Why to Buy???? Read On .......... It's official...almost.
One of the biggest changes to Canadian law took a huge step last Thursday, which could soon shape the fate of the entire world.
With the third reading of Bill C-45, Canada's Senate voted to legalize recreational marijuana - putting the country on track to become the first of the G7 nations to allow the national use of the drug.
And for those invested in Canadian marijuana stocks, it should have been a massive victory...
Yet, marijuana stocks sold off...
But why?
More importantly, does that mean the run is over?
In this letter, we'll explain how marijuana legalization in Canada works and answer some of the questions you may have.
First, it's important to know and understand how laws become laws in Canada, before we even get to marijuana legalization.
How Laws in Canada are Made
In summary, here's how it works, via the House of Commons:
1. notice of motion for leave to introduce a bill and to place it on the Order Paper;
2. preparation of a bill by a committee (where applicable);
3. introduction and first reading;
4. referral to a committee before second reading (where applicable);
5. second reading and referral to a committee;
6. consideration in committee;
7. report stage;
8. third reading (and passage);
9. consideration and passage by the Senate;
10. passage of Senate amendments by the Commons (where applicable);
11. Royal Assent, and
12. coming into force.
In the case of marijuana legalization, the bill is called Bill C-45.
This past Thursday, we passed Stage 9: consideration and passage by the Senate, with a 56-30 vote.
In other words, we're just one final stage away from Stage 11: the Royal Assent - a fancy term for officially introducing a new law.
But before that can happen, we need to go through Stage 10: passage of Senate amendments by the Commons (where applicable).
Sometimes, the Senate may adopt a Commons bill without any amendments. When this happens, a message is sent to the House of Commons to inform it that the bill has been passed, and Royal Assent is normally granted shortly thereafter.
However, in the case of Bill C-45, there were new amendments.
The New Amendments
Most of the new amendments were technical legal jargon and clarification, such as translation (English to French) incongruities and definitions.
However, a small few could impact the legalization landscape in a more dramatic way.
For example, amendment 3 states:
"5.2 For greater certainty, this Act does not affect the operation of any provision of provincial legislation that is more restrictive with respect to, or prohibits, the cultivation, propagation or harvesting of cannabis in a dwelling-house."
That means that provinces will have the power to regulate home cultivation, even granting the ability to impose an outright ban - whereas the preamended Bill allowed people to grow up to 4 plants in their homes.
Another amendment states:
"(2.1) Subparagraph (1)(a)(ii) does not apply
(a) if the cannabis is distributed by an individual who is 18 years of age or older and less than two years older than the individual to whom they distribute the cannabis; or
(b) if the cannabis is distributed to an individual who is 16 years of age or older by their parent or guardian in their dwelling-house."
These were added to the Distribution section of Bill C-45, which talks about what is prohibited when it comes to distribution - in particular, distribution to minors.
In other words, the amendment was added to allow friends to share marijuana with other friends, as long as the one sharing is older than 18 and is sharing with someone older than 16.
It also allows parent and guardians to share marijuana with individuals that live in their home who is 16 years or older.
Other amendments include the right to vote on the introduction of future products such as edibles and vaporizers, and more significantly, the banning of promotion by marijuana companies on merchandise and other "swag" items.
Despite the media headlines, however, most amendments seemed relatively minor.
So, what happens next?
Third Reading Passed...What Next?
Ministers are now working this weekend to complete their review of the amended bill.
From there, they will make recommendations on the Senate's version of the bill, which will then be presented to the Cabinet for consideration.
A motion stating which amendments the government can accept will then be drafted and put forward to the House of Commons for a vote.
Once the House of Commons vote, it will send a message back to the Senate outlining which amendments it will adopt.
Now here is where it can go back-and-forth.
If the House rejects some of the Senate's amendments, but the Senate insists on those amendments to be included, the Senate can then send the Bill back to the Members of
Parliament for further review.
This is where legalization can be delayed once again.
However, given that the majority of the amendments are relatively minor language changes, it's hard to fathom this process will take much longer.
In fact, we've been told we could have something back as early as Monday night.
And while the market is beginning to feel that legalization could once again be delayed, judging by how marijuana stocks dropped after the vote, there is one more important thing in Legalization's favour: the summer break.
Every year, Parliament is closed starting from June 23 or the Friday preceding if June 23 falls on a Saturday, a Sunday or a Monday, up until the second Monday following Labour Day.
For this year, the last day we will see Parliament in action is June 22 and it won't resume until September 17, 2018.
That means if legalization doesn't go through by June 22, we'll have to wait until at least late September.
But given that Bill C-45 has already gone through so many amendments through the first and second reading and only a few minor amendments remain, it's hard to imagine that politicians will fail to agree by this month - especially given that Bill C-45 is one of the biggest bills for Trudeau's Liberals.
