The Real Reason Why Marijuana Will Be Legal

Sean Brodrick By Sean Brodrick, Resource Strategist, The Oxford Club

Commodities

There’s a big furor over marijuana. Legal marijuana may be the fastest-growing industry in the U.S. It is making millionaires and could make billionaires.

Why are we talking about marijuana in an energy and resource e-letter? The answer is simple: It’s a resource. Marijuana is a cash crop, and a huge one at that. The U.S. market for legal cannabis grew 74% in 2014 to $2.7 billion. That’s up from $1.5 billion in 2013.

It’s so big, it’s even entered the presidential race, with many contenders saying the decision to legalize pot is up to the individual states. And sure enough, medical marijuana is now legal in 23 states. Recreational cannabis is legal in four states and the District of Columbia.

But let me tell you, we could see a wave of legalization across America. And it comes down to one reason: money. As states balance tight budgets, marijuana might become a necessity.

We’ll use some facts from Colorado, where recreational marijuana is legal.

  • Legal sales in Colorado of medical and recreational cannabis hit $700 million in 2014. That’s the first full year for which statistics are available, according to a Wall Street Journal analysis of Colorado tax data.
  • The number of active licenses to grow the plant for retail consumption shot up to 397 from 204, according to Colorado’s Marijuana Enforcement Division.
  • Colorado alone brought in about $76 million from taxes and fees on the marijuana industry in 2014. It brought in so much money from taxing pot, the state is actually lowering the tax from 10% to 8% starting in 2017.

And now businesses are capitalizing on this trend.

  • American Cannabis Partners is opening Colorado’s first “weedery.” In other words, a winery for marijuana users. But unlike a winery, you won’t be able to consume the product on the premises. The new facility will be called the Colorado Cannabis Ranch & Amphitheater. It will be a $35 million facility, including open-air greenhouses, a rooftop bar, a restaurant and live musical performances.
  • My 420 Tours, founded in 2013, brings 300 to 600 tourists per month to Colorado to stay in weed-friendly hotels. Activities include everything from tours of dispensaries to marijuana cooking classes.
  • Then there are the dispensaries themselves. Any adult Colorado resident can apply for a retail marijuana business license. Individual cities in Colorado can ban marijuana dispensaries, but plenty welcome the tax revenues.

Marijuana is such a booming business in Colorado that owners of other Denver businesses find themselves fighting for warehouse space with companies growing weed. Rental costs in the Colorado warehouse market rose 10% last year.

Reefer Madness

So that’s Colorado. But the marijuana rush is spreading far beyond the state’s borders.

In California, medical marijuana generates $100 million in sales tax revenue and keeps more than 100,000 people employed across the state.

Washington state recently passed its one-year anniversary of legalizing recreational marijuana. In that time, the state has harvested $70 million in tax revenues from marijuana sales.

Oregon, which legalized it on July 1, has a different tax structure than Colorado or Washington. It expects “only” $18.4 million in tax revenues over the next two years.

But I haven’t told you the biggest incentive to legalize weed: Colorado has kept back $25 million of its marijuana tax revenue. It plans to return this to ALL taxpayers, whether they bought marijuana or not.

If other states follow Colorado’s lead, I think legalizing and taxing marijuana could become very popular indeed.

Canadian High

Even Canada is getting into the act. The largest legal medical marijuana facility in the world is less than an hour from Buffalo, in the town of Niagara-on-the-Lake, Ontario.

It’s a 350,000-square-foot greenhouse. That’s more than eight acres of pot growing under one roof. Park Lane Farms is the company growing the marijuana. Its sister company Tweed Marijuana Inc. (OTC: TWMJF) sells it.

Health Canada, which regulates the country’s marijuana business, estimates that the Canadian medical marijuana industry will reach C$1.3 billion (US$987 million) in a decade.

And Canada’s Supreme Court recently struck down a law that restricted medical marijuana users from purchasing or consuming the substance in any form other than dried leaves. This now allows for cookies, teas, oils and more. That sounds like more business opportunities to me.

High Hurdles

To be sure, marijuana faces hurdles. One is that federal regulators have yet to approve an easy way for banks to handle accounts for marijuana businesses.

The U.S. Treasury Department issued guidelines last year for how banks could accept marijuana money, but many large banks considered the guidelines onerous. So they still won’t take deposits related to pot.

