“Isn't This Industry a Scam!?”

On Monday, we received a question in the Tomorrow’s Trends Today feedback box from Jerry in Wisconsin:

“All you talk about is Marijuana investing! Isn’t this industry just a scam!?”

Jerry echoes a statement we receive a lot, so let’s address it.

The first wave of marijuana legalization began in 2010 — only 7 years ago. With it, came a flood of new companies looking to cash in on early legalization of the drug.

So, in reality, we’re talking about a 7-year-old industry. In the life cycle of a trend, marijuana is but a baby.

There are risks to investing in a young industry. But make no mistake, pot stocks are here to stay.

“The marijuana market keeps opening up. We’re seeing huge ‘green field’ opportunities for early investors and entrepreneurs. This trend is our friend.” Says our resident pot expert Ray Blanco.

According to Forbes, the marijuana industry raked in $6.7 billion in sales last year. Projections value the industry at over $20 billion by 2021.

So to answer your question Jerry, no, the marijuana industry is not a scam. While there are risky and speculative plays out there, it’s par for the course in such a young market. And as legalization continues to grow across the U.S., the market caps on these small stocks will continue to grow.

But it’s not just risky small caps making investors money in marijuana. Large companies are also trying to get a piece of this market.

Thanks for writing in. And feel free to send your feedback and questions to TomorrowsTrendsFreedback@AgoraFinancial.com.

Jerry’s not the only skeptic. We receive a lot of questions regarding marijuana. Look below, as Ray Blanco continues to separate fact from fiction in the pot market.

Regards,

Amanda Stiltner
for The Daily Reckoning


Your Marijuana Questions, Answered

By Ray Blanco

Earlier this month, something huge happened.

It’s something we’ve been waiting for.

Canadian Prime Minister Justin Trudeau unveiled the draft legislation for legal recreational marijuana.

Canada’s legislation could serve as a model for the United States in the not-too-distant future. The U.S. is a market with nearly 10 times the population.

For Canadian pot, however, the law is remarkably liberal.And it will make Canada the largest country ever to legalize cannabis. The law will be implemented in 2018.

In the meantime, things are moving along in the U.S. More than half a dozen states passed cannabis legalization by ballot last November. Right now, they are busy taking measures to implement the will of the voters.

Brand-new markets are opening. Momentum keeps building in the U.S…but skepticism remains.

So let’s take a look at some common questions I receive about the marijuana market.

Q: How are the books kept on [legal cannabis] companies, since they are not bankable?

This is a great question.

In places like Colorado, where legal marijuana businesses are growing by leaps and bounds, the books are kept like any other business.

The difference is for now, they’re cash businesses.

In time, as regulations ease further, banking will become easier and easier.

It’s a part of the industry I’m tracking closely, certainly. And I’ll always keep you up to date as regulations continue to change and impact the marijuana market.

Q: Fact or fiction— the pot industry is like internet stocks all over again. And there’s a big crash and a wipe out coming soon.

Total fiction. There are real companies out there right now developing real and tangible

products. It’s not pets.com. It’s not a crazy idea with a URL on the internet that doesn’t generate any revenues. There are marijuana companies that are selling product, they’re generating revenues. It’s a real thing that people want, that helps them in whatever way, and they’re paying for it. Cannabis is real.

Don’t get me wrong, there’s hype in everything. Some marijuana companies will succeed and some will fail. But I would not compare it to the late 90’s tech bubble at all.

Q: All the best cannabis related small caps on the market right now are going to

get bought out by bigger companies in the cannabis markets. And gain chances

for everyday investors are going to evaporate before anybody really gets a chance

to make a ton of money. What do you think?

There will be chances to make tons of money. Yes, I believe in the years to come, as it

becomes legal, there’s going to be consolidation. And the so-called “giants” of the marijuana industry are going to want to buy a share. But we’re not there yet.

For many years in biotech you could make huge profits by getting in early on promising companies that were bought out later by Big Pharma. I’m talking, triple-digit gains. So the fact that some of these big players are going to try to get in and buy up the little guy is great news for investors. It’s a rationale to get in now on higher quality names.

Q: It’s gone. All the best cannabis stock opportunities are gone, aren’t they?

Not at all! It’s still early innings, folks. The markets are just brand new; they’re just starting to grow.

This is a story that’s going to play out for years. And there’s going to be lots of potential for gains. We are far from being near the end stage. This is the gold rush phase.

To a bright future,

Ray Blanco
for The Daily Reckoning

The Daily Reckoning