Cannabis - Insiders' Selling Has Started (Green Organic Dutchmen)

It's on (and does not match with a prior option exercise)...

Eleven Predictions for 2019: Cannabis to Suffer From Its Own Accounting Rules

In taking a stab with some convictions and also looking to the consequences of those convictions, here is the first annual "Look Ahead" for 2019.  These go  to 11.

Interest Rates: although the pace of interest rate increases will likely continue in the USA as the economic story is much better, here in Canada the rose coloured glasses will come off for Bank of Canada's Poloz and will have to admit to the squandery of the federal Liberals and their impact on what could have been an economy and GDP on steroids here in the Great White North. No rate increases in 2019, plausible decrease towards end of year depending on how bad unemployment rears its ugly head and the election outcome combined with cries for housing affordability.  A 0.25% decrease to close 2019 at 1.5%.

S&P/TSX: although less volatile than its Dow Jones counterpart, the TSX has already weathered the oil and gas storm from our domestic and foreign environmental vigilantes.  As cannabis is expected to "roll" over in 2019, gold (and perhaps copper and other base metals) will take shine as the tariff tweeting battle will come to a conclusion. Banks, telecomms, etc will continue to do well in light of decent dividend yields while REITS may catch a leg up if interest rates pause in replacing the high flying cannabis returns. With most of the noticeable gains coming since Trump was elected, yet down 13% for 2018, no foreseeable game changing catalysts on the horizon, all we can look toward are the pre-election balloons (taxation? Accekerated depreciation?) that will be floated ahead of October that may be priced in and give some gains if the market runs with it. 14,600 close for 2019 (little gain). 

Canadian Dollar: there is no shortage of events the Liberals have done to shoot the Loonie in the foot (for example, this entire blog has tracked them since its inception in 2015). With less than a year to the election, world currency markets will start to dump the Loonie as Trudeau's Liberals begin to telegraph their economy killing agenda all in the name of "sunny ways" and expected to be paid for with....even more debt. CAD/USD of $0.719.

Gold: has enjoyed higher prices on the Dow's extreme sell off days and on lighter volume but has durprisingly seemed to find a footing towards US$1,280/oz despite no activity out of India or China during its seasonally most active time of the year.  Also unimpressive, the SPDR Gold Shares ETF stands at a mere 788t or 25.3 Million oz equivalent to approximately 0.25 years worth of annual world mined production. As cannabis is expected to  implode due to writedowns in 2019, bitcoin has also died a quiet death, FAANG stocks are becoming long in the tooth (get it?) and blockchain is nowhere, in accepting reasonable valuations of companies that they understand investors will return to simpler industries that make and produce things.  Peak of US$1,335/oz for the year, average US$1,292/oz for 2019.

Cannabis: although only recently discovered by yours truly, cannabis producers use the same biological accounting methods as say corn producers or cattle growers. The commodity is just that - a grown product that takes time then boom! the revenue realized. As such, as per IFRS (globally accepted accounting rules), revenue, before the product is sold, is actually spread over the entire growing cycle based on assumptions of prices in the future, estimated harvest time, etc. This is calculated widely in the corn and cattle industry as these industries are established and the current market pricing is known due to up to the minute quotes and also in the future due to options and futures markets. This is NOT the case on cannabis and accountants' "guesstimates" will be met with writedowns in the 3rd and 4th quarters of 2019. Retail investors will flee as only a minority of CPAs (previously known as CAs) understand biological assets accounting methods. Like that famous end of year wrap up show on Radio-Cabada, "Bye Bye" CSE (Canadian, also known as Cannabis, Stock Exchange).

Housing Market: the housing market will continue to be propped up by foreign buyers and will continue to be unrecognized by the various real estate boards and media. These boards will continue to paint a rosy picture regardless of whether interest rates increase, pause or decrease. Lacking any restrictions on foreign buyers other than a meaningless tax in some jurisdictions, Canada's own "imported real estate inflation" (yup, we brought this on ourselves) will charge on with only itself to blame. Good for those already an owner, bad news if one of those early in career looking for something new in a high rise tower with a chic pool and gym setting (and the monthly $400 to $700 in condo fees that go along with it...yes on top of the mortgage).  Areas like Kelowna are seeing more rental only buildings being thrown up; however, not that popular yet in the main three - Toronto, Montreal and Vancouver.

