We know that systemic risk cannot be mitigated through diversification and that is a basic tenet to the concept of diversification. Traditionally, hedging is the tool of choice to mitigate some systemic risk. I would like to put forth a hypothesis that investing in the legal cannabis industry may just be another and here is why.
1. We know from past articles and content (including third party), that this is not another dot-com industry because dot-com was the creation of a new industry whereas this represents the transformation of an existing black market into a legal regulated market for recreational. It is also the creation and development of a new medical market. Cannabis as medicine dates back centuries so using the word “new” is somewhat ironic if not misleading. We also know the centuries of proven success of using hemp in textiles, building materials, food, etc.
This transformation is happening faster in more progressive countries (Australia, Canada, Germany, etc) but also within the USA with states such as California, Colorado, and Nevada leading the way. As a warning and this is something we discuss often – although as referenced above this is not a dot-com industry there are facets of this industry that mirror the dot-com era and these can typically be avoided through due diligence. This includes avoiding some paid stock promoters with their paid newsletters and by steering clear of many social media characters.
2. Medical research on various components of cannabis (including hemp) continue to yield encouraging results. Not only are there signs of success across an array of diseases and conditions but the cost of cannabis tends to be lower than the cost of traditional pharmaceuticals.
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