Building Wealth Doc's note: Cannabis investments are hot right now. 2018 was a groundbreaking year for the industry and now, everyone wants to know how to benefit.
That's why today, I'm sharing an essay from our in-house cannabis expert, Thomas Carroll. If anyone understands the nuances of the pot industry, it's Thomas. Today, he explains why the election could create a huge opportunity in cannabis stocks...
And if you want to learn more about three of the top stocks to play this opportunity, click here for the details.
The COVID-19 pandemic has set the perfect table for meaningful cannabis legalization at the federal level...
Two big reasons? Money and jobs.
The cannabis market in the U.S. likely exceeds $50 billion annually. Almost all of this remains untaxed.
If rationally structured and legalized, excise taxes of 20% would add $10 billion of NEW revenue for state and federal coffers. Excise taxes are a flat-rate tax that applies to specific goods, services, and activities.
As COVID-19 and its economic impacts have laid waste to businesses across the U.S., workers have been fired and furloughed at a rate never seen before.
Legal cannabis is quietly expected to be the fastest-growing occupation in the U.S. over the coming years... by an eye-opening margin.
According to the Bureau of Labor Statistics, legal cannabis jobs are expected to grow 250% between 2018 and 2028.
And as with tax revenues, the biggest boon for employment will come from further expanding the legal market to cannibalize the illicit market.
In fact, a report from New Frontier Data estimated that federal legalization would create 782,000 jobs immediately.
The benefits far outweigh the costs... from the creation of new state and federal tax revenues, to new employment, to the discovery of new medicines.
Eliminating the irrational treatment of cannabis over the last 50 years has tremendous, multifaceted upside.
And despite continued hurdles and opposition, cannabis sales continue to soar...
This year, sales will grow by 40% according to a new report by Marijuana Business Daily. This is a great forecast in the year of a global pandemic. And it is directly in line with our expectations in Cannabis Capitalist.
Total legal sales are expected to exceed $30 billion by 2023 – less than three years from now. For context, total sales in 2020 are projected to be $15 billion to $18 billion. This includes both medical and recreational use.
For further context, this is about five times the size of what consumers spend on toothpaste annually.
With the upcoming election, we need to examine our two candidates for president – current President Donald Trump and the democratic nominee Joe Biden.
Both have well-documented opinions against illegal drugs... But both are also coming to grips with the reality of cannabis. Nonetheless, each has continued to put up roadblocks for the full legalization of cannabis at the federal level.
Let's Start With The Donald...
Early on in Trump's bid for the White House, his view of cannabis saw ups and downs.
During his campaign for the presidency, Trump indicated he favored states controlling their own destiny with respect to cannabis. However, this support quickly faded...
Once elected, the administration showed little support.
In early 2017, then-Press Secretary Sean Spicer indicated that the federal Department of Justice (DoJ) could go after states that had legalized cannabis on their own.
A year later, Jeff Sessions rescinded the Obama-era Cole Amendment. This document said the federal government would not interfere with state-level legal cannabis programs.
These actions were the opposite of the campaign's promises, and in 2017, a number of states pushed back. And perhaps the strongest pushback came from Cory Gardner, the Senator from Colorado.
He strongly believed the negative cannabis commentary from the Trump administration went directly against his campaign promises to let states do what they want.
As a result, Gardner used his position in the Senate to block 20 Trump nominees for key positions in the Department of Justice. So the president made a deal with Gardner promising the Fed would not interfere with Colorado's legal cannabis programs. This set important precedent for the industry...
The episode concluded with Gardner saying, "President Trump has assured me that he will support a federalism-based legislative solution to fix the states' rights issue once and for all."
In November 2018, Sessions resigned as Attorney General after a short tenure. Since then, legal state cannabis programs, along with numerous congressional bills, have supported a continued march toward legalization.
Ultimately, it's anyone's guess about where Trump really stands on cannabis.
In 2018, Trump commented in a recorded meeting that cannabis causes people to "lose IQ points." But moments later, he said federal progress to allow banks to work with legal cannabis businesses is "all working out."
