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Alan Greenspan to investors: ‘Run for cover’

Alan Greenspan says the party’s over on Wall Street.The former Federal Reserve chairman who famously warned more than two decades ago about “irrational exuberance” in the stock market doesn’t see equity prices going any higher than they are now.

“It would be very surprising to see it sort of stabilize here, and then take off,” Greenspan said in an interview with CNN anchor Julia Chatterley.

He added that markets could still go up further — but warned investors that the correction would be painful: “At the end of that run, run for cover.”

Markets have staggered in recent weeks, with spooked investors selling over mixed messages coming from the White House concerning the status of trade negotiations with China and growing fears of a global economic slowdown.

The jitters come as the Federal Reserve’s interest-rate setting committee prepares to meet Tuesday and Wednesday. They’re expected to raise rates for the fourth time this year — though investors will also be combing for clues on their plans for 2019. Minutes from the Fed’s last meeting in November signaled policymakers want to take a more flexible approach next year adding to investor anxiety.

On Monday, the S&P 500 closed the trading day at its lowest level since October 2017, while the Dow Jones Industrial Average plummeted more than 600 points at one point in the day.”

The volatility is a function of how we speak, think and feel — and it’s variable,” he said. “Unless you can somehow radically change human nature and how we respond, this is what you’ll always get and have been getting. You have to count on it, if you’re going to understand how the market functions.”

President Donald Trump has in recent weeks taken repeated aim at current Fed chairman Jerome Powell, a former investment banker appointed last year by Trump himself. The President, a close market-watcher who has staked his presidency on the state of the economy, has accused Powell of trying to undercut him politically by slowing the economy down.

He blamed the Fed for the market rout in October, calling the Fed “out of control” and suggesting Powell seemed to enjoy raising rates. He also later called the Fed a “much bigger problem than China,” referring to a trade war between the two countries.

One White House official said that Trump continues to privately express anxiety about the markets, even as he publicly insists the economy is strong.Before markets opened on Tuesday, Trump tweeted yet another fresh warning to Fed officials to slow down their rate hike plans, while encouraging policy makers to read a Wall Street Journal editorial “before they make another mistake.”

I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!— Donald J. Trump (@realDonaldTrump) December 18, 2018

“Don’t let the market become any more illiquid than it already is,” Trump tweeted. “Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!”

It was the second day in a row Trump tweeted on the Fed’s upcoming meeting. On Monday, Trump tweeted it was “incredible” that the Fed was considering a rate hike despite low inflation and a strong dollar.

But Greenspan, who was first appointed to the Fed by President Ronald Reagan and became the longest-serving chairman, remaining in his role into the George W. Bush administration, said a key driving factor in the market’s volatility has been the “pronounced rise in real long-term interest rates.”

The former chairman also warned that the United States may be poised for a period of stagflation, “a toxic mix” when the economy suffers from high inflation and high unemployment. The last time the country experienced such an episode was in the 1970s and early 1980s.

“How long it lasts or how big it gets, it’s too soon to tell,” said Greenspan. “We’ll know it when we get on top of it.”

Other economists, however, have expressed concerns about the risk of raising rates now, even at the risk of creating the impression that the President had cowed his own policymakers — whose independence from political pressure is intended to reassure markets that their decisions are free of political concerns.

“I’m in the peculiar position of thinking the Fed should not raise rates, but it should not listen to the President, which is a hard position,” Nobel Prize-winning economist Paul Krugman said Monday on CNN’s Quest Means Business. “There’s a pretty good case for not raising rates now. But to not raise rates in this beating would look like they’re allowing themselves to be bullied.”

Greenspan, however, dismissed the idea that the Fed might cave to political pressure by the President.

“I’ve seen no evidence of that,” said Greenspan, who said during his tenure he figuratively wore “ear muffs myself.” Adding he never recalled a time when someone had wished he had raised rates.

“We listen — sometimes respectfully, sometimes not,” he said. “But do we change policy? ‘No.'”


China to mark economic miracle that pulled 700 million people out of poverty

China has pledged more economic reforms to push growth higher and help offset any impact from the US trade conflict. It comes as the world’s second-largest economy marks the 40th anniversary of “reform and opening up” this week.

Statistics show that more than 700 million Chinese people have shaken off poverty since Beijing started its program of economic reforms four decades ago. The figure accounts for over 70 percent of global poverty reduction during that period.

The first wave of reform, which lasted from 1978 to 1989, was characterized by agricultural reform and revival of the private sector. The second wave of reform (from 1992 to 2012) resulted in the legalization of the market economy, China’s accession to the WTO, and a booming private sector.

China’s record in poverty reduction since reform and opening up is without parallel in human history, according to Wang Yiwei, professor of the School of International Studies at Renmin University.

“Between 1978 and 2017, China’s economy expanded at an annual average 9.5 percent growth rate, increasing in size almost 35 times,” he told Xinhua News.

The total expansion of China’s economy over a 39 year period was almost three times as much as Japan’s, Ross noted, adding that “No other economy commencing sustained rapid economic growth even remotely approaches the 22.3 percent of the world’s population as China had in 1978 at the beginning of reform and opening up.”