Election October 2019: in a realistically only two party system, the NDP will hopefully be completely disregarded this election lacking leadership and a leader that does not even have a seat in the House of Commons while focus will rightly be on the two governing and opposition parties. As the Liberals have moved from their center ice position into left wing, the NDP are looking for a spot on the forward line but may be relegated to the second line...or become a healthy scratch for election night. As they have been, and will be, chased out provincially from places like Alberta or are barely able to form a government as in BC, things are not looking good for Jag and his orange cohorts.  As such, watch for Justin to squeeze them out with all sorts of leftist extremist promises to win as many voters as he can while losing out other liberal strongholds after his gaffe filled term as well as to compensate for no votes in Alberta. Can the Conservatives garner the votes needed based on Justin's incompetent sunny ways or need to switch up right-wing for center ice on the top line? Unfortunately, despite Trudeau's bungled trips abroad, nonsensical remarks, out of touch trust fund views, holier than thou, blane everything on Harper, anti-American persona...Canadian voter apathy is also part of the equation. I'll prepare for the worst and hope for the best. Liberal minority win.

Deficit - Canada: Trudeau and his merry band of taxing and spending Liberals has helped to rack up federal debt to an all time high of C$671.25 Billion. Yes, that one trillion number is in our sites. With no mention of how this will be paid down or by when is more than concerning. The Liberals' solution - throw out C$20 Billion annual deficits as more fuel to the fire. By the end of 2019, which is an election year, it is plausible this total debt picture starts with a 7 as in C$700 Billion.

Deficit - Ontario: after the Ontario provincial Liberals received blow after blow by legislative and financial watchdogs let's believe for a minute Dougie Ford will be the new hope to turn things around after a whirlwind 100 days in office. Thanks to the McGuinty and Wynne run Liberals, Ontario's debt is currently at C$323.8 Billion. THIS IS IN ADDITION TO THE FEDERAL DEFICIT OF C$671.25! As an aside, this equates to an estimated C$44,000 per man, woman and child (and whatever other inclusive genders need to be mentioned here)!!! After an estimated C$12 Billion deficit planned under the now ousted (thankfully) Wynne government, Dougie had better reduce this number after inheriting this mess from the previous Liberal math wizards.  Prediction for Year 1, C$331 Billion debt,  C$8.0 Billion deficit.

Recession or Not? When the equity capital markets rise this high from a shot in the arm from the world's largest economy (yes that was Trump), it's hard to avoid asking when will this party end? The spillover has also been felt in Canada. The risks of a recession here in Canada are: further and mistimed interest rate increases, cannabis roll over, the real unemployment figures are made available, potential larger Liberal  deficits, botched trade deal(s), further industry pull out like GM, more Saudi oil pumped to run our Western Canadian Select producers (and USA shale producers) into the ground, no progress on Canada's Trans Mountain pipeline, a botched infrastructure program (or just another broken promise), stifling carbon taxes and extra levels of approvals for large projects...many risks. Although easy to predict an upcoming recession on the factors, timing of these compounding effects may take longer than a year.  Recession in 2020.

Western Canadian Select (WCS): your author is by no means an oil expert but based on what is in the news, it is not very rosy. Obviously no pipeline in the near term, not even the one Canadians now own. So, discounts will continue to be built into the Canadian oil price as the USA refiners can do that (Canada cannot transport it so the USA has the upper hand and at what price they'll take it). Assuming tariff and trade words settle down and come to a conclusion, the Saudis will act more royal and the oil market will settle out.  WTI back up to US$70/bl by year end and discounted WCS at C$30 to C$40/bl.

Wild cards: Conservative win in 2019 after Canadians finally review the record, accomplishments and policies of the Mr. Dressup government, Loonie stays the same (we can only hope!), no extra Reconciliation holiday as it will be an election (broken) promise, McKenna keeps her Twitter account on mute

A Pittance! Liberals Have the Gall to Offer a Measly $1.6 Billion to Alberta's Oil Producing Industry....In the Form of Loans!?!?

Just when you think this government could not act any more childish, mean spirited (in a political sense) or just plain idiotic, Justin and his band of reality challenged cohorts never cease to amaze.

As if this $1.6B is going to plug any holes in the already bursting dam (of capital fleeing from an important industry in Canada).  Just a sign of the times...and "sunny ways".

