Dow Swings More Than 800 Points

On this second-to-last full-length trading day of 2018 (New Year’s Eve, unlike Christmas Eve, will not be closing early Monday), we expected to see some new economic data — specifically Advanced Trade in Goods for November. However, due to the continuing U.S. government shutdown, now nearly a week old, this joins a growing list of data we will not have until the government reopens — likely not until after the start of the new year.

It’s been a crazy final full trading week of 2018, with Thursday trading swinging over 800 points on the Dow — overcoming a 600+ point downslide, and the biggest intra-day swing in a decade — to finish up on the day. Today’s pre-market looks to extend this bid-up into Friday, although these days it pays to keep close attention to these sorts of things.

Consider also that this is all happening without the benefit of big economic news events — such as a new trade agreement with China — or “normal” trading volumes, as many investors spend the holidays out of the office. The first truly “meaningful” market activity won’t likely be with us until the first full week of January, when Q4 earnings reports begin to trickle in.

Harshing Aphria’s Mellow?

More consolidation in the marijuana industry looks to be in the works, with one of the largest Canadian pot producers, Aphria, Inc. (TO:APHA) , now being subjected to a hostile takeover bid by American cannabis firm Green Growth Brands. Currently, Green Growth — owned by the Schottenstein family, which has helmed such successful retail companies over the past 40 years as American Eagle Outfitters (NYSE:AEO) and DSW (NYSE:DSW) — has made a C$11 per share offer for Aphria, or just over $2 billion.

Aphria has already said the offer “significantly undervalues” its company, which operates in arguably the fastest-growing business in the Western hemisphere. APHA shares are currently up more than 12% in today’s pre-market, and the offer represents a 40%+ premium from trading levels earlier this week. A review of the offer had been reportedly underway by the company, but now we see headlines that Aphria has rejected the offer.

We don’t expect to see the last of this. Green Growth, with its significant retail experience, sees the U.S. market for cannabis only going up from here. Legal marijuana grew 33% from 2016 to 2017, according to Cannabis Business Plans, and as of our latest mid-term election cycle, we now have 32 states which have legalized medical use of cannabinoid products, including CBD — considered a wellness ingredient that does not include the intoxicating effects normally associated with marijuana use.

Ten states plus Washington DC have now legalized recreational cannabis use, which is a number that looks to escalate in 2019 and beyond. Recognizing how well the taxation of the still Schedule 1-classified “narcotic” (a clearly outdated terminology) on the federal level has served states like Colorado and California — two early adopters of the drug — cannabis’ benefits now appear to far outweigh the problems associated with it.

Not that this is anything our Founding Fathers didn’t already know: George Washington and Thomas Jefferson freely grew hemp on their farms in Virginia. In fact, it didn’t become illegal until the Marijuana Tax Act of 1937 banned the substance — four years after prohibition of alcohol was deemed unconstitutional.