The Stansberry folks have their very own marijuana-focused newsletter now, too, joining pretty much every other publisher with a service dedicated to these niche stocks that have, with waves of state legalization, been through several bubble-and-bust cycles in just a few years as the industry has begun to mature. It’s called Cannabis Capitalist, helmed by Tom Carroll and introduced in these recent ads, so I guess it’s something they’ve launched within the past few months (the ad is new, it’s dated October 2020).
The pitch they’re making is for nonrefundable subscriptions at the “50% off” price of $2,000 a year, and this is how they describe the newsletter:
“We want to recommend that readers position themselves to own the kind of cannabis companies that are on track to go from small operators to the blue-chip companies that dominate the market at scale.
“We’re going to look to invest in takeout targets, where smaller companies are likely to be bought out at huge premiums in the coming months.
“And we are going to be patient in recommending when to get into these companies at reasonable prices. That’s going to be a key part of success. We always include buy-up-to prices for the smaller, more volatile cannabis stocks… They can rise quickly, but you don’t want to chase them on the latest rumors.”
The ad that readers have been sending my way is headlined, “A Monumental Moment for Cannabis,” and it starts out with this emphasis on a upcoming “catalyst” that will boost cannabis stocks…
“This is what we call a ‘frontier market’ – and new markets like this can offer as much risk as they do reward.
“But if you can time your entry right… ahead of a critical catalyst, the returns you can generate are simply extraordinary….
“With the country’s eyes glued to the news, focused on everything from COVID-19, to the presidential election, and racial tensions in America, you have a unique opportunity today to capitalize on an approaching policy change that is all but passing unnoticed by the mainstream media.”
So… what’s the catalyst? It has something to do with the election… from the ad:
“… we’re not predicting federal legalization or anything like that…
“Not yet, that is.
“Instead, as we’ll share over the next half hour or so, a much more subtle policy change that few people are paying attention to is about to open this market to 45 million Americans, virtually overnight.”
“Subtle Catalyst” has a nice ring to it… I’m thinking it would make a good name for a smooth jazz band. But what is that catalyst being hinted at?
Essentially, it’s “more states are legalizing” — with the kicker that he sees the snowball rolling for the legalization across the heavily-populated Northeast as a result of this year’s elections:
“2020 will be the biggest year in cannabis since 2016 when nine states legalized medical or recreational cannabis….
“Six states have some type of reform on the ballot in November. And in all, eleven could legalize in early 2021.
“And the one state I’m paying very close attention to is New Jersey, which could start the dominoes falling toward a new, multi-billion-dollar recreational cannabis market on the East coast….
“Currently, New York, Rhode Island, Pennsylvania, and Delaware all have legislation pending for recreational use.
“And when a huge neighboring state like New Jersey moves forward with legalization, the rest will follow. It will be like marijuana dominoes falling.”
I guess that makes sense, and it’s similar to the legalization wave we see from legalized sports gambling — nobody wants to see their own residents crossing over the state line to spend their money, whether it’s on a wager or a toke… that extra tax revenue looks awfully appealing to every state right about now, with state and municipal budgets in most places decimated by the coronavirus pandemic and associated shutdowns.
In marijuana right now, my little Massachusetts town is on the interstate, just a couple hours from New York City and within a few minutes of Connecticut, and because our local dispensary was the first big one to open in New England, almost exactly two years ago, we still see a steady stream of out-of-state license plates pulling in and creating a line at that dispensary, almost every day of the year. To some degree, then, our little downtown is being subsidized by visitors from New York City… and that probably won’t last very long. States don’t like to lose tax revenue to neighboring states, especially now when sales taxes are collapsing in most areas, and unemployment is driving income tax receipts down.
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And this “betting on the next state to legalize” pitch is not a new thing, of course, marijuana speculators have been betting on state legalization votes for 20 years or so… starting with the slow wave of medical marijuana legalization and then really catching fire with recreational “adult use” legalization in Colorado and Washington in 2012, and exploding with the federal legalization in Canada in 2018, with lots of other votes and legislative and regulatory fights along the way. You can find examples of both 1,000% gains and 99% losses through those “catalyst” moments without having to look very far, though the industry does seem to have been settling down as some of the wildly bubblicious stocks have come down to more rational-sounding valuations, and as a few larger multi-state operators have been established and some of the high-flying names that were so well-marketed and appealingly brand-focused in the early days have fallen apart (I’m looking at you, MedMen).
The ad talks about the huge size of the market — with a graph indicating US cannabis sales were between $50-55 billion last year (including black-market sales, presumably), more than is spent on video games or donuts and about half of the total spent on beer, and with annual growth of something like 20%… the point being to emphasize that it’s still pretty early days here, the newsletter doesn’t want you think that you’ve “missed out.”
And they offer some huge projections if you add in nutraceuticals and pharmaceutical products…
“medical and recreational cannabis in the US alone will disrupt markets where current spending is over $500 billion. That is half a trillion dollars. These numbers are almost incomprehensible.”
And apparently the coronavirus has had a big positive impact…
“As all this cash transitions from the black market move to the legal cannabis market, it’s not difficult to see that investors will have the opportunity to make huge gains.
“The market is already there – and it is massive… it simply hasn’t shifted into legal channels yet.
“But the coronavirus changed everything….
“It’s accelerated the legal cannabis market at a pace we’ve never seen before. Taking a chunk out of the illegal market like we’ve never seen before.”
There’s also some chatter about the STATES Act and the MORE Act, which both have had pretty broad support in their goal of effectively decriminalizing marijuana at the federal level and pushing that decision down to the states, but haven’t yet passed — the MORE act would remove marijuana from the Controlled Substances Act and effectively legalize it, going a little further than the STATES Act (with some other clauses that are appealing to various groups, including the move to expunge past minor marijuana charges, open up the VA to using medical marijuana for veterans, etc.), and was expected to be pushed through the House before the election, but given the coronavirus relief efforts and the general lack of agreement on anything in Washington, it has been pushed back and will probably get a vote in the House, at least, in the lame duck session. Whether it will pass or not, I have no idea — that depends mostly on the Republicans and the President, I expect, since both the STATES Act and the MORE Act have had pretty strong Democratic support. More from the pitch:
“With the 2020 election upon us, I thought that with the MORE act up for a vote… legalization might just happen before November. However, there’s no way they could’ve moved to legalize marijuana before even deciding on the next stimulus bill. Rightfully so.
“So, the MORE act vote was postponed. But the House has promised it’ll happen this fall.
“And whether that happens or not, I’m confident that marijuana will be legal at the federal level in months, not years.
“Of course, the opportunity today is to get in BEFORE that happens.”
And then we get to the investments bit…
“If you get in today, I expect you’ll see shares of a handful of companies I have identified absolutely soar in in November. As news of New Jersey passing recreational marijuana likely hits headlines.
“And even better, these are companies you’ll want to hold onto… because if cannabis is legalized in 2021, as I expect it will be at the federal level, shares of those companies are going to soar even higher.”
And the clues about the first stock they’re dangling as bait for us…
“Amongst the companies I’m going to be tellin