Another billionaire enters legal cannabis market

Thursday, 14 March 2019
Adelaide, Australia
By Bernd Struben

  • Buying into strength
  • ‘Are Ecowarriors Setting Their Sights on Your Pets?’

Billionaire marijuana investor.

If you’re like me, you probably find these three words, in this order, are still jarring.

Only a few years ago the term ‘billionaire marijuana investor’ conjured up the image of some underworld figure. And his — or her, if we’re going to be PC about things — billions weren’t invested in stocks, bonds and gold.

Some of that wealth found its way into fancy cars and flashy homes. But most of it was kept in bundles of $100 bills, spilling out of overstuffed suitcases. Or stashed in some basement vault.

That all began to change over the past decade. Slowly at first, with the US states of Colorado and Washington legalising recreational marijuana in 2012. (Colorado’s first legal sales kicked off in January 2014.)

But as you can see in the map below, legalisation is rapidly picking up pace.

chart image

Source: Wikipedia
Click to enlarge

The only states where cannabis is still entirely prohibited for any use are the grey shaded ones. And the pressure is on every state government to move towards fully legalising recreational use.


Money, of course.

Cash strapped Illinois, where medicinal cannabis is legal but recreational use is not, might be next in line to take the plunge.

From Bloomberg:

Illinois Governor J.B Pritzker proposed legalizing and taxing marijuana and sports betting as a way to help the worst-rated state shore up its finances as he seeks to rein in pension costs and eliminate a backlog of unpaid bills.

Legalizing and regulating adult-use cannabis would bring in $170 million in licensing and other fees in fiscal year 2020, Pritzker said...’

That’s $170 million a year for the Illinois state government. And many times more for the businesses that would grow and sell cannabis. Not to mention the reduced burden on the justice system.

Of course, the story is much bigger than just the US. Much bigger even than Canada’s decision to fully legalise recreational and medicinal use across the nation. A decision that was implemented with the first legal sales on 17 October last year.

That’s less than five months ago.

But as I said, things are picking up speed.

In the most recent news, Israel’s Benjamin Netanyahu is looking at legalising cannabis use for all adults.

As Bloomberg reports:

The Israeli prime minister said he’s looking into legalizing cannabis in an interview Monday on his Likud party’s Facebook newscast. He’s weighing embracing pot as polls show the new Zehut party that supports marijuana legalization gaining steam.

Medical cannabis stocks surged…

Israel’s local cannabis industry has been blooming, with the government approving medical cannabis exports this January. Officials have estimated exports could bring in as much as 1 billion shekels ($276 million) a year in tax revenue.’

A few things to note here.

First, ‘medical cannabis stocks surged’ on the announcement.

According to the article, InterCure Ltd. rose 4.6% in trading in Tel Aviv on Tuesday afternoon, while cannabis producer, Tefen, gained 16%.

The other thing is the US$276 million in revenue that Israel’s medical cannabis exports are already expected to bring in.

With money like that on offer, you can see why more US states and more national governments — including New Zealand — are considering throwing in the towel on their failed prohibition efforts and raking in the rewards of a legal market instead.

Yes, yes, I hear you say. But what was all this about billionaire marijuana investors?

Glad you asked…

This headline also comes from Bloomberg, ‘Billionaire Nelson Peltz Joins Aurora Cannabis as Strategic Adviser’. The article continues:

Billionaire investor Nelson Peltz is joining Aurora Cannabis Inc. as a strategic adviser and is receiving stock options that could make him the pot firm’s second-largest shareholder…

GMP Securities analyst Martin Landry raised his rating on the stock to buy from hold, saying Peltz “could be instrumental in facilitating discussions” with large consumer packaged-goods companies.’

Aurora Cannabis Inc [TSE:ACB] gained 12.97% on Wednesday (overnight Aussie time). That brings the share price gains since 2 January this year to an impressive 52.15%.

As the green wave continues to pick up momentum across the globe, I expect investors in the right pot stocks will enjoy many more profitable periods like this.

Which isn’t to say all pot stocks will rocket higher. Some will surely fail, taking investors’ hard earned money down with them.

That’s why, over at Australian Small-Cap Investigator, Sam Volkering works overtime to separate the wheat from the chaff. Or the weed from the chaff…if you will.

You can find more on his most recent favourite pot stock play here.

Now a look at the markets.


Overnight, the Dow Jones Industrial Average closed up 148.23 points, or 0.58%.

The S&P 500 gained 19.40 points, or 0.69%.

In Europe, the Euro Stoxx 50 index finished up 19.50 points, or 0.59%. Meanwhile, the FTSE 100 climbed 0.11%, and Germany’s DAX closed up 48.24 points, or 0.42%.

In Asian markets, Japan’s Nikkei 225 is up 141.04 points, or 0.66%. China’s CSI 300 is down 0.05%.

In Australia, the S&P/ASX 200 is up a tiny 0.19 points, or 0.00%.

On the commodities markets, West Texas Intermediate crude oil is US$58.32 per barrel. Brent crude is US$67.55 per barrel.

That puts WTI up 2.0% since I wrote to you yesterday. The rise is largely based on lower inventories reported by the US Energy Department. The report showed a 3.9 million barrel fall in US inventories last week where analysts had expected an increase.

WTI is