Furthermore, the House of Commons is represented by a majority Liberal Trudeau government that would much rather Bill C-45 be passed, then to continue with on-going delays - especially ahead of the Parliament Summer Break.
And especially since Trudeau promised last year that legalization would happen by July 1, 2018.
In other words, I'd be shocked if Bill C-45 doesn't become law by June 22, 2018.
Mark your calendars.
But let's say, for whatever reason, legalization in Canada is delayed.
Does that mean the run is over and we should not look to enter the market until after summer?
Bigger than Canada?
In many past Letters, I have discussed how marijuana is set to become a massive market that will create thousands of jobs, bring in millions in revenue, and create a whole new generation of millionaires.
Most importantly, it could make YOU a lot of money. And fast.
I suspect more will come from the sector in the coming weeks - especially given that I fully believe we'll see legalization pass in Canada before June 22, 2018.
But Canada's expected legalization of marijuana isn't the only reason why I suspect marijuana stocks to go higher.
Just the other day, something incredible happened.
In fact, this something could not only send marijuana stocks higher, but it could even give US President Donald Trump a second term.
Remember last month when I told you that a few US Senators were in the process of drafting a new bill that would give states the right to determine the best approach to marijuana within their borders?
"Just the other week, President Trump promised Cory Gardner, a top Senate Republican, that he will support congressional efforts to protect states that have legalized marijuana.
~ Via Financial Post:
"...President Trump has assured me (Cory Gardner) that he will support a federalism-based legislative solution to fix this states' rights issue once and for all."
And while a bill has not been finalized, Garnder, "has been talking quietly with other senators about a legislative fix that would, in effect, make clear that the federal government cannot interfere with states that have voted to legalize marijuana."
Turns out that bill may appear this week.
"In an interview with Yahoo News, Gardner said he met with Warren and "a number of senators on both sides of the aisle" on Wednesday to discuss a bill that will prevent the federal government from meddling in state-controlled marijuana industries. He said a draft of the bill could appear as early as later this week."
A month later, that's precisely what's happened.
Just this past Thursday, Senators Cory Gardner of Colorado and Elizabeth Warren of Massachusetts released a bipartisan marijuana legislation reform bill that would give US states the right to determine the best approach to marijuana within their borders.
And in less than 24 hours, at the G7 Summit, President Trump told us that he was inclined to support the bill.
Trump told reporters when asked about the legislation. "We're looking at it. But I probably will end up supporting that, yes."
Now, don't think for one second that Donald Trump is just saying that without thinking.
Whether you like him or not, President Trump is a master at getting deals done - especially deals that would give him another term as President of the United States.
And I bet he will strike the Democrats first.
You see, in Canada, the Liberals made legalization part of their successful 2015 election campaign - gaining tremendous support, and likely votes, from those in favour of marijuana use.
In the US, those who favour marijuana legalization in the US continues to break new highs, with more than 64% of the US in favour of legalization.
"Americans continue to warm to legalizing marijuana, with 64% now saying its use should be made legal. This is the highest level of public support Gallup has found for the proposal in nearly a half-century of measurement."
With that being said, don't you think that legalization will be a huge part of the next US elections?
Don't you think that the Democrats are likely planning to make legalization part of their next election campaign?
I certainly do.
Only...I think Trump will strike first.
And that could light the marijuana market on fire.
Conclusion
I said it last month and I'll say it again:
"The legalization of marijuana in Canada, and around the world, is one of the biggest money-making opportunities we'll ever see in our lifetime."
Whether you support legalization or not, I am a strong believer that those who don't invest in the space now will regret it for the rest of their lives.
Heck, if you simply invested in the This is truly the beginning of one of the biggest market events in history.
And while investors may sell and cause pressure on marijuana stocks on the back of legalization - the old "buy the rumour, sell the news" mentality - those investors have forgotten one very crucial point: legalization will bring big funds and institutions into the market.
You see, the biggest banks, and even pension funds, all want to play in the sector. However, because marijuana is not yet legalized, many of them have stayed away.
But what happens when it does become legalized?
What happens when the biggest Canadian pension funds participate?
Considering that the top 10 pension funds alone have assets of over a trillion dollars - much of which are focused on the slumping oil and gas sector - I'd say the biggest buying has yet to come...
Or how about when all of the big Canadian banks begin to cover the marijuana space?
We already witnessed BMO enter the game in January by underwriting a $175 million stock deal with the world's largest marijuana company...
And we recently witnessed CIBC launch coverage of the space...
I predict that we will soon see deals - be it debt, stock, or other agreements - between marijuana companies and the big institutions following legalization.
And these deals will light the market on fire.
Get ready...
Ivan Lo
The Equedia Letter