Weed Stocks Flying High

Let’s have some fun here and introduce two fictional characters who will talk about the marijuana legalization movement, what this means for ‘pot stocks’, and what you should consider before partaking, either as an investment or otherwise. Oh, and it may be more fun for you if you pretend that the characters speak like Crush (i.e., the sea turtle in Finding Nemo: https://www.youtube.com/watch?v=ansWZq7yULE).

Act I. Two Dudes Talk Pot

Lotusflower. “Dude, what’s the deal? Is it, like, legal?”

Tree. “Partly dude, but not totally. For us California dudes, it rocks ‘cause weed is now legal for both medicinal and recreational purposes. But other States haven’t yet been blessed by the ganga god.”

Lotusflower. “Still, this definitely calls for a party.”

Tree. “You know who we should party with? Bill Clinton.”

Lotusflower. “He’s a politician man. Why would you want to party with a politician?”

Tree. “Dude, no judgment is our motto, right? Besides, it’s like, hey, remember when he was being grilled by those curmudgeons up on Capital Hill in the 1990s, and he messed with ‘em, saying he was fond of lighting up but didn’t inhale? Hah! That dude’s got chutzpah. Well, today, if he hangs with us in the golden state, he could totally admit inhaling because the authorities sitting up high have waved their magic wand and said, uh, ya, you dudes and dudesses of legal age can fire up the bong at your pleasure in California and other States too.”

Lotusflower. “All the States?”

Tree. “Not everywhere yet, man, but soon it’ll happen. For now, aside from the most rad State of all, California, it’s totally legal to toke for recreational and medicinal use in Colorado, Washington, Oregon, Maine, Nevada, Massachusetts, Alaska, and D.C. And there’s a whole bunch of other States that allow medicinal use only.”

Lotusflower. “Excellent.”

Tree. “Agreed dude. But what sucks is that the Federal government isn’t on board.The Feds still classify weed as a Schedule I narcotic, on par with heroin and LSD. Man, what planet do they live on? But those tighties in Washington are swimming against the current. Soon we’ll be like Canada.”

Act II. Canada Renamed WeedLandia

Lotusflower. “Canadians are cool. They’re like chilled Californians, you know.”

Tree. “Totally. And get this: the Canuck federal government has already made medicinal weed use legal across their whole, entire country. But that’s not all. Their government, run by this former snowboarding dude, is like going to make recreational use legal too. The dude actually campaigned for legalization when he was running for head office; how excellent is that! And the Federal Health Minister told her fellow dudes and dudesses at a United Nations General Assembly special session on drugs that Canada would introduce a legalization bill in the spring of 2017.

It’s not just political babble either. ‘Cause, like, real soon, this bureaucratic group known as the Task Force on Maple Syrup Legalization … um, wait, no, it’s called the Task Force on Marijuana Legalization, will release this special report detailing how to build the weed market so it minimizes criminal involvement, protects minors, ensures product quality and adds tax revenue. And the country’s largest pharmacy chain, Shoppers Drug Mart, (owned by the Canadian grocery giant, Loblaws; trading under the ticker TSE:L) is already talking with government folks about dispensing marijuana from its stores. Once big corporate gets involved, pot goes mainstream and it’s further legitimized in the eyes of the public.”

Lotusflower. “I love Canada.”

Tree. “Ya, when you think about, it’s this whole new industry that’s just getting started. It’s going to be huge, dude. I mean, is it any wonder that the major opponents to legalization are the pharmaceutical and alcohol industries? Pharma will lose boatloads of dough when people stop buying their anti-depressants and anti-anxiety meds. I mean, why not chill naturally, right, and avoid pharma side effects. With weed, I’m guessing they will have a warning label saying something like, careful dudes, you might laugh yourself silly on this stuff and eat too many potato chips. As for alcohol, it’s already been shown in Colorado that once pot gets the green light, alcohol consumption drops off.”

