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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relatively short time frame indeed. Especially when you consider when that happens it will not be the ground floor but rather lifting the curtain on existing sophisticated industries in several states.
w The current oversupply situation may be alleviated when (not if) there is a formal reclassification of Cannabis by the DEA to supply those states and jurisdictions with no to low industry participation.
w As if they read my mind because this point actually came out after I wrote this article – The DEA orders a 500% increase in the production of Cannabis in the fight against Opioids. I have been predicting since 2016 that this migration to the end of
prohibition is inevitable despite the significant resources of those that benefit from the status-quo Federal prohibition environment. I specifically stated the DEA would reschedule cannabis before long. You may recall how this article began with a well-known industry face not realizing the existence of the Consolidation Curve. This same individual also stated ‘as fact’ that the USA would not reschedule cannabis for many years.
w We know that alcohols sales have fallen significantly where cannabis has become legal.
w We know that many surveys and polls suggest that as many as 50% of the population would try a cannabis edible or
beverage and their extended consumption would of course be based on that experience.
w We were pretty much the first I know of to predict that cannabis infused beverages could transform the industry. That is understandable because even in 2016 all knew that there was a movement towards healthy drinks and cannabis and hemp infused beverages were often described as tasting like “swamp” or even “bong” water. Many companies loaded their drinks with corn syrup and various artificial flavors and colors. However, because we connect the dots so you don’t have too … we correctly predicted that companies such as The Tinley Beverage Company with its many executives from the traditional beverage industries would lead the way to healthy great tasting infused beverages. Ever wonder why cannabis edibles are typically cookies, brownies, and gummies? Lots of flavors and sweeteners to mask the flavor.