Updated January 5, 2018
Marijuana stocks are hot topic right now. Cannabis related investments have been a big topic for a while, but since January 1st, California has gone legal from a recreational stand point.
Virtually overnight, the cannabis market grew exponentially, and it is projected that California will sell almost 50% of all legal U.S. pot.
- Casey Research
The U.S. pot market is expected to grow from $6.5 billion to $50 billion by 2026.
That would make it the same size as the American craft beer and chocolate markets combined according to Market Watch.
NBC News reports marijuana is...
"The biggest investment opportunity since the dot-com boom..."
And Forbes writes marijuana is...
"... the best ground-floor opportunity we've seen since the early days of the internet."
Now, before we get too excited and wrapped up in the hype let's keep something in mind.
Cannabis is a speculative, emerging type of investment.
Investing in such categories is only for the individual that is comfortable with risk and can afford the uncertainty, as well as the potential volatility.
Many of the rules are just getting formulated and a lot of them will change. Most likely, there will be more losers than winners. So, investor beware.
Our goal is to help teach you how to do some due diligence before considering putting any hard earned capital to work in Cannabis related companies. We work day in and day out with a focus on teaching investors how they can manage the risks associated with investing.
In this video we will educate you about the opportunities that exist in the fast growing cannabis industry while also teaching you how to protect yourself from the risks associated.
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Selected Content from Video:
The Denial-Panic Continuum
This chart is something that I share with people all the time. The Denial-Panic Continuum can happen in a market over a period months and years, but it can also happen in individual investments.
In the world of cannabis, you are having a little bit of the same thing.
A good example is maybe somebody who got involved in the market in 2012-2013, a couple years after the financial crisis. They start to put money to work, they start off with optimism.
As time progresses and as markets go higher, something starts to change in everybody’s psychology and we are at the point now where we are getting what we call Euphoria, what we call FOMO, or Fear of Missing Out, which is people who sat out before saying “Hey I really have missed out”, I was too scare to do something a couple years ago, but now I keep hearing from people how much money they have made in the XYZ, should I get back in?”
Fear of missing out and Euphoria
How do you know you are getting into one of those cycles?
Things that are very esoteric start to become valuable- take Bitcoin and cryptocurrencies, for example.
I saw the same thing in 98-2000, in the Dot-Com era. During the Dot-Com era, even if a company wasn’t involved in the internet or technology, if they threw Dot-Com behind their name their stock just raced up higher. We saw this in the last week or two, we have seen companies that have nothing to do with cryptocurrencies come out and just put “blockchain” or something like that in their name, and their stock just doubles.
That stuff only happens when you are getting to a point of euphoria.
People trying to make a fortune, everybody wants to make a quick buck.
I believe as time progresses and you start to evolve from 28-29 states that have some kind of legality of cannabis to more states adding on, you are going to see this peak-valley type of process in the cannabis stocks more often.
At the end of the day, stocks and the stock market are about supply and demand- when a company issues stock, they have a limited number of shares that they issue.
As there are more people that want to buy it the price goes up. What should happen over time, as a state like California comes out with a new regulation, in this case legalization for recreational use, you get a big fury into those stocks.
In the last two weeks lot of these stocks have gone up 200, 300, 400 percent, it’s amazing.
Even with the news that came out earlier this week, with Jeff Sessions shooting a little bit of a warning shot across this industry, the hit that happened in those stocks yesterday was very minor compared to the rise that they have had in the last two weeks.
So as you come up to the mid-term election, I would imagine, depending upon which states have some kind of ballot initiative, you will get another run in these kind of names.
As time progresses, this industry will mature. What’s happening right now is what we call price-discovery and so in that process of price discovery these stocks related to the cannabis field are going to go through this continuum many times and in a very fast pace.
Another way of saying that is volatility, they are going to swing in price very dramatically.
A Brief Background on The History of Marijuana
As time progressed, how did cannabis fall out of favor? How did it become illegal?
As you can see, Cannabis is not a new commodity- people have been using cannabis for food, textiles, and medicine for literally thousands of years. Only in recent history have we been able to perform studies that back up this ancient medical wisdom. Today, the United States FDA has approved two drugs that are THC-based for medicinal use that are focused for cancer nausea, one that is called Marinol and the other Syndros.
To understand how we got here, it helps to look back at the history.
It really started to come into the US heavily in the early 1900's, when a lot of hispanics or Mexicans were migrating into the US during the Mexican Revolution. Cannabis starts coming over the border, and then we go through the Great Depression. Leading up to the Great Depression was the Golden Ages, the time of excess- What was happening then, there was a push-back against everything that was considered excess- we went into the prohibition of alcohol.
This was kind of a perfect storm in the 20's and 30's - where you had a political situation where people in the US were starting to get irritated by this influx of Mexican immigrants- they were associating Cannabis and weed with that, there was already this social push against alcohol and drugs and things of that nature.
Then the world of finance came in and really puts the cap on the prohibition. Back then, in the early 30's there was a guy, who happened to be the wealthiest guy in the US at the time- His last name of Melon. He was also the Treasury Secretary at the time. Melon had a couple friends with the last name DuPont.
This family had just come out with a new fabric, a new synthetic material called Nylon, and hemp was a direct competitor with Nylon. So lo-and-behold, in 1937 we have the Marijuana Tax Act.
The prohibition of marijuana deepens and strengthens. At that point, there was no studies into hemp. In the 1940's when our hemp supplier, the Philippines, fell to Japan, we briefly turned and allowed hemp to come back into the country and we encouraged communities to grow hemp for building materials.
Then, in the Nixon years, in the 1970s, we started pushing back against the craze of the drug use from the 1960's.
In 1970 is when the drug act really came out that listed Marijuana, LSD, Cocaine, etc all as Schedule 1 drugs.
It was as early as 1972 that there were all sorts of reports coming out saying, we have made a mistake, marijuana shouldn't be on that list, but the cast had already been set.
In 1996, the Compassionate Use Act was passed in California to allow Medical Marijuana. Now, you go forward, 2012 was the first year that we had two states went legal for recreation, Washington and Colorado.
Ancient History of Cannabis:
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Modern History of Cannabis
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