And Colorado’s attempts to set up a credit union for pot farmers has so far failed. The National Credit Union Administration cited uncertainty about the marijuana business when it declined the application for deposit insurance.

Marijuana growers also can’t get crop insurance. With wildfires ravaging the West, many growers, big and small, are sweating big-time.

Still, despite these risks, the reward can be a bumper crop of profits. A pound of “pharmaceutical grade” marijuana costs about $1,000 to produce and sells for $7,500 at retail prices.

How You Can Make Money

Most marijuana stocks have something in common: They’re terrible, with valuations far out of whack with their underlying fundamentals. However, there are a couple of possibilities you might want to consider.

MassRoots Inc. (OTC: MSRT). This company has a market cap of $59 million, so it’s very small. But it’s generating a lot of buzz.

MassRoots connects marijuana users to each other and area dispensaries via mobile app. Since the company does not handle or sell marijuana, it is available nationwide.

The company website says the app has 500,000 users, more than 1,000 marijuana businesses listed, and 140 million user interactions.

GW Pharmaceuticals (Nasdaq: GWPH) has a market cap of $2.4 billion. It’s a real company with revenues and earnings. It develops drugs derived from cannabis compounds, THC (a psychoactive compound in marijuana) and the non-psychoactive cannabidiol. It has been doing this for over a decade.

GW Pharmaceuticals is currently testing a new cannabidiol-based drug, Epidiolex, which is targeted at treating severe epilepsy.

Long story short, legal marijuana is coming to your state sooner rather than later. And those who want to target profits can start right now.

All the best,

Sean

  • James Machen

    Cheers to you Sean for bringing the reality of marijuana to your conservative readers. Keep the information flowing. Someone needs to dispense the reality.

    • Sean Brodrick

      Thanks, James.

  • david

    the only problem is that long term use of this drug is not beneficial to health and it is just another sign of the Wests Morale decline and I am not a prude just a realist for common sense to be displayed.

    • Sean Brodrick

      David, there are a lot of things that aren’t beneficial to health that are legal. Tobacco and whiskey being two of them.

    • theskunkinyourcrawlspace

      so are tobacco products, alcohol, most prescription drugs, even diet soda, the list is long

    • Ronnie Silva (Prof. CHEF)

      david ..and your statement is based on what? …Some archaic “Assassin of Youth” Propaganda?? I have My Life & others, to go By. Read something by Tommy Chong, his experiences are just like mine —He feels just as active/ healthy as he ever has, if not, Better!! I am 60 years of age and have smoked quality marijuana since 20. I smoked cigarettes for a few years, a couple times in my life, putting them down for good, at 28 (Best Quit). I could feel the bad health effects from Tobacco within a couple months of starting—such as Shortness of breath, stressed, edgy and less stamina while Surfing, Diving, Racket ball. Shortly after, I gave up drinking Hard Alcohol (another Best Quit)—some “Party Days” in my twenties . I still enjoy 1 – 3 Beers on occasion or 1-2 glasses of wine with a good dinner (moderation). I no longer take Any Addictive Prescription medications, pain pills, many Opiate based & Highly addictive!! … Or anti-depressants as many people I know —-I stopped in 1998 …None did me any good, I took them because my Doctor said to— (Toxic worthless side effect laden garbage). I Feel Better & am in Better shape Now, than when I drank, smoked tobacco & was on 6 prescription drugs. I stay active, Bike, Walk, Surf, Fishing, Hiking etc. I sleep 6 hrs. a day, Rarely eat breakfast & Feel Great! I don’t eat much of the Processed ‘Meal-in-a-Box’, Frozen “convenience” foods, NO Fast Food (fast to the grave!!) More Kale, Cabbage, Legumes, Melons, Broccoli, Brussel Sprouts,Asparagus..Grains and Nuts ..Chicken, Pork, fresh if possible, but I’ll use frozen, plus Seafood & a little Beef, but more for a “treat” than part of my diet…I Still drink Milk & Use Butter, Half & Half, yogurt(Low Sugar) —Almost No potato chips, Cheetos,crackers, NO Micro Pop-Corn, no to Most Cereals, ZERO High Fructose (POISON) Soda, Gatorade(YUCK!!) or Candy …few cakes or desserts. I try to eat meals I make with real ingredients…My Mac & Cheese is : Macaroni, Cheddar, a little Swiss, Flour, Butter, Half & Half salt and pepper …finished with bread crumbs and baked —-Not 38+ ingredients, many found in a Lab, not MY Kitchen–like the Boxed Brands!! I “Vaporize” my marijuana much of the time (Zero Carbon no Burning), some edibles, make MJ Butter, but still enjoy a good smoke now & again. I use it 6 to 10- times per week, in small amounts 1.5 to 2 Tenths of a gram. ea. time. I Just had my annual physical and was told, as usual —– I’m in better shape than most my Doctor’s patients, Half my age!!” I Socialize with 18-81 yr. olds & date 25- 50 yr. old women —I’m “fully functional”. I have never and continue to experience Zero Ill side effects from 40 years of marijuana use. Just like my friend Emmet, he is 81 and has smoked marijuana since the mid ’50’s …..Surfs every day, swims 5 miles every other day & rides 15 miles every other day. He looks like 60 and is as active as any 45-50 yr. old. I had a birthday, early Summer, many of the Younger surfers(20-35) thought it was my 42nd -45th Birthday. I’d say, the Cigarettes, Pharmaceutical Drugs, Drinking Hard Drinks, in Bars, Fast Food and a Less Healthier diet, were detrimental to my health. The Marijuana has done quite the opposite ….part of my maintaining a youthful life!! —WORKS FOR ME and 5 of My Friends! —-Many Physicians that were against Marijuana, are Changing their views, in Hoards!

