Why we’re closer than ever to federal marijuana legalization
Full federal marijuana legalization … before the end of the year?
Odds are you missed it, but this past Sunday, there was an important interview with Rep. Earl Blumenauer (D-OR) on a local Portland TV station … and it has big implications for marijuana investors.
You might recognize Blumenauer’s name. He’s perhaps the most outspoken advocate for marijuana reform in Congress. Last fall, he laid out a step-by-step plan called the “Blueprint to Legalize Marijuana.” It detailed a pathway to ending the federal marijuana prohibition by the end of this year.
“Congress is out of step with the American people and the states on cannabis,” he wrote to House Democratic Leadership. “There’s no question: cannabis prohibition will end. Democrats should lead the way.”
On Sunday, Blumenauer said that federal legalization is absolutely a possibility in 2019.
That might surprise you. Advances toward federal marijuana legalization seem to have slipped into the background as the headlines have been filled with the urgency of yield curves, trade wars, and threats of recession. But that just makes the investment potential in marijuana all the greater.
Stepping back, regular Digest readers know that we’re incredibly bullish on the legal marijuana trend. That’s because it’s less of a “trend” in the traditional sense, and more of a seismic cultural-shift that’s reshaping society and creating a trillion-dollar investment opportunity.
Now, as we’ve noted here in the Digest, the marijuana sector has pulled back in recent months, creating great buying opportunities in select stocks that could be tomorrow’s market leaders. This pullback, combined with marijuana’s temporary respite from the media spotlight means you and I can buy into great companies at discounted prices before federal legalization happens … which will usher in a new era of investment-grade capital bolstering the marijuana sector.
If Blumenauer is right, and federal legalization does happen in 2019, then we need to take advantage of this buying opportunity now … but do so wisely.
So, let’s look at what Blumenauer said in this latest interview, then discuss how to position ourselves today for the potential legalization of tomorrow.
***”We’ve got things keyed up. I think there’s a great chance of doing it this congress — maybe even this fall” — Earl Blumenauer
The segment of the interview focused on marijuana began with a question from the host:
You wrote that, “by the end of 2019, marijuana will be legal at the federal level.” We got about four, five months left here? How we doing?
Well, we are in really great shape. We’ve had a number of votes in the House. The things I’ve put in the Blueprint are moving forward … We’ve had the most comprehensive piece of legislation come out of the Judiciary Committee. And the banking legislation came out of Financial Services.
So, we’ve got things keyed-up. I think there’s a great chance of doing it this congress. Maybe even this fall …
But the issues dealing with cannabis are on the right track. We can get it wrapped up this congress. Maybe even this year.
As we’ve been saying for months here in the Digest, when federal reform legislation is passed, it’s going to be a watershed moment for the marijuana investment market, leading to massive gains in a compressed period.
That’s because big-money institutional investors and pensions that have been hesitant to invest based on marijuana’s illegal status will no longer feel limited. Legalization will usher in a second wave of investment gains.
Matt McCall is InvestorPlace’s resident marijuana expert. While a great many other analysts are just now jumping on the marijuana bandwagon, Matt has been a leader in the space since 2014. He recently highlighted the impact of legalization the following way to his subscribers:
U.S. legalization will be the biggest catalyst in the history of the marijuana industry. The day the U.S. government passes a legalization plan on the federal level will be a defining moment that will mark the next era in marijuana investing.
***As we’ve said many times here in the Digest, for the biggest gains, you want to be invested in the right marijuana companies before legalization happens
The flood of new money that will flow into the market after legalization occurs will have the power to generate life-changing wealth — if you’re there first, in the right companies.
On that note, if you haven’t begun to establish any marijuana positions yet, you’re getting the chance to buy-in today at discounted prices. That’s because the marijuana sector has pulled back in recent months, with some top names seeing double-digit declines.
For instance, Tilray is down 58% on the year as I write. And while Cronos is up in 2019, it’s down roughly 48% from its March peak. Below is the ETFMG Alternative Harvest ETF, one of the largest marijuana ETFs in the market. Starting at the beginning of the year, you can see it soaring nearly 55% by mid-March, before pulling back significantly.
Of course, as thoughtful investors, we need to look at all sides of this pullback. Is the pullback truly a good buying opportunity, or is the selling reflective of a bubble that has burst?
Matt recently wrote on this point to his subscribers:
Don’t make the same mistake a lot of people will make when short-term corrections come. Don’t sell your holdings because some idiot tells you “the marijuana bubble has popped.”
Instead of selling, just remember: When you study the history of massive, world-altering business trends and the long-term wealth-building opportunities they create, you’ll learn that any time a major new industry is in its early stages, temporary bouts of extreme enthusiasm followed by sharp corrections (aka “high volatility”) are the norm — not the exception.
This is what many cannabis skeptics fail to mention in their critiques of the sector. They see excesses of short-term optimism and then make blanket statements about how the whole sector is a terrible investment that should be avoided like the plague forever. They make no distinction between short-term “froth” in the market and the incredible long-term business fundamentals.
On this note, I’d like to remind readers that research firms estimate the U.S. market for legal marijuana products will reach $20 billion next year alone. That’s up from a mere $5.4 billion in 2015. And by 2030? The size will skyrocket to $75 billion.
***Marijuana investments could be all the more important in your portfolio if the market stumbles later this year or in 2020
While we still believe there is more room for this bull market to churn higher, some of the brightest minds in investing are seeing storm clouds on the horizon. If the broad market is, in fact, due for an eventual bear, or even just sideways returns, then it will be more important than ever to be invested in specific trends that will outperform.
Of course, while we’re bullish on marijuana in general, that doesn’t mean you can invest in any marijuana stock and expect great returns.
Given this, Matt recently created a 5-Factor Analytical Model for evaluating newly public legal marijuana companies as part of his Cannabis Cash Calendar. If you’d like to learn more about it, click here.
Circling back to Blumenauer and the potential for federal marijuana legalization in 2019, we’d be thrilled to see it happen this year. But even if it doesn’t, we believe legalization is an inevitability. Given this, we view temporary pullbacks in the sector as buying opportunities in the right marijuana stocks. When legalization finally happens, we expect the next wave of gains to hit the sector. But you want to be invested before this point.
Here’s Matt on this:
Please don’t wait until the major news outlets run stories about legalization. Don’t wait until your neighbor and co-worker are talking about legalization. And definitely don’t wait until legalization is a done deal.
The really big money is made by investors who are able to buy early. My entire investment career has been about this. Buying ahead of the legalization of marijuana could be one of the best investments you make in your life.
We’ll continue to keep you up to speed. Have a good evening,