Lotusflower. “Hold on. You said the industry is going to be huge?”

Tree. “That’s my guess. Think about tobacco and if you invested in one of the big tobacco companies fifty years ago what your investment would be worth today. Now I’m not saying there are any guarantees that weed will infiltrate the masses to the extent cigarettes once did but serious demand is out there.”

Lotusflower. “Maybe I’ll invest? You know, make some money from the stock market.”

Act III. Ethics of Pot Investing
Tree. “You good with that? I mean, would you buy stock in a tobacco company?”

Lotusflower. “No way, those dudes are evil.”

Tree. “Then why buy a pot company? You and I both know the excellent benefits of pot but when you smoke it, it’s not exactly a balm for your lungs or throat or brain. We gotta be real here; there’s downsides, man, on the health front just like with tobacco. Anyway, your call dude. Search your values registry and figure out what works for you. It’s more important to be true to your nature than to make a few bucks on a stock investment that doesn’t connect with your soul.”

Lotusflower. “Ya, I’ll wrestle with that one. For now, let’s say I’m down with investing. You think I should?”

Tree. “Well, here’s the thing: the upside is that marijuana companies are growth companies meaning their future growth looks real good. In Canada, the recreational use market, expected to be operational by 2018, has an estimated worth of $10 billion, a fat round number wouldn’t you say? But never discount the risk. We don’t know how well run these pot companies will be, how much profit they’ll bring in or exactly what regulations the government will put in place and the degree to which those regulations might enhance or stifle the weed business.”

Act IV. America: Not Yet Open For Marijuana Business
Lotusflower. “Dude, Canada is, like, cool and all but why aren’t we talking about USA home grown companies for investing?”

Tree. “Because it’s a totally messed up legal framework in the good ole’ USA with pot being illegal at the federal level but legal in many states. The result of this disconnect is that American pot companies cannot export their stash outside the country; even though they have to pay federal taxes they can’t take advantage of corporate tax breaks that would increase profits; they can’t hire legitimate tax auditors because their business is technically illegal under federal law; they attract fewer investment dollars for research and development; and they can’t register patents or trademarks, and all these restrictions damage their global competitiveness. There’s too much uncertainty surrounding the American industry and the last thing investors want is uncertainty. Makes ‘em nervous and less likely to invest.

So with U.S. competition weakened by regulatory risk, Canadian companies are stoked. It’s like they’ve got this huge head start growing their business not only domestically but also internationally by partnering up in other countries. Right now, potential global markets include countries where the drug is legal at the federal level, including: Australia, Brazil, Chile, Costa Rica, Czech Republic, Germany, India, Italy, Portugal, Spain and the Netherlands.

American, Canadian and investors from other countries see what’s happening and are piling into Canadian listed marijuana stocks precisely because of their competitive advantages that primarily include: a clear legal framework and, having already built Earth’s most advanced large scale commercial medical marijuana program, they’re itching to ramp up production once the recreational market gets a green light. The result being international demand for Canadian bud producers to share their expertise in exchange for fees and royalties, and the opportunity for the Canucks to burn their reputation as industry leaders.”

Lotusflower. “Right, so, um, we should hitchhike north across the border and invest?”

Act V. Investing in Pot Stocks

Tree. “Let’s talk it through first, dude. ‘Cause you know, I’ve been following the pot stocks traded on the Toronto Stock Exchange and the TSX Venture Exchange (the Venture Exchange is for smaller companies). And, here’s the thing: there’s huge speculation going on and this is making the shares crazy volatile. I mean, within a five day period last week, you’re seeing price swings up t0 50%! Not only that but some shares of these companies have already risen several hundred percent in the past year. And that just isn’t normal so you don’t necessarily want to run with the bulls on this one ’cause bulls are fueled by animal spirits, not thinking brains.”

Lotusflower. “So what are we waiting for? Get out your thumb ‘cause we’ve got to catch ourselves a ride!”