If we've learned anything about this controversial president, we know he will act in his own best interest. Traditional policy analysis does not work with a non-traditional politician.
Enter Joe Biden...
Contrary to Trump, who has no political history, Joe Biden's record is crystal clear as to where he stands on drugs, punishment, and jail time. His political career was built on policy that was incredibly tough on big and small offenders alike.
However, his party has changed its tune, especially with the rise of Black Lives Matter and other causes supporting civil, human, and social-justice rights.
Democrats now generally believe the 1980s and 1990s War on Drugs was a failed policy that created more civil disruption than protection. And it disproportionately impacted people of color.
Biden must revise his thinking on this very important issue for the 2020 election. If not, he may lose democrat support.
Let's look at his legislative history...
In the 1980s and 1990s, he was as tough as possible on drugs. Much of the rampant urban crime during that time was thought to stem from the growth in crack cocaine. Biden sponsored, co-sponsored, or actually wrote parts of these laws.
In 1984, the Comprehensive Control Act expanded federal reach. It strengthened federal drug-trafficking penalties and allowed the government to seize property before proving someone was guilty.
The Anti-Drug Abuse Act of 1986 further increased penalties for drug offenses... the most impactful one being when it made an important (but unfounded) distinction between crack cocaine and powder cocaine.
In 1988, the Anti-Drug Abuse Act created the Office of National Drug Control Policy. This new office coordinated and led federal efforts against drug use. It also continued to strengthen penalties for moving drugs from one place to another.
As prisons filled, the 1994 Violent Crime Control and Law Enforcement Act increased funding for prisons. This, in part, led to an increase in prison population during the 1990s and 2000s.
For any chance at White House success, Biden must adjust his stance to reflect modern policy thinking. And he has...
In 2008, the Second Chance Act provided help for people released from jail. In 2010, the Fair Sentencing Act reduced the 100-to-1 disparity between crack and powder cocaine to 18-to-1.
More recently, in July 2019, Biden proposed a comprehensive criminal justice reform plan. The goal is to eliminate "racial, gender, and income-based disparities in the system."
Decriminalization of cannabis is a big part of this plan. Even back in 2018, a CBS news poll found that 72% of democrats support cannabis legalization.
If enacted, this would reverse many of the laws he helped to create over the past 40 years.
Given the massive divide between super liberal democrats and more moderates, cannabis could be a great way for Biden to connect the dots of his own party. This could strengthen the party with voters in November.
Biden no longer believes cannabis to be a "gateway drug." He favors decriminalization and letting states do what they want. This is a huge step.
And his running mate, Kamala Harris, reversed her opinion. In fact, she is the chief Senate sponsor for the Marijuana Opportunity, Reinvestment, and Expungement ("MORE") Act – a comprehensive proposed law that legalizes cannabis and includes a number of social and criminal justice reforms.
We believe the Biden-Harris ticket would strongly support well-balanced cannabis legalization that includes a big criminal justice component.
A Win-Win for Cannabis
Regardless of the November election, cannabis will be a winner.
Trump may seek to move cannabis legislation before the election. Our "Hail Mary" is Trump encouraging meaningful legislation before the end of the year. This would provide him with a big, bipartisan policy win supported by two-thirds of the nation.
Why would his administration not do this?
On the other hand, a Biden White House and democrat-controlled Senate is an almost guaranteed scenario for cannabis proponents. The many cannabis bills currently sitting in Congress would swiftly see progress.
Remember, the market reflects the future today. Should either one of these scenarios play out, cannabis stocks will roar to life...
Happy investing,
Thomas Carroll
Editor's note: According to Thomas, we have the chance to make quick gains ahead of a major legislative change in November... The last time he saw a situation playing out like this, you could have made 500%, 980%, and a massive 1,042% gain by following his recommended buys. And after studying dozens of companies that will be impacted... he's narrowed down to a "short list" of companies trading for as little as $2 that could soar in November. Click here to learn more.