Would S.A.F.E (Banking legislation) hurt AFGC (and others)?From the 5 Minute Forecast:
“Cannabis stocks surged in late September as the House voted on the National Defense Authorization Act,” says our pot stock authority Ray Blanco.“That wouldn’t normally be bullish for pot, but in an effort to get a pro-cannabis measure through Congress, a formerly stand-alone bill known as the Secure and Fair Enforcement (SAFE) Banking Act was inserted as an amendment into the NDAA,” he says.
SAFE would open up the banking system for companies operating legally in their respective states,” Ray says. “If it were to pass, it would greatly ease business transactions and help reduce the costs of engaging in the cannabis trade.”
Would this legislation hurt AFGC by allowing competitors to enter the lending market that AFGC targets?
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Probably, and the pot financiers generally react negatively when those bills seem to be making progress — but it wouldn’t be ALL negative. The pot REITs would also be able to borrow at lower rates, and their tenants would immediately become better credit risks, so they could lever up more, like traditional REITs. Negative, but not disastrous… and part of the reason they’re all rushing to grow fast so they have a strong base if and when laws evolve.
The risk I’m more concerned about is full federal legalization — if that passes, suddenly the industry can consolidate with national leaders and brands and the rule that all pot must be grown locally disappears. That probably destroys a lot of local pot growers who would no longer be able to compete. Our town seemingly has a dozen dispensaries and several growers for 30,000 people, which wouldn’t be sustainable if there was a dominant national brand or two that could produce at lower cost.
Thanks.
for the most part, I think Travis has answered most of your question. These pots stocks have enjoyed big growth because of this niche. However, there are plenty of other reits out there that still exist and have done fairly well (Realty income, STAG, AMT, EQIX, among others).
I doubt growth can keep up with current pace with legalization but there will still be a need for IIPR financial services.
My question is, with or without federal legalization, how long can this marijuana boom continue? I live in a town of around 50,000. On my 5 mile commute home, I can go past 4-6 different pot shops. How long is this sustainable and when will these businesses begin to close?
In comparison, there are just as many fast food restaurants in the same stretch of driving. Is the demand for pot really that high?
I remember cash for gold pawn shops circa 2008. Those mostly went bust in 3-5 years.