Tree. “Not so fast Loflo. I mean, sure, stocks have been on fire. But here’s what you have to do: look at the price today, then wipe the dust off your crystal ball, peer inside, and look at where the company will be one or two or five years from today.”

Lotusflower. “Seriously, dude?”

Tree. “Well, that’s what investors do; try to predict future performance. So if you think that there’s a whole lot of folks around the globe who will opt for a joint, a weed infused chocolate bar or a magic brownie, instead of downing a beer or sipping chardonnay, then dude, this is just the beginning for these stocks.”

Lotusflower. “Go back to that crystal ball of yours. What do you see?”

Tree. “I’m looking at the success story of Colorado and other early State adopters of legal weed laws; and I’m looking at governments getting all hot and bothered over the tax revenue they’ll be collecting; the number of people who already know the benefits of weed, and the many others who will seek entry to the weed pleasure dome as an alternative entertainment source or as a substitute for a chill pill; the amount of money raised by these companies (for example, Aphria [TSX-V:APH] and Organigram [TSX-V:OGI] – both recently raised $35 million (CAD) through underwriters, selling shares at a fixed price); and I’m looking at big time corporations wanting a piece of the action (see Shoppers Drug Mart above) and my ball says this:

Share price volatility has been insane. Nutty speculation is going on. But, this isn’t a bubble. These are real companies doing business in a new industry with significant growth prospects. Volatility will eventually calm. And if you have an investment time horizon between two and five years, then now may be the time to wade in. Still, dude, this is just my one lonesome opinion. Think about what I’m saying and do your own research before you dive in. And remember, if you can’t afford to lose, then you shouldn’t make the investment.”

Enter Buddha. I will tell you a story. There was a man named Andrew Carnegie. Perhaps you know of him, the richest man of his time. When he was dying, his biographer asked, ‘are you content?’ And he replied, ‘no, my life has been a failure’. Surprised, the biographer said, ‘With all your money, how could you not be content and fulfilled.’ The dying man responded, ‘that logic destroyed my life.’

Money may purchase many things, but not contentedness. Rather, being content arises from inner richness, from knowing your true nature and doing what is right for you.

Pathway to Financial Freedom

If it’s okay with you, dear reader, I would like to step back from talking about investing to ask why we invest our money in stock, bond and other financial markets?

A softball question? A naïve question? Absurd? Do I know anything about investing and money, you may ask? Alright, before I have to fend off any more imaginary attacks on myself, I’ll say that, of course, a primary reason we invest is to make money. Sure, but why do we want to use our discretionary income to make more money? Drum roll please: Continue reading “Pathway to Financial Freedom”

Is Warren Buffett Buddha?

The other evening I’m reading about spirituality issues related to Buddhism and Yoga. And I’m deep in focus, taking it all in, and trying to make sense of what are to me new ideas, new ways of thinking, novel perspectives that may help me better understand myself and my connection to this world we live in. Continue reading “Is Warren Buffett Buddha?”

Enter the Buddha

Here’s what I’m thinking: continue with yesterday’s stream because there’s a whole lot more to say on this issue of money and happiness.

So, I left off posing the question, is happiness a pipe dream? I’m going to hedge here and say ‘maybe’. Really, it depends on you. It depends on whether or not you understand that money is a tool meant to serve you, not an object to which you become a servant. Continue reading “Enter the Buddha”

The Money Journey

This blog is about money. Investing money, saving money, spending money. And happiness. – Happiness?

This blog is about money. Investing money, saving money, spending money. And happiness.

Happiness?

I like to think of happiness as the pleasant payoff that comes about from experiencing emotional, psychological, and spiritual contentment. I’ll talk more about this shortly.

For now, it’s worth your while to toss around the idea that, more than net worth, it is our thoughts, perspective, and emotional connection to money that tie into our balance of mind, and set the stage for happiness. Continue reading “The Money Journey”