39 Days to Rethink This Maligned Cannabis Market

In just 39 days we will be entering the ‘new 20s’.

That is bonkers. When I used to say ‘the 20s’, I think of a throwback to the ‘Jazz Age’. This was of course the 1920s when economic boom took hold after the First World War.

It makes me think of flappers, Babe Ruth, Steamboat Willie, Gordon Coventry, Charlie Chaplin, and cars that looked like the Ford Model T.

Tomorrow when we say the 20s, we’ll be talking about the next decade. The 2020s.

Oh, where does the time go?

I’m excited about the next decade. I think we’re about to enter a similar period. In fact, I think the new 20s is going to be a lot like the ‘old 20s’.

I think we’re going to step into another economic boom. It will present opportunities to investors like never before.

There will be all kinds of new and emerging industries that didn’t exist before. The kind that could elevate economic development to a whole new level.

According to the BBC:

The 1920s was a period of great innovation in technology and science.

Technological advances led to both the development of new industries and an increase in productivity in existing ones.

I see the new 20s being exactly the same.

Much of this will come through advanced technologies like AI, quantum computing, fusion power, and advanced life sciences. These are of course the works of science fiction from the 1920s.

But there will also be opportunity from old industry that existed in the 1920s as well.

It took 100 years, but we’ve come around

At the start of 1920 cannabis was legal in many places around the world. It is believed to have risen in popularity because of prohibition.

But you could quite easily get your hands on some ‘reefer’.

This would all change by the end of the 20s. And as we moved through into the 30s and onward, cannabis would become illegal across much of the world.

This push to criminalise cannabis was rooted in misinformation and fear. It certainly wasn’t based on scientific research and development. And the criminalisation of cannabis would last around 100 years.

Now as we know in 2017 and 2018 the legalisation of cannabis took markets by storm. States across the US and then Canada legalised cannabis in quick succession. It sent stocks like Canopy Growth Corporation [TSX:WEED], Cronos Group Inc [TSX:CRON], and Tiray Inc [NASDAQ:TLRY] soaring.

And then as medicinal cannabis was legalised in Australia it also set the market at home alight. Stocks like AusCann Group Holdings Ltd [ASX:AC8], Cann Group Ltd [ASX:CAN], Althea Group Holdings Ltd [ASX:AGH], and Elixinol Global Ltd [ASX:EXL] rocketed in price.

And then the story began to take a side seat. The excitement fell away. The story didn’t change, the roadmaps didn’t change. The development and innovation in the space didn’t change.

But the market quickly began to fall out of love with cannabis stocks. There was belief it was an overinflated market where demand wasn’t at the levels expected.

And in 2019 cannabis stocks have taken a beating.

The story, however, isn’t over. In fact, it’s only just begun. In the new 20s I believe the cannabis market is going to grow to be one of the world’s biggest agricultural industries.

Double the market

Across the ‘pond’ over in New Zealand, things are about to change. Next year they’re holding a general election. They’re also concurrently holding a referendum on legalising cannabis.

I expect that will pass. And if it does it will be a boom for ASX-listed cannabis companies.

It’s not just New Zealand that’s going to blow this market wide open.

Did you see the front page of The Telegraph (UK) at 2:45pm on Wednesday, 20 November? That would be around 1:45am Aussie time.

As I’ll assume you didn’t, here’s what it looked like:

Money Morning

Source: Screenshot from The Telegraph website

[Click to open in a new window]

Right there, front and centre, the number one headline, ‘Lib Dems pledge to legalise cannabis as they launch manifesto’. This is part of their pledge at the upcoming UK general election in three weeks’ time.

The chances of them getting into power is slim to none in my view. But this is proof the upper echelons of government in the UK are taking this seriously.

According to the UN Office of Drugs and Crime (UNODC) 11% of people in New Zealand smoke cannabis. In the UK it’s 6.2%. That’s the numbers they know about. Chances are those numbers are conservative.

Still, that works out to be a total of around 4.65 million cannabis smokers. That could be on the verge of legal cannabis markets.

In Canada the UNODC reckons 12.7% of the population smokes weed. That’s 4.77 million cannabis smokers. Now look at what a legal cannabis market in Canada has done for cannabis stocks already. Now instantly double that potential market.

Hopefully you start to see where this is heading. And if New Zealand and the UK have legal cannabis markets, what do you think Australia is going to do? Sit there and watch the opportunity for government revenues and GDP growth sail past?

The UNODC says 10.2% of Aussies smoke weed already. That’s over 2.5 million people. What do you think a legal recreational cannabis market in Australia will do for the likes of AusCann, Cann Group, Althea, Elixinol, and the others?

I’d hope the answer is self-explanatory.

Sure, cannabis stocks have struggled in 2019. But with the ‘New Roaring Twenties’ just 39 days away, perhaps this is a stock market opportunity you need to rethink.


Sam Volkering,
Editor, Money Morning

Sam Volkering is an Editor for Money Morning and is small-cap, cryptocurrency and technology expert.

He’s not interested in boring blue chip stocks. He’s after explosive investments; companies whose shares trade for cents on the dollar, cryptocurrencies that can deliver life-changing returns. He looks for the ‘edge of the bell curve’ opportunities that are often shunned by those in the financial services industry.

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