Experts, including those from the Chinese Commerce Ministry, say Beijing should stick to the reform and opening up policy if it wants to resolve trade tensions with the United States.

“Over the decades, our thoughts on reform and opening up should have been updated. The economic growth and better standards of living [achieved] should have provided very solid evidence [of the need] to continue with reforms and opening up,” said He Ning, a former Chinese Commerce Ministry official dealing with US issues.

The trade war with the US has undermined investor confidence in China and clouded growth prospects. China’s growth has slowed in the third quarter of this year to its lowest in a decade and is expected to continue slowing down in the fourth quarter and the first half of 2019.

Authorities, who met last week, are aiming to focus on the “powerful home market” to drive growth through trade turmoil. They plan to accelerate economic reform and push forward with “all-around opening-up,” according to Xinhua News report.

It pointed out that in 2019 Beijing aims to control financial risks, curb pollution and further reduce poverty. The government will try to keep economic growth within a reasonable range and work to stabilize employment, finance, trade, investment and market expectations, the report stated.


PLUS Strengthens Grip on California’s Cannabis Infused Edibles Market

PLUS Strengthens Grip on California’s Cannabis Infused Edibles Market-C.PLUS-Stockhouse news It’s a once-in-a-lifetime opportunity. The high-margin, cannabis-infused edibles market in California is literally up for grabs – all because of a government-mandated industry shake-up earlier this year.

Let me explain.

For consumers, 2018 will go down in history as the year that recreational cannabis became legal in California. But for wholesalers and retailers alike it will also be remembered as the year that state legislators put the vast majority of California’s artisanal cannabis-infused food producers out of business.

The rationale for this was simple: it was all about public safety. Truth be told, the Golden State badly needed to implement a better system for quality control and safety for the mass production of cannabis-infused edibles.

However, most of the state’s hundreds of small-scale operators do not have the technology or expertise to ensure precise dosing and product consistency, which is why most of them have thrown in the towel.

Accordingly, a once highly fragmented marketplace is now being fast consolidated by a handful of sophisticated, large-scale operators. This include the cannabis-infused food industry’s new poster boy – Plus Products (CSE: PLUS).

From a standing start a few financial quarters ago, PLUS has become the best-selling manufacturer of edibles in California’s medicinal and adult-use edibles markets. Indeed, sales of PLUS’ THC and CBD infused core products – gummies – are on an upward trajectory that seems poised to continue to strengthen as more and more Californians turn to infused products for both medical and recreational purposes. More on this in a moment.

Remarkably, the company’s sales are based so far solely on four core candied products. Yet this inaugural product line gives PLUS over 5% market share already in California’s multi-billion-dollar cannabis industry. And an aggressive ongoing corporate expansion is destined to carve out a much bigger segment for PLUS.

In fact, PLUS is not resting on its laurels by offering consumers what they are looking for – gummies that are consistent in quality and also standardized dosing. Key to the products’ appeal is the fact that they are scientifically-formulated to be fast-acting, unlike most other edibles on the market. 

The company is now expanding into other popular, high-margin verticals in the edibles marketplace. To this point, PLUS have acquired Oakland-based Good Co-op Inc., a popular manufacturer of infused baked goods. Notably, the baked goods category accounted for 13% of the overall edibles market in 2018, excluding tinctures, according to BDS Analytics.

Good’s high-quality, low-dose baked goods product and brownies are made without using additives or preservatives and have been featured in Fortune, Vice Magazine and Eater.

Such a strategic acquisition helps further consolidate PLUS’ grip on a fast-growing state-wide infused edibles market.

Company CEO Jake Heimark explains: “This acquisition accelerates our time to market in the baked goods category, and will help solidify the Plus leadership position in edibles. We are committed to becoming the largest edibles brand in all legal jurisdictions…”

The Race to Build a Dominant Brand

The company is fully funded for completion of phase one of its manufacturing growth strategy. This involves expanding from its current production capacity of 16,800 to 40,000 square feet.

This is projected to offer enough capacity to generate around $150M in annual production capacity just for PLUS’s four core gummy products alone. All told, up to 120,000 square feet of manufacturing capacity can be brought online, leading to a maximum output (at least at this one location) of as much as $450M of product.

Such financial projections seem immodest. But not when considering how fast the edibles market is growing in California and how new product safety regulations are dramatically curtailing output among cottage industry manufacturers of infused foods.

Also, branded infused food products derived from concentrates and extractions demonstrate superior long-term pricing durability compared to dried flower cannabis.

The fact that edibles provide a discrete, smoke-free experience has heightened appeal among health-conscious and image-conscious consumers. Accordingly, cannabis-infused foods have so far demonstrated superior pricing durability compared to dried flower cannabis. They are also very popular with retailers. In fact, edibles account for up to 60% of a typical dispensary’s profits.

Image courtesy of PLUS Products Inc. Data source: BDS Analytics GreenEdge™

All told, PLUS is making all the right moves to establish a powerful brand in a new cannabis infused foods industry that has been deconstructed by the state government and is now re-building from the ground up.