As an aside, and adding insult to injury, MP Sohi is the one appointed to look after this file, one of the most important files currently for Canada (Immigration being the other).  It appears he is so over his head with incompetence in this role, that Jim ("Dude where's my...") Carr had to show up to stand next to Sohi as that was Carr's previous role - to help Sohi with the buzz words of the industry he has not learned yet?.

What is  more ironic, Carr is the Minister of Trade Diversification! The Liberals are doing everything possible to REDUCE diversity of trade especially as it pertains to Alberta's oil sands!

https://business.financialpost.com/commodities/energy/what-is-ottawas-energy-loan-program-and-will-it-actually-help-canadas-battered-oilpatch?video_autoplay=true

Infrastructure Promises, Promises: Remember the Campaign and the Setting Up of an Infrastructure Bank? Well, Nothing Done Yet

$35.5 billion tied up and nothing to show for it.  Much like the Liberals track record thus far. 

https://business.financialpost.com/opinion/what-has-trudeaus-infrastructure-bank-achieved-a-recycled-loan-and-millions-in-expenses

Gender Equality? More of Trudeau in Hot Water AND Foot in Mouth Disease

http://nationalpost.com/opinion/colby-cosh-menace-of-the-man-camp-sorting-out-trudeaus-latest-alberta-problem

Bank of Canada Rates Unchanged: Thank The Liberals For Bungling Canada's Energy Industry and its Contribution to Economic Growth That May be “Materially Weaker”

In the USA, the unemployment rate is closer to 4%, and is not complacent about it.  Here in Canada we are supposed to jump for joy at 6%.  The impacts of pipelines lacking is finally resulting in the rose colour coming off economists' and BoC's glasses.

What's that I hear? I think I hear a sigh of relief from real estate agents and mortgage brokers.

https://business.financialpost.com/news/economy/bank-of-canada-holds-interest-rate-at-1-75-per-cent

https://www.bloomberg.com/news/articles/2018-12-04/falling-car-sales-are-latest-sign-of-rate-hikes-hitting-canada?srnd=premium-canada

Aphria: Does White Collar Crime Pay in Canada? Full Quintessential Capital Report

There is a reason why these early stage companies are not listed in the USA. The SEC would be chasing cats with stories like these that are allowed to exist in Canada.

Also the media has chosen to ignore the details of insiders ownerships of target companies when Aphria acquired them and only refer to a negative report as Quintessential is a short seller.

http://www.qcmfunds.com/aa/

http://www.qcmfunds.com/wp-content/uploads/Quintessential_Aphria_Report_20181203.pdf

$50 Million: If Trump's Tweets are Erratic (and Ego Driven), Then Trudeau's Tweets are Reckless, Infuriating (And Ego Driven)

Foreign aid and foreign policy through a phone ? Meanwhile an auto industry in Oshawa looks on...

"...The timing was inopportune from Trudeau’s point of view. In lieu of economic stress in Oshawa and Alberta, where the government offered little more than thoughts and prayers, the Prime Minister had apparently opened the government’s cheque-book to send money abroad..."

http://nationalpost.com/opinion/john-ivison-trudeaus-tweeting-with-the-stars-a-reminder-of-the-risky-side-of-political-theatre

Another Week And Again No Shortage of Liberal Dumbassery Material - Alberta Oil, Pipelines, Deficits, GM Pulling Out After USMCA and now Corrupt Liberal MP Playing the (Gambling, Addiction) Victim Card

As they say on Facebook...."Seriously, I can't make this stuff up!"

Too much to individually post and comment, so here they are...and growing.

Fairly brazen twitter handle, Raj @rajliberal .

https://nationalpost.com/opinion/andrew-coyne-fall-economic-statement?video_autoplay=true

https://nationalpost.com/news/politics/braid-liberal-no-oil-plan-for-alberta-is-working-just-a-little-early/wcm/3de8ad98-046c-462e-bcbf-35518d294ec9

https://business.financialpost.com/investing/oil-industry-cant-sustain-record-low-prices-and-the-only-solution-may-be-government-intervention?video_autoplay=true#comments-area

https://nationalpost.com/news/politics/rcmp-called-to-probe-tale-of-two-liberal-mps-a-suburban-overpass-trip-to-india-and-multimillion-dollar-land-deal