The House of Representatives passed the SAFE Banking Act on Wednesday, pushing us closer than ever to full Federal legalization
Just two days ago, the House of Representatives approved the first standalone marijuana reform bill in history.
Regular Digest readers will recognize the name of the legislation — the Secure and Fair Enforcement (SAFE) Banking Act. Its purpose is to shield banks that take on marijuana business clients from being penalized by federal regulators.
You see, the majority of marijuana companies have been forced to operate on a largely cash-only basis. This is because banks fear federal reprisal for taking them on as clients.
Wednesday’s vote is a huge step toward permanently changing this.
While the House has approved marijuana amendments in the past, they’ve had to be renewed annually. This is the first standalone reform bill that, if passed by the Senate next, then signed by the president, would be permanently codified into law. Some early reports suggest Senate approval is likely.
***This is a major domino to tip, and it points toward an eventuality we’ve been highlighting in the Digest for months …
Federal marijuana legalization is coming.
On that note, here’s Rep. Ed Perlmutter (D-CO), the sponsor of the bill:
If someone wants to oppose the legalization of marijuana, that’s their prerogative, but American voters have spoken and continue to speak and the fact is you can’t put the genie back in the bottle. Prohibition is over.
Matt McCall is our resident marijuana expert. He’s been tracking the marijuana sector and making his readers huge gains in the space since 2014, long before it was popular.
This past Sunday, Matt told his subscribers about this historic vote. After giving them the details of the (then) upcoming vote, he wrote:
The SAFE Banking Act is going to pass at some point.
… it’s a big deal. It will open the door to the next wave of marijuana profits …
It would also pave the way for a lot more cannabis stocks to trade on the major stock exchanges. Most marijuana companies cannot yet trade on the New York Stock Exchange (NYSE) or Nasdaq, the two biggest exchanges in the country. They will not approve for trading any company that touches the plant or engages in any activity that is deemed illegal at the federal level.
The ability for stocks to uplist to the NYSE or Nasdaq would be yet another game-changer. When these tiny pot companies “jump” to a bigger exchange, it’s a sign that the company has arrived. Big investment houses, mutual funds, pension funds, brokerage houses — all the big boys — are free to invest billions.
***A new marijuana strategy that combines growth and income
These “jumper” stocks, as Matt calls them, present major long-term investment opportunities for marijuana investors. That’s why Matt has been recommending them to subscribers for months.
But there’s another reason why Matt likes them — instant cash-flow in your pocket …
This past Tuesday, Matt held an event detailing a new way for investors to generate cash from the marijuana sector. He calls it Cannabis Cash Weekly.
As Matt put it, the strategy “helps investors ride the wealth-creating tsunami of marijuana legalization … and earn huge paychecks as you do it.”
From Matt:
… thanks to a once-in-a-decade anomaly in the business world, there’s currently an investment offering 100%+ annual yields.
That’s not a joke and it’s no typo.
Believe me. I know it sounds crazy. I wouldn’t believe it if I didn’t see it with my own eyes and earn huge yields with my own money.
Again: 100% annual yields.
***Being transparent, I’m skeptical when I see big claims like this
After all, when it comes to the stock market, big claims are easy — follow-through is the hard part. So, I wanted to know what Matt’s new strategy really is, as well as whether “100% yields” were realistic or not.
After some digging, here’s what’s going on …
Matt’s new strategy involves a type of option known as a “covered call.” If you’re less familiar with options, a covered call is the most conservative type of option.
With a covered call, you own the underlying stock. And then you sell a call option to another investor. This call option gives the second investor the right to buy your stock if it climbs to a certain agreed-upon market price within a certain agreed-upon amount of time.
In exchange for this “deal,” the investor pays you cash up-front — and you keep this cash regardless of whether you actually sell your shares to him or not.
So, let’s see how this might play out …
In situation 1, if you sell a covered call and your stock doesn’t rise much — it doesn’t reach your agreed-upon “sell” price within the specific time-frame. In this case, you just continue holding your stock — except you walk away with the cash the investor paid you. You’re free to sell another covered call on those same shares you own, generating more income.
In situation 2, the stock does climb high enough to reach the agreed-upon “sell” price. In this case, you sell your stock. But here, note that you generate income in two ways: one, any gains between your purchase price when you bought the stock and your sell price to this other investor, and; two, the cash the investor paid you up-front to agree to this deal.
Here’s how Matt describes it:
At the end of the day, when you combine two of my favorite strategies — growth investing and covered calls — you get a system that can be very profitable without taking on a lot of risk.
***So far, so good, but what about the “100%” yield part?
Matt actually addressed this in a note to readers on Wednesday. From Matt:
If you caught my on-air demonstration (click here for the recording), you saw how we made $420 from Aurora Cannabis (ACB). That’s an instant 5% yield … with only one trade. If you do this every week — as we will be — then that adds up pretty quickly.
Now, “5%” is certainly not “100%+” so what’s the difference?
Well, the 5% that Matt banked on Aurora was a short-term trade. When you annualize it, meaning “what would this trade return to me if I repeated it for a full year?” that’s when we get to the 100%+ yields.
Let’s look at an example …
Matt sent subscribers his first live-trade recommendation to his new Cannabis Cash Weekly subscribers on Wednesday. It involves the biggest cannabis company in the world, Canopy Growth (CGC).
Given the way Matt has structured it, below are the possible outcomes. Please note I’ve edited out some of the specifics of the trade. This is done as a safety precaution. Since we won’t be monitoring this trade in the Digest, I wouldn’t want any non-subscribers to place it and then be left unclear on how to proceed.
From Matt:
The estimated gain on the trade in two days will be 2.3% with an annualized gain of 419.8%.
Outcome #1: If CGC closes above (our strike price) on (our chosen expiration date), the stock will be called away (sold) at (our strike price). The net gain is 2.3% or an annualized gain of 419%.
Outcome #2: If CGC closes (on our chosen expiration date) below (our strike price) the stock will remain in your portfolio, and you will keep the cash from selling the option as well. The next step would be to sell another covered call on the stock next week.
If Matt was able to repeat this exact trade over the course of the entire year, then his total yearly return would obviously be 419.8%. But we have to account for Outcome #2 above, which is that the stock isn’t called away. This would mean holding onto the stock longer, while selling more calls on it.
Obviously, we can’t calculate unknowns, but the possibility of Outcome #2 happening means we should water down that 419.8% return. Of course, Matt has done this. From what I read from Matt leading up to his event, he referenced “100%” yield. So, based on what I’ve seen, this looks realistic.
By the way, as I write Friday morning, Matt and his subscribers are on track to lock in their gains on Canopy when the trade expires at the end of today’s trading session. In other words, Canopy is currently trading above the chosen strike price, so it’s looking like they’re going to walk away with that 419.8% annualized return.
If you want more details on Matt’s strategy, you can click here for the playback of Tuesday’s Cannabis Cash Weekly.
In any case, this historic vote from the House of Representatives is pointing toward huge gains for marijuana investors. We’ll continue to keep you up to speed here in the Digest.
Have a good evening,
Jeff Remsburg
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