CDN & US MJ Markets & Task Force - The Decisive Factor...I'll respond to LeafRider and add a couple (important) points while on the topic.
From what I can recall, it is illegal to ship MJ to the U.S., or even for states to ship across state borders. Hence why I have emphasized the bubble in this sector right now because if people are playing on U.S. momentum they are misinformed. MJ is illegal at the federal level. You can technically face charges/go to jail for investing in U.S. MJ companies and banks won't touch them because they could also be charged with money laundering. It is a total mess and will continue to be until federal level legalization. What we want to pay attention to is if some big companies open up shop in Cali because the market is big enough. Such companies could be a launch pad for a federally legal market. Unless these same companies buy us, these guys could be major competition in the future, not just in North America, but internationally as well. Its not like its impossible to get a sales license in Canada
Moving along then. When you look at the MJ market maturing, you should recognize how Canadian regulation is both a blessing and a curse. We need our sector to remain protected for as long as possible until we can lower costs, develop strains, MJ products etc. While we gain a lot from restricted competition, the regulatory framework can also be very harmful. I highly doubt Canada will legalize highly processed MJ products, like shatter or edibles, as done in some parts of the U.S.. These processed MJ products will bring the lion's share of the profit. Making edibles is a lot of work and I don't even know how to make shatter. (Shatter is amazing by the way if you have a vape pen, it is the ultimate convenience for smoking MJ).
The point I really want to hit home is there is a lot riding on this task force. People are focusing on how it is going to "legitimize the sector". Can we not agree that the sector is already legitimized? The deep pockets aren't holding back because they don't think the sector is legitimate, they are holding back becasue they need to ensure there will be growth in the stock and in the sector...
IF the Canadian government allows Canadians to grow their own MJ for rec. purposes, that could cut out a large portion of the dried bud sales. If your only allowed to sell dried bud with some oil and pills on the side, then its going to impact your profits in a noticeable way. People have downplayed the importance of the ACMPR system allowing all medical patients to grow their own. When that was released, I took a firm stance that this development was horrible for the sector. However, the stock didn't fall because of anticipating the task force in November. So you need to keep in mind, the jump from 2.73 to 4.24 was partly based on a political development that didn't bear fruit. That's more pressure on the task force to deliver. Rather, people stayed bullish because they argued that it is "legitimizing the sector and legitimizing the LPs". How far will this logic drive the price? It has already driven it beyond what CGC should be worth in a year's time.
Here is a real life example of what I am referring to....I was at someone's house this weekend (baby boomer) and he grew a couple plants last year, and just harvested a couple again this year. He has so much weed he is just giving it away to everyone. He also made butter, cookies, syrup etc. Now, not only is he not going to buy any MJ, but now I won't either. Home grown is usually sh1t. Many of you will make this point and it is legitimate. But if you see a seed market open up and people get access to really good strains, then it could make a greater impact than some people anticipate.
This is the kind of info the deep pockets are waiting on. Its not legitimacy, its whether they will be able to retain a monopoly on MJ. With the U.S. accelerating towards legalization on a federal level, Canadian investors should be on edge NOT rejoicing. That is very naive and is based on misinformation.
The good news is that I haven't seen many indications that the Canadian gov will permit home growing for rec. purposes. I wouldn't say its probability is at 0% odds though. All rec. models so far have permitted a limited number of plants for personal use. What we need to pay very close attention to is how forceful pro-legalization MJ lobbyists are on this issue. We will also need to see how the gov. rolls out their ACMPR program for regulating personal cultivation.
I am not arguing for people to leave the sector, or sell their stock... don't get all pyscho bullish on me again for the love of God. This is a discussion that highlights some of the regulatory risks, as well as the risks of legalization in the U.S.. It could be a while before these risks make a real impact even if they do materialize. Hence, keep it on your radar as it IS relevant to this month's developments, but don't panic sell after reading this post.
Hope you enjoyed the read. Looking forward to (real) responses.