  • Jay Rorke

    Great article on the business realities we face in the marijuana realm. I utilize Marinol & Cesamet for Lyme related issues. Both are medical mj that help with nausea, joint pain/inflammation & sleeping at night. All of which can be an issue w/chronic Lyme that is often treated w/pulsed regimes of antibiotics. People often fuss about cannabis without realizing all the health benefits of canabidiol. Do your research. It is much safer than alcohol, tobacco & high Fructose corn syrup. Heaven forbid!

    • Donald Lloyd Castle

      Well said, Most scripts that doctor’s write are much more harmful than marijuana, but what do I know the “FDA” told us they were safe and that marijuana’s not. You will see the day the FDA will tell us marijuana is safe too ! It’s not funny but it’s a joke !

  • 😄

    Keep it up

  • Donald Lloyd Castle

    Yes, I very much agree with James Machen it’s damn well time some truth about marijuana was told ! In all things there is only a limited amount of time we should spend being stupid.

  • disqus_3W22PHzgh4

    Another issue with hemp is industrial usage, it can be used for biofuel, paper, many other uses,why the government does not permit it here is not rational. In the past it had very widespread use. We need to look at all the positive potential of our national productivity.

  • Robbie Thomas

    yes I have made money with the weed stocks approx. $19,000 with thcz at the time. but as so many other companies do reverse stock splitting; which steals your money and shares that really hurts a persons wallet and portfolio. I wish some one had been honest and told me the risk with reverse stock splitting; that all stock companies do

    • Donald Lloyd Castle

      Believe me, I know what your talking about “MISTER MONEY HOLDINGS” the king of reverse splits.

    • Joannie

      Do you recommend any stocks that are doing well right now? I believe in the legalization of marijuana across the country! I have fibromyalgia, and bone on bone in both knees so I am in a great deal of pain! I would rather go with something that grows naturally than addictive pain medications with terrible side effects, ex. constipation not to forget they stop working as well after a while and you need more but are called an addict if you fall into this case? Canada has real “free health insurance” therefore the country is quicker to get on board with legalizing it for medicinal purposes due to the many benefits of it over labs creating side effect ridden drugs at huge costs! Please let me know if you have any tips on a good stock? Thanks so much! Joannie

  • Donald Lloyd Castle

    We will legalize marijuana for the same reason we stole gambling from the mob. “THE MONEY” Not because we give a damn about the affects, it may or may not have on the people. Just to be clear, I’m not opposed to gambling or marijuana I’m only opposed to the way the system works !

  • Jen

    I wonder why you didn’t pick up tweed Sean. I bought shares from my own research and my stocks have over doubled already. Do you prefer your picks to be US companies? What about us Canadians eh? : )