I got a very poignant question from one of my Crow’s Nest readers this week. As most of you know, I’ve been writing about marijuana investing for several years now — and all of my work has finally come to fruition. We’ve been nailing triple-digit gains left and right: 800% on a Canadian marijuana producer, 380% on a cannabis capital group, and 93% on a medical marijuana com
[I got a very poignant
question from one of my Crow’s Nest readers this week.
As most of you know, I’ve been writing about marijuana investing for several years now — and all of my work has finally come to fruition.
We’ve been nailing triple-digit gains left and right: 800% on a Canadian marijuana producer, 380% on a cannabis capital group, and 93% on a
medical marijuana com]
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Marijuana Investors Have Nothing to Fear...
[Jimmy Mengel Photo] By [Jimmy Mengel]
Written Tuesday, December 13, 2016
I got a very poignant question from one of my [Crow’s Nest readers] this week.
As most of you know, I’ve been writing about marijuana investing for several years now — and all of my work has finally come to fruition.
We’ve been nailing triple-digit gains left and right: 800% on a Canadian marijuana producer, 380% on a cannabis capital group, and 93% on a medical marijuana company — to name a few.
But some recent appointments in the Donald Trump cabinet have given many marijuana investors pause — like the reader I mentioned. Here’s his letter...
Hi Jimmy,
What are your thoughts on the effect the Trump Administration will have on the Cannabis industry in the U.S. — especially with a Jeff Sessions appointment to Attorney General? He has been very clear in his historic opposition to any marijuana legalization and I'm somewhat concerned as to the negative impact he may have — like the possibility of nullifying the "Cole Memo", which would have massive negative repercussions not only on U.S. cannabis plays but Canadian stock picks as well.
Love your Newsletter!
Dean D.
Thanks for the question Dean. I completely understand your concern.
But here’s why I think you have no reason to worry…
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Dean was alluding to the fact that Senator Jeff Sessions of Alabama was tapped to serve as Attorney General of the United States, and will likely lead the Justice Department in the Trump administration.
It is safe to say that Sen. Sessions is no fan of marijuana…
He illustrated just how much he loathed marijuana smokers when he remarked that he thought the Ku Klux Klan “were OK until I found out they smoked pot.”
That’s right, the racist organization that has a sordid history of murdering minorities, burning crosses, and wearing really silly looking outfits was “OK” except for the fact that some of them smoked marijuana.
While that is clearly a ridiculous thing to say, Sessions has also made more direct attacks on marijuana use and legalization itself. Just this year he stated that “good people don’t smoke marijuana”.
For the record, I can safely say that I know many good people who smoke marijuana. And I’d bet a king’s ransom that you probably do too. But as far as marijuana investment goes, his comments about the legalization of marijuana are the most alarming.
At a Senate hearing earlier this year, Sessions remarked that “marijuana is not the kind of thing that ought to be legalized, it ought not to be minimized, that it’s in fact a very real danger.”
At the same hearing, he went on to say that “I think one of [President Obama's] great failures, is his lax treatment in comments on marijuana.”
I imagine that Sessions was referring to the “Cole Memo” that Dean brought up in his question. For those unfamiliar, the Cole Memo essentially states that the Federal Government will not spend its resources cracking down on marijuana businesses that are operating legally under state law.
In the past, the Feds could descend into legally operating dispensaries and laboratories and rain down the fury of federal law — arresting the proprietors, shuttering shops, and seizing property. The Cole Memo essentially put an end to that, which allowed the booming industry to flourish without the nagging fear that a business owner could be shut down and jailed for something that was perfectly legal in his or her state.
It also stressed the importance of focusing on specific legal issues within the industry that I believe most people would agree on:
- Preventing sales to minors
- Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels
- Preventing marijuana from traveling from legal states to states where it is illegal
- Preventing violence and the use of firearms in the cultivation and distribution of marijuana
- Preventing drugged driving and other public health threats that may arise from marijuana legalization
From my perspective, these are far more important issues for the government to worry about. Raiding and shutting down legal businesses is not only a violation of states' rights, it’s also an incredibly expensive and resource-sucking process.
You can read the entire memo [here].
In short, these comments from the presumptive legal authority in America are certainly chilling.
However, I think that Donald Trump has far more to lose if he decides to let Jeff Sessions start a new war on drugs.
Here are four reasons why...
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Money
Legal marijuana is big, big business — and Donald Trump is clearly of fan of big, big business.
According to ArcView Research, “Legal cannabis sales in the United States jumped 17 percent, to $5.4 billion, in 2015 and are expected to grow by 25 percent this year, to $6.7 billion.”
The market for recreational marijuana could explode to $21 billion by 2020, according to New Frontier Data. That’s a massive increase from the $5.7 billion last year and the projected $7.9 billion this year.
If you look five years beyond, that number could more than double. Investment firm Cowen & Co. predicts that legal marijuana sales could reach $50 billion by 2026.
Taxes
With big business comes big taxes, and the legal marijuana industry is raking them in…
In Colorado alone, legal marijuana sales reached $996 million last year, bringing in $163 million in tax dollars. That makes it the second largest revenue source — three times larger than alcohol, and 14% larger than casinos. According to the Marijuana Policy Group, marijuana tax revenues will overtake cigarettes by 2020.
Washington State brought in $77 million its first year — which is impressive — but that figure is projected to jump to around $270 million this year.
But California will hit the jackpot: some state analysts estimate local governments could see $1 billion in revenue from the production and legal sale of marijuana.
Once the Pandora’s Box of billions in tax revenue is opened, I don’t think even the “reefer madness” of someone like Jeff Sessions can close it.
Jobs
Trump ran for president on a pledge to bring back good, well-paying American jobs… and no new industry has done as well as the legal cannabis industry to bring about new jobs.
The industry created more than 18,000 new full-time jobs in Colorado alone. That isn't just entrepreneurs starting pot shops, but those who provide lighting equipment, rent warehouse space, and hold retail positions. Other jobs include providing security, legal representation, and accounting services.
Nationwide, the industry provides over 150,000 jobs. If other states follow along we could see 300,000 new jobs in the next few years.
While I think it’s great that Trump wants to bring back manufacturing jobs to America’s heartland, most would agree that is a pipe dream. The marijuana industry — if left alone — could bring back decent jobs in far greater numbers.
Public Support
Another thing Trump has been famous for is citing polls to justify his actions. If he sticks to that metric as Commander-in-Chief, he’ll have no choice but to back the will of the people.
A recent survey has shown that support for marijuana legalization in the U.S. has reached 60% — the highest level ever recorded.
That percentage will continue to increase during his presidency. I doubt he wants to wage a war on a very popular public opinion. Not to mention he will have his hands full if he wants Jeff Sessions to focus on the crux of his campaign: illegal immigration.
In short, I don't think marijuana investors like Dean should fear for their portfolio. In fact, I am personally doubling down on what I believe will be the single best investment of the next decade.
[I'd urge you to do the same...]
Godspeed,
[Jimmy Mengel]
Jimmy Mengel
[follow basic] [@mengeled on Twitter]
Jimmy is a managing editor for [Outsider Club] and the Investment Director of the personal finance advisory [The Crow's Nest.] You may also know him as the architect behind the wildly popular finance and investing website Wealth Wire, where he's brought readers the stories behind the mainstream financial news each and every day. For more on Jimmy, check out his editor's [page].
*Follow Outsider Club on [Facebook] and [Twitter].
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