminal levels of additional fees, Airbnb shares are now fleecing investors. A weak Q2 outlook killed the vibe. - Seeing Airbnb lead the [Alpha](=) portfolio lower felt like getting an angry message from your host for “not cleaning enough” despite the $250 cleaning fee you paid. - That’s what happens when you give Mr. Market weak guidance. Still, the firm did beat on sales and EPS by 3.8% and 70.8%, respectively. - Markets were focused on the Q2 revenue guidance range of $2.68bn-$2.74bn, expecting to get… $2.74bn. Hopefully, there’s another eclipse to help ‘em out. = Thought Banana 🤔 Can A B*tch Get Some Cannabis? Yeah, I could’ve said “We’d Love Some Weed” for the header, but the distinct lack of profanity just doesn’t do it for us. Anyway, U.S. cannabis regulations are about to experience their most significant change since the Controlled Substances Act was passed by Congress back in 1971-a year when Pablo Picasso was still alive and France was still using the guillotine. This has already caused pot stocks to get real high once again. But let’s dive in and find out what’s actually going on. What’s Happening? On April 30th, 10 days after 4/20, the U.S. Drug Enforcement Agency (DEA) announced its plans to move cannabis from “Schedule I” to “Schedule III” under the Controlled Substance Act. = [Source]() That might not sound like much, but this is a huge deal for pot users, investors, and haters alike. Moving from Schedule I—alongside the likes of heroin and LSD, to Schedule III—alongside steroids and Elon’s favorite drug, Ketamine, drastically changes its regulation. For anyone interested, here’s a disgustingly blurry screenshot from ChatGPT summarizing the legal implications of this change. Who Cares? Culturally, commercially, and regulatorily, this is a huge development for the U.S. This change does not require Congressional involvement, so it should be more successful than previous bills in Congress that aimed to achieve the same result. For investors, the most important changes to pay attention to include: - Much more freely available research for companies, universities, and other institutions - Likely less black-market competition given upgraded legal status and availability - Ability to bank and deduct business expenses similar to a federally legal business - Decreased stigma around using weed, especially for older generations That’s why we’ve seen a sudden pop in share price for most cannabis operators exposed to U.S. markets. But, this doesn’t “legalize” weed nationwide nor solve all the industry’s problems. Given the federal government’s inability to draft coherent, agreeable legislation on cannabis, this will remain a state-by-state issue for the foreseeable future. As a result, the fragmented regulatory landscape still lends itself more favorably to small, local markets than to a potential Anheuser-Busch of weed. States where weed is still fully criminalized, such as South Carolina, Kansas, Idaho, and Wyoming (*cough* *cough*, narcs) and states that currently only allow for CBD, like Texas, Georgia, and Tennessee, aren’t going to rush to catch up to the likes of California, Massachusetts, Colorado, and others where cannabis is fully legalized. [Source]() So, for companies, this doesn’t really change a lot in terms of market opportunity. But many cannabis firms face egregious effective tax rates and banking environments, allowing cost savings that might actually make them viable businesses long-term. The Takeaway? Holding cannabis companies in recent years has felt about as comfortable as walking back into your house after burning and having to convince your parents, through red eyes and a dry mouth, that you were just going “for a walk.” (no, Mom & Dad, I’ve never done that!) But now, if this change follows the expected timeline of coming into effect within the next 6-12 months, 2025 very well could be the year of profitability in this sector. The below cannabis ETF remains 82% off all-time highs but has nearly doubled since last summer. Companies like Cronos above, Trulieve, Green Thumb, and other U.S.-based firms have already ripped in response. As we’ve been saying for years, now, we finally have the chance to get high alongside our portfolios. I’ll see you apes at the top—and your eyes better be red. 💭 The Big Question 💭: Are you making any investments in the cannabis sector? Which companies do you think will benefit the most and why? Will other countries follow suit? Banana Brain Teaser 💡 Previous 🗓 Company P had 15 percent more employees in December than it had in January. If Company P had 460 employees in December, how many employees did it have in January? Answer: 400 Today 🕐 A doctor prescribed 18 cubic centimeters of a certain drug to a patient whose body weight was 120 pounds. If the typical dosage is 2 cubic centimeters per 15 pounds of body weight, by what percent was the prescribed dosage greater than the typical dosage? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 "If it’s flipping hamburgers at McDonald’s, be the best hamburger flipper in the world. Whatever it is you do you have to master your craft.” — Snoop Dogg How Would You Rate Today's Peel? 😁[All the bananas](=) 😐[Meh](=) 😩[Rotten AF](=) Happy Investing, David, Vyom, Jasper & Patrick [ADVERTISE]() // [WSO ALPHA]() // [ACADEMY]() // [COURSES]( // [LEGAL]( [Unsubscribe]( IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States (617) 337-3353