This article seeks to explain all the news, details and updates on the current cannabis market. Below are some topics for those of you who are contemplating investing in the marijuana index. Also there are projections and analytical studies that have been done recently to better understand the market as a whole. There are also tips you may want to adopt when trying to find the best ways to invest in marijuana stocks.
Federal Marijuana Legalization News
Before you get all antsy and excited, let’s take a moment to review the current status of where the federal government stands on marijuana. In case you didn’t know, AG Jeff Sessions on January 4th 2018, rescinded the Obama-era memo, that allowed states to decide for themselves to legalize the billion dollar plant.
In 2016, then an Alabamaa senator, urged congress to acknowledge the drug as dangerous. Several U.S attorneys however, stated that they don’t plan to interfere with states that go legal. There are other officials who agree with, or stand with Attorney General Jeff Sessions. One would be, the U.S Attorney of Massachusetts who isn’t on board as of now, eventhough his state is planning to legalize adult use later on in 2018.
When Sessions sent the memo and made his stance on federal legalization of cannabis, he sent the marijuana index plummeting. Only for a short period of time, stocks took a hit, though it did maybe scare some people. A lot of investors steered away for now, until the U.S can get a plan together on the matter.
Anti-legalization groups have been praising Sessions since the news broke. On the back end of that, there have been as many as 20 states that wrote to congressional leaders, seeking expansion’s of banking options for businesses in the legal marijuana trade. The emotions are mixed, some officials have stated, Sessions policy on cannabis is a direct challenge to federalism. They believe the prohibition evokes no sense of liberty, or no sense of what people really want. Many people, including military personnel believe its a better alternative than Opiates. Other officials see it as an attack on voting majorities who voted to legalize. Either way, right now everything is sort of a blur.
Senator of Colorado, Cory Gardener did’t support recreational use 5 yrs ago, but is now defending the billion dollar industry. I think the fact that marijuana brings in over a billion dollars a year alone to his state, played a part in changing his outlook on it. Their may be a congressional prohibition shutdown looming in the near future. With the country split on the route it should take, it could get nasty.
Some congressmen, such as Virginia Republican, Tom Garrett, says it could move the country fundamentally, and he also introduced bill SR 1227. Which could remove marijuana out of the Contrrol Substance Act completely. According to a 2017 Quinnipiac Poll, 94% of Americans support medical marijuana use as prescribed by a doctor. Many Republicans are staying away from the marijuana prohibition, simply because in alot of their states, running on anti-marijuana campaigns, is not a smart move.
Even deep southern states like Georgia & Alabama (ROLL TIDE!!), are somewhat turning over a new leaf on the matter. In 2015, GA Governor Nathan Deal, signs a law that legalized the use of cannabis extracts for a handful of childhood illnesses. It includes the relief of epileptic seizures. The next year, Alabama passed Leni’s Law, which decriminalized the drug for limited purposes. Swinging back west across the Mississippi River, A city located in Texas, called Schulenburg will be a newly-licensed farm and dispensary. It will begin selling low-THC compounds to consumers.
Vermont actually became the first state to legalize marijuana through legislature. The bill was signed by Gov. Phil Scott, allowing for possession of up to an ounce, as well as two mature plants and four immature plants. Recently, New York Governor, Andrew Cuomo announced his plans to study a regulated marijuana program in New York State. The study will look at the health, economic and criminal justice effects of legalizing marijuana. It will also look at how legalization in neighboring states will affect New York.
New York has Compassionate Care Act in place, which Cuomo signed into law in July 2014. It established a marijuana program for New York. In November 2017, the governor signed legislation allowing medical marijuana for post-traumatic stress disorder. New York is showing proof of a future full endeavor into the cannabis industry, California already staking their footprint, you can probably bet the next most popular state of New York will follow suit.
Nine states so far have legalize adult use, the following includes, (as of date):
- Washington, D.C
- Vermont (July 1st)
A report revealed by the Drug Policy Alliance, along with other financial analysts, stated that by 2026 they expect an industry value as high as $50 billion dollars. As early as 2020, the industry could grow to a value of 20 billion dollars. Just think about the possibilities you have, if you start by doing your homework to gain that extra niche, for when the market takes off.
Taking a look at the numbers so far, you will see why the projection of a fifty billion industry is possible. Colorado has now collected over $500 million in taxes and fees from legal marijuana, since the retail sales started in 2014. Between the year of 2016 & 2017, Washington collected $80 million in tax revenue, Oregon brought in $75 million. Just think, there are more people in New York than all three of those states combined. An official study taken in 2013, found that a potential tax revenue for the state could exceed $400 million if adult use was legalized in New York.
The legal market in New Jersey, is projected to reach a possible value of $1.2 billion, and the state expects a $300 million dollar tax revenue per year spending by consumers in New Jersey, Delaware, Pennsylvania and New York, according to reporting by the DPA. The problems New York may have, if they don’t legalize, is that they become somewhat of a barrier state. They would resemble Customs or Boader Patrol, because they would almost literally have to inspect every car that came through from those legalized states into New York, to see if they are carrying cannabis.
New York is notorious for it’s heavy-handed enforcement on cannabis. It’s potentially the capital of cannabis arrest in the entire country. A 2016 DPA conducted report, found 62% of New Yorkers support the legalization of cannabis. With all the support from Americans and Government Officials, how will AG Sessions and others who stand with him respond next.
With all the above support and non-support, their are still some key factors to include when discussing the marijuana industry.
- Controlled Substance Act (est. 1970)- list marijuana as a schedule 1 drug, although alcohol and tobacco isn’t on the list, since 1981 bills have been introduced to reclassify marijuana to a schedule 2. That would eliminate it from the Controlled Substance list altogether, none have ever made it out of the committee.
- D.E.A- Has rejected every petition to change marijuana’s classification.
- State Laws- commonly divided into three groups: medical use, (de) criminalizatiom, legalization. State medical marijuana laws vary greatly, but they all recognize the therapeutic effects of cannabis and cannabinoids. State’s have sovereign powers, but they are not equals of the federal government. The federal authority to regulate marijuana is based on the Commerce Clause. The Supremacy Clause gives the federal government primacy over the states.
- Insurance Companies- They don’t know whether they violate federal law, if they provide state regulated medical marijuana coverage, or pay claims to stolen or damaged marijuana
- Employers/Employees- Are uncertain on how state authorized marijuana use can impact hiring or firing decisions.
- Military Veterans- Concerned that their participation in medical marijuana programs will impact their benefits.
- Business Owners- Risk forfeiture of their profits and assets, and may lose banking services that were open to them in the Obama administration.
Their are many risks associated with this industry, but granted, it is still promising. With all the support, Congress must act fast, or AG Jeff Sessions could absolutely nullify the state marijuana laws, through rigorous federal enforcement.
Canada Marijuana Legalization Coming Summer 2018
For those of you who are skeptical about the U.S cannabis market, On July 1, 2018, Canada will be the second country, behind Uruguay to legalize. That means no confusion on state and federal laws. Officials have a clear understanding of the rules and regulations for the most part. When comparing the U.S cannabis industry vs. Canada’s, you would have to agree, that Canada does it just a little bit better. Greatly due to the alignment of consumers, government officials and Canadians as a whole.
We see here in the U.S, that the emotions are mixed leaving alot of people, including business owners, concerned and confused. Just like the U.S, Canada has faired well in the marijuana industry. They spent an estimated $5.7 billion dollars on marijuana in 2017. Canada is now the home of the world’s largest marijuana company. With the closing of a deal between two well known Canadian companies, Aurora Cannabis and CanniMed Therapeutics. With Aurora Cannabis purchasing the smaller company for $1.1 billion dollars, by market value, it forms the largest cannabis company in the world. Canada is already looking to expand to the European market, along with the U.S.
Canadian marijuana companies have been searching for workers ahead of legalization. They are recruiting everyone from growing and production, to sales and marketing. Companies are attracting business executives, tech wizards and marketing masters. Salaries are said to be comparable to what similar industries offer. A general growing position would make around $50,000 per year. While a director of production could expect to make around $100,000.
Canadian marijuana consumers, said they are likely willing to pay more for regulated marijuana. With all the hype around the legalization date set for July 1st, police departments are scrambling to prepare. The Canadian Federal Government plans to spend as much as $80 million dollars to train at least 750 officers, to weed out the high drivers. They will be trained using observational tests. This particular method leaves doubt and concern within the community. Canadians wonder how reliable the method will actually be. They think it may lead to many unjustifiable arrests/detains and alot of human errors.
Officials are dealt with the burden of changing zoning bylaws, and cities are trying to figure out what the legalization will mean for them going forward. Eventhough the news is good for most consumers and cannabis business owners, there is still some key elements that need to be ironed out for sure.
Knowing this, Canada as a whole, plans to spend $1 million dollars to study recreational marijuana. There will be 14 research projects at universities and hospitals around the country, that will recieve a $100,000 dollars from the Canadian Institute of Health Research, to study the effects of legalization.
Canada plans to secure the cannabis industry through joint dealings and transparency. Honestly, Canada is light years ahead of the U.S when it comes to the handling of cannabis. If you, like many others including myself, aren’t really thrilled on how the U.S is handling things in the industry, get your ducks in a row and be prepared for the opening of the Canadian Marijuana Market. I mean, the support is already there as a country, why not spend more time in the Canadian Stock Exchange, at least they don’t have an Attorney General stating, “Good people don’t smoke pot”, that henders them from the process.
Marijuana Exchange Traded Funds On The Rise
This is what every seasoned investor has been waiting on to hit the cannabis market. Marijuana ETF’S are funds you might want dig into, for not only the possible financial gain, but the lower risk that’s involved. You see, ETF’S usually hold a portfolio of the top marijuana companies in the market. Also, ETF’S usually pay monthly or quarterly dividends, so you can possibly get a bang for your buck when investing in these funds.
One of the more impressive news stories for exchange traded funds, has been the 2017 established company, ETFMG Alternative Harvest ETF(NYSE:MJX). Who came on the scene just days before California open stores for legal sales of recreational marijuana. Data shows investors like the investable marijuana theme. Some market observers expect the theme will remain steady. MJX’s underlying index covers businesses that are legally engaged in activities related to cannabis, however the benchmark does not include those that directly cultivate, produce or distribute marijuana or products derived from marijuana. Unless those activities become legal under federal or state law, MJX will stick to there current strategy.
ArcView Market Research, projects the compounded annual growth rate will be faster than cable tv in the 1990s’. The North American cannabis market is expected to grow from $6.7 billion in 2016 to a staggering $22.6 billion by 2021, which will gain a CAGR of 27%.
Investors have added nearly $294 million to MJX, since the beginning of 2018! MJXs’ company weight in their holdings include:
- Canada (41%)
- U,S (34%)
- UK (9%)
- Hong Kong (3%)
- Italy (3%)
- Denmark (3%)
- Japan (3%)
- Sweden (3%)
Sector weights include:
- Health Care (50%)
- Consumer Staples (31%)
- Materials (9%)
- Stocks (7%)
- Industrials (3%)
There is plenty other companies who are hitting the market to get a piece of the billion dollar pie. The U.S Marijuana Index, which tracks 15 of the largest marijuana stocks in the U.S, posted strong gains over the last week or so with a 5.5% increase.
So many companies are taking advantage of this upcoming market.
Top Cannabis Stocks
Well, well, well. We have come to a new day of age people. The world is somewhat transitioning again, what side of the transition will you be on? Now, before we get into the nitty gritty of some of the current and possible top cannabis companies in the world, let’s take a dig into innovation.
There is cycle that usually happens within the market and with the economy as a whole. For instance, when dealing in terms of the stock market, sometimes a companys’ share price drops for an extended period of time. At one time the price could have been $25.47 a share, but over the last 4 months the price has dropped at least $2 dollars per month. By the end of the 4th month, the share price is now $19.47, roughly. Some investors would usually buy these stocks during these times, because of the benefit of purchasing them at a cheaper price. They have enough confidence in the company to know that, eventually they will bounce back and they would now have shares of stock that are worth more than when they originally bought them. The investor now has the option to sell them for a profit, or continue to hold them, to see how high the price will go, the higher the price the more the investor earns if they sell. Investors call this strategy, “Buying the Dip”. The stock price takes a dip, you buy in low, the stock price rises again, you sell. Money in the bank!
Granted, the stock market is directly tied to the economy, I do mean directly! Trends, daily news, company announcements, social media, amount of money spent by consumers, business deals, new tv show premieres, bills that were passed, legislation that was signed. All these things can, and do affect the stock market.
Now, with all these things that can possibly affect the market, imagine, if you don’t already know, what the internet did, not only for the economy, but for the stock market. Every 8-12 years their is usually some kind of new business/economic innovation that takes place. For example, when talking about this “new” emerging economy that’s brewing or shall I say, already here. In 1995, we had what is globally known today, as the Internet. When the internet was introduced, people did all types of speculating and questioning. Some even made fun of the so called “network of information”. They thought it wouldn’t be successful. What do you think?…..Exactly!
Then in 2007, along with Myspace(R.I.P), there came FB. Mark Zuckerberg, started with a small company, and then grew it to a multi billion dollar corporation. Over 250 million people use FB nowadays. During the time of the social media boom, you had online streaming paving it’s way. In 2008, Netflix hit the scenes, a new way to view what you liked to watch, via internet.
When FB announced their billion dollar initial public offering, (IPO), it was one of the largest tech offerings to date. At that time, the biggest ever with the internet. When Netflix hit the market in 2008, there shares were selling for around 9 to 10 dollars. FB price per share was around $38-40. Now in 2018, FB has a common stock price of, $185.98 at the close of market(Jan.29th 2018), and Netflix has a common stock price of, $284.59 at the close of the market(Jan.29th 2018)
Now imagine, if you had invested say, $100 in Netflix in 2008, which would have gotten you 10 shares in that company. Overtime, you consistently bought small amounts of stock. Later on down the road, you find yourself with a 100 shares of stock in Netflix. Now let’s say you decided not to sell any of those stocks, since you first started to buy them in 2008. Now you decide, you want to sell, in 2018. Netflixs’ stock price is now $284 a share if anyone wants to purchase it. When you bought your 1st share, it was only 9 or 10 dollars, now it’s worth over $280, just for one share. I’m pretty sure you could quit your day job after you sell. Probably could go buy a small island of some kind just for fun.
It is now 2018, and what is this new business/economic innovation that is here? Well, it’s not as new, but for what it could do for the economy, is honestly a theory many have had for decades. With Canada and California making announcements that they are legalizing marijuana, with Canada legalizing their entire country! Many know what this could mean financially and economically. Colorado has a population of around 670,000. They manage to bring in $1 billion dollars a year through their marijuana market. California has a population of 39 million, and is the 6th largest economy in the world, and the largest in the U.S, with a gross domestic product (GDP) of $2.5 trillion dollars. Just think how much they can bring in, with that huge of a population, Colorado did $1 billion, and they don’t even have a million people living in the state. Canada, on the other hand, is legalizing their whole country, no explanation needed here, on there possibilities of growth.
There are over 250 marijuana stocks out there, alot of them are what is known as, “penny stocks”. Which are very volatile and carry a lot of risk. Although they may be anywhere from three cents to 2 dollars, their that price for a reason. Small companies like that can get swallowed whole by larger companies, or simply fall to the waste side because they don’t have enough capital to maintain. That’s why when looking into individual marijuana stocks, you need to be careful.
If you do any investing, you should be familiar with, 10k reports, 8k reports, income statements, balance sheets, market value, trade volumes and be equipped with some type of intangiables when dealing with the market. There hasn’t been a whole lot of wide media coverage on the marijuana index, highly because of the fact it’s still federally illegal. Many investors knew marijuana stocks were mostly penny stocks, so they stayed away. When the exchange traded fund, Alternative Harvest came about, investors where thrilled. They knew that they didn’t have to do whole lot of grudge work on marijuana companies now, there was an ETF that held a portfolio on the “top” marijuana companies.
ETF’s do all the heavy lifting, you just decide on how much you want to invest, after a little research of course, and then put your order in. Take an investment company like Stash Investing. They now have a marijuana section you can invest in now. Companies are lining up to grab their spot with the cannabis industry, from bio-tech companies to security firms, all the way down to waste management. Yes, their will be trash companies, dedicated to collecting waste from cannabis products/companies on a national and global scale. Cannabis represents for about 250,000 jobs across the U.S, the future job opportunities could be huge. A new medical field is prominent, with New York now having over 40,000 health care certificates giving out for the Marijuana Health Care Field, is just an example of what that could mean for already legalized states.
Be on the look out for an in-depth breakdown on some of these companies in the near future on MillennialXeConomics.com. Feel free to leave a comment.