Accordingly, the business is now being quickly consolidated by just a few large, well-financed players that promise to dominate the burgeoning marketplace for cannabis-infused foods. And PLUS Products is fast becoming a stand-out performer.

Investors should therefore take note that the company is positioned to have a banner year in 2019 as it consolidates its grip on California’s lucrative, fast-growing market for cannabis-infused edibles. In turn, this reality promises to build considerably more intrinsic value into the company’s share price for the foreseeable future.  

About the Author: Marc Davis has a deep background in the capital markets spanning 30 years, having mostly worked as an analyst and stock market commentator. He is also a longstanding financial journalist. Over the years, his articles have appeared in dozens of digital publications worldwide. They include USA Today, CBS Money Watch, Investors’ Business Daily, the Financial Post, Reuters, National Post, Google News, Barron’s, China Daily, Huffington Post and AOL.


New York Governor Andrew Cuomo Endorses Marijuana Legalization

New York will become the next state to legalize marijuana if Gov. Andrew Cuomo (D) has his way.

The newly reelected governor for the first time explicitly endorsed ending cannabis prohibition on Monday as part of a speech outlining his “top legislative priorities for next year,” which he framed under the banner of “social justice, racial justice and economic justice.”

“The fact is, we have had two criminal justice systems: One for the wealthy and well off and one for everyone else,” Cuomo said in the appearance at the New York City Bar Association. “And that’s going to end.”

“We must also end the needless and unjust criminal convictions and the debilitating criminal stigma and let’s legalize the adult use of recreational marijuana once and for all.”

While Cuomo said in Friday interview that the speech would “get to the meat of the specific legislative issues” and was “not going to be a lot of rhetoric and retrospective,” he did not offer any detail on the provisions he believes a marijuana legalization bill should encompass.

It remains to be seen how the governor feels about issues like cannabis tax rates, businesses licensing structures or whether he believes home cultivation should be allowed.

Nonetheless, the official endorsement of legalization marks the culmination of a significant evolution on cannabis for Cuomo.

As recently as a year ago he called marijuana a “gateway drug.” But 2018 has seen Cuomo’s position on the issue change dramatically, beginning amid an unexpectedly strong primary challenge from Cynthia Nixon, a progressive candidate who ran on a legalization platform.

In August, the governor formed a working group to draft a legalization bill after a state Department of Health report, which he commissioned, found that the benefits of legal cannabis outweigh its potential consequences.

With Democrats taking control of the state Senate in last month’s midterm elections—which Cuomo called “a new political reality” in his speech—advocates believe that marijuana legalization legislation has a good shot of making it to the governor’s desk in 2019.

Also in Monday speech, Cuomo laid out his views on potential action on issues such as health care, education, women’s rights, immigration, gun control and economic policy.


Recession fears are overblown, and stocks will break out to new highs next year

Wall Street angst over a possible recession may be increasing, but one bull refuses to waver.

Federated Investors’ Steve Chiavarone believes there’s nothing on the horizon that suggests the 2018 market corrections will become a massive downturn next year.

Rather, he sees stocks hitting fresh record highs — citing labor market trends, inflation levels, the Treasury yield curve and credit spreads as key factors contributing to a favorable economic and market environment.

“We don’t have any of the early signs of recession. Yet, we have a market where despite 20 percent earnings growth, the P/Es [price-earnings ratios] have fallen 20 percent,” the fund manager said on CNBC’s “Trading Nation” on Friday. “What that tells us is the market is pricing in recession in 2019. We just don’t think that is going to happen.”

Yet, it appears the Street isn’t convinced.

The major indexes ended the week deep in the red, with the Dow plummeting almost 500 points on Friday mainly due to global growth jitters. It’s now off 2.5 percent so far this year.

The S&P 500, which closed at its lowest level since April, is off more than 12 percent from its all-time high of 2940 hit on September 21 and 2.75 percent for 2018.

Fed to ease volatility?

However, relief may be in sight. Chiavarone suggested next week’s Federal Reserve’s policy meeting could help calm the Street and act as a catalyst for a year-end rally — particularly if Chairman Jerome Powell confirms he’s moderating his stance on tightening interest rates.

“We need to get a little bit of clarity on that. If it turns out that it’s just the December hike, and then we’re in pause… I think that’ll provide some comfort to the market,” said Chiavarone.

Plus, he said any solid news on resolving the U.S.-China trade war could also help propel stocks higher. “You’re going to have volatility in the market until we have more clarity on trade,” he added.

Chiavarone’s firm has a 2019 S&P 500 year-end price target of 3100, a number that was originally expected this year. Federated downgraded this year’s target to 2800, following the deep sell-offs gripping the market since October.

“We’ve broken below some key technical supports,” the fund manager said, saying the firm’s holdings were heavily tilted toward stocks. “We were 11 percent overweight equities in the summer. We’re closer to 3 or 4 percent overweight equities now in recognition of that.”

But he viewed the downturn as a temporary situation.

“Our best analysis —as we look at markets and as we look at the economy — is that things are stable,” Chiavarone said. “We’re confident where markets are going to go over the next 12 months.”