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Inside the Market Warren Buffett: Bubbles inevitable because ‘the guy next door, who they know is dumber than they are, is getting rich and they aren’t’

A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

I have stated my belief previously that even though cannabis-related revenue is set to explode, stocks in the industry are overstating future profit growth. I don’t think the true believers using a ‘growth at any price’ investment strategy are listening, however,

“'You might argue our valuations are a little bit ahead of our skis,' said Paul Rosen, chief executive officer of Tidal Royalty Corp., which finances weed companies … ‘It’s still not a grown-up sector by a lot of portfolio managers’ standards,’ said Bruce Campbell, founder of StoneCastle Investment Management Inc., which is launching a cannabis-focused mutual fund. ‘The valuations are off the charts if you use any type of typical metrics, so that scares a lot of institutions.’”

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The current situation reminds me a lot of the late 1990s. Investors were right that technology would eventually revolutionize everything, but they paid too much for the stocks.

“'The valuations are off the charts': Canadian pot stocks might be too high” - BNN Bloomberg

Related: “Man loses 96% of his wealth trading crypto” – CNN Money

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The quote is jarring, but Uncle Warren likely doesn’t mean that another 2008 is inevitable in the near term,

“'Well there will be [another financial crisis] sometime,' Buffett said in an interview for CNBC … ‘People start being interested in something because it’s going up, not because they understand it or anything else. But the guy next door, who they know is dumber than they are, is getting rich and they aren’t,” he said. “And their spouse is saying can’t you figure it out too? It is so contagious. So that’s a permanent part of the system.’”

“Warren Buffett on why bubbles happen: People see neighbors 'dumber than they are' getting rich” – CNBC

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“Mark Carney: No one can rule out another financial crisis” – BBC (video)

“Ray Dalio, the billionaire founder of the world's biggest hedge fund, says that the next major financial crisis is only two years away.” – CNBC

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Energy-focused Canadian fund manager Eric Nuttal’s missives are always entertaining,

“'Will the most soul sucking, emotionally draining, gut wrenching, never ending stress-inducing trade in history be worth it in the end?' … Current valuations do not make sense to us … it is not normal to be able to purchase a business, using current oil prices, at 3.6x its enterprise value to cash flow … In recent weeks, despite very strong underlying product demand as exemplified by the highest US refinery utilization for this time of year since 2001, US crude oil inventories have been building primarily due to a drop off in exports … It is only a matter of time until the market realizes that the oil market is heading towards a multiyear chronic undersupply. At that point stocks that have lagged the commodity by over 50% can easily double”

“@SBarlow_ROB Nuttal's emails on oil patch always entertaining, "Will the most soul sucking, stress-inducing oil trade in history be worth it? " – (research excerpt) Twitter

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“Oil nears $80 a barrel as concern grows over global supply” – Reuters

“OPEC sees global oil supply as robust, demand growth revised a touch lower” – CNBC

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Tweet of the Day:

Diversion: “This robot will draw and erase anything on your walls” – CNBC

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