Considering Cannabis

We’ve been watching the cannabis marketplace for quite some time. We’ve been reading articles, studying newsletters, and looking for investment opportunities. Many of you have asked why we aren’t in the space already. To be frank, we thought the evaluations were too sky high over the last year. However, there’s been an aggressive decline in global cannabis stocks during that time, as well*.

This drop in stock price may be a great entry point, but the cannabis marketplace is full of a number of risks not faced by most stocks and ETFs we typically invest. Today, the federal government still considers cannabis illegal and many banks can’t accept any funds from a company growing, selling, or extracting cannabis**. Further, pensions and institutional investors are limited in how much they can invest into cannabis***. And lastly, in the US, so long as cannabis remains an illegal substance under federal law, traditional lenders in the U.S. will almost surely steer clear of the cannabis industry****.

We see opportunity for medical marijuana, CBD oil, pharmaceutical applications, and, of course, recreational marijuana. The headwinds are the political climate in DC and the much needed legislation to allow the cannabis marketplace to expand. We may begin tip-toeing into this marketplace and will look to trade in this investment space as the cannabis market continues to pick up steam. As we learn more, we will keep you updated, but we wanted to share this initial observation with our audience.

Here’s a quote from Todd Harrison and CB1 Capital:

“Some street estimates point to a $300B industry. However, this number is mainly derived from short-sighted projections of recreational cannabis use and is compared to the near $1.4T size of the global recreational alcohol market. In our view, the global market size of cannabis will far surpass $1.5T in the years to come. We believe current projections are underestimating the growth potential across numerous economic sectors, especially many healthcare channels*****.”

Special thanks to Todd Harrison and CB1 Capital, a leader in the cannabis active asset management space.

Sources:
* Stockwatch: MJ ETF -54.27% 9/30/18 to 10/10/19. SEED ETF -64.27% 9/17/17 to 10/10/19

** https://www.forbes.com/sites/kevinmurphy/2018/09/06/legal-marijuana-the-9-billion-industry-that-most-banks-wont-touch/#5dfbcd313c68

*** http://bayareacannabis.com/path-to-legalization-made-cannabis-companies-hot-stocks-but-pensions-other-funds-remain-cool/

**** https://www.torys.com/insights/publications/2017/07/raising-capital-and-investing-in-the-cannabis-industry

***** The Bear Traps Report 10-6-2019