Morning Reads

Morning Reads

Todays Open Interest Change




It's that time of the year again when the budding marijuana legalization conversation lights up on the federal level. It's actually been going on for quite sometime, and witnessed some momentum last year with the introduction of the Cannabis Administration and Opportunity Act in the Senate and the Marijuana Opportunity Reinvestment and Expungement Act in the House. While there are still some headwinds to the measures being pitched on Capitol Hill, President Biden did ask the DOJ and HHS in October to "review expeditiously how marijuana is scheduled under federal law."

Backdrop: When state and federal laws conflict, the latter preempts the former as per Article IV of the Constitution. However, the 10th Amendment - as interpreted by the Supreme Court - outlines that the federal government cannot "commandeer the state," meaning it cannot force states to arrest cannabis sellers or users that comply with their own state laws. In turn, states also cannot block the federal government from enforcing their laws either. As a result, federal agents could be dispatched to make arrests within states if there was a will to, and the resources were available, but in recent decades sentiment has turned with regard to weed's place in society. Smoking pot in America is now more popular than cigarettes

Oregon led the effort towards decriminalization in 1973, California kicked off medical marijuana in 1996, and recreational weed even became legal in Colorado and Washington in 2012. As of today, pot is now legal recreationally in nearly half of all U.S. states, though it still remains a Schedule I drug under the Controlled Substances Act of 1970. The illegal classification on the federal level makes it complicated for companies to operate within their own state borders, as many business activities and banks are regulated by federal law, as well as taxes, trademarks, and legal processes like bankruptcy.

Outlook: Despite economic uncertainty and rising inflation, cannabis market research firm BDSA expects legal U.S. cannabis sales to grow 14% to $36.5B by the end of 2023. For investors trying to gain exposure to the sector, check out the latest Seeking Alpha analysis and news on multistate operators like Cresco Labs (OTCQX:CRLBF), Curaleaf (OTCPK:CURLF), Green Thumb Industries (OTCQX:GTBIF) and Trulieve Cannabis (OTCQX:TCNNF). Cannabis-related ETFs also include the AdvisorShares Pure Cannabis ETF (NYSEARCA:YOLO) and funds like the ETFMG Alternative Harvest (NYSEARCA:MJ).

Margin miss

Shares of Tesla (TSLA) fell 7% after the bell on Wednesday after lower pricing and high expenses contributed to a margin miss. The company will continue to prioritize sales growth ahead of profit due to the EV price war and macro challenges in the economy. "This is an extremely important point," Elon Musk said on the earnings call. "We're like laying the groundwork here, and it's better to ship a large number of cars at a lower margin, and subsequently, harvest that margin in the future as we perfect autonomy." He also noted the energy storage business had its best quarter ever, and even managed to pick a fight with Microsoft (MSFT) after the Q1 earnings. (190 comments)

Debt drama

House Speaker Kevin McCarthy has introduced a bill that would raise the $31.4T debt ceiling by $1.5T along with limiting federal spending, which would be enough to avert a default until at least March 31, 2024. The "Limit, Save, Grow Act," which is set to undergo a House vote next week, is estimated to cut budget deficits by $4.5T over the next 10 years, by bringing discretionary spending back to 2022 levels and capping future spending growth at 1% per year for the next decade (COVID funds, student loan forgiveness and energy regulations are also part of the proposal). "President Biden has a choice: come to the table and stop playing partisan political games, or cover his ears, refuse to negotiate and risk bumbling his way into the first default in our nation's history," declared McCarthy. "If Washington wants to spend more it will have to come together and find savings elsewhere just like every single household in America." (101 comments)

Emerging markets

The trophy of the world's most populous nation is changing hands, according to fresh estimates from the U.N., which pegged the population of India at 1.4286B in mid-2023, compared to the 1.4257B of China (and excludes Hong Kong, Macau, Special Administrative Regions and Taiwan). The growth story in India, where half the population is under the age of 30, is already on the radar of emerging market investors, with SA contributor Macrotips Trading pointing to the iShares MSCI India ETF (INDA) for boosting exposure to large- and mid-cap Indian equities. In the short term, India is benefiting from access to discounted Russian oil - which has allowed the economy to grow rapidly with relatively less inflation than others - and in the long term, India is forecast to become a manufacturing alternative to China. Well timed? Tim Cook was in India this week to open Apple's first store and meet with Prime Minister Narendra Modi, as the company aims to build out a consumer base and expand its production footprint. (2 comments)

Today's Markets

In Asia, Japan +0.2%. Hong Kong +0.1%. China -0.1%. India +0.1%.
In Europe, at midday, London -0.2%. Paris -0.5%. Frankfurt -0.9%.
Futures at 6:30, Dow -0.4%. S&P -0.7%. Nasdaq -1%. Crude -1.8% to $77.78. Gold +0.3% to $2012.60. Bitcoin -1.1% to $28,838.
Ten-year Treasury Yield -5 bps to 3.56%

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
10:00 Existing Home Sales
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
12:00 PM Fed's Waller Speaks on Financial Innovation
12:20 PM Fed's Mester Speaks on Economic and Policy Outlook
3:00 PM Fed's Logan gives opening remarks before a Fed Listens Event
5:00 PM Fed's Bostic on regional and national economic conditions
7:45 PM Fed's Harker on economic outlook

Companies reporting earnings today »

What else is happening...

U.S. Supreme Court extends pause on abortion pill curbs until Friday.

Bed Bath (BBBY) moves as traders bet on bankruptcy vs. survival odds.

AT&T (T) earnings preview: Optimism or macro headwinds?

Margin improvement boosts IBM's (IBMfirst-quarter report.

Seagate (STX) to pay $300M penalty for shipping Huawei hard drives.

Job cuts that Disney (DIS) is planning will land at ESPN unit.

Morgan Stanley (MS) earnings beat on strong trading revenue.

Economic activity barely budged - Fed's Beige Book.

Abbott (ABT) sales grow on medical devices amid COVID test slowdown.

Chip watch: ASML falls after earnings, TSMC (TSMoutlook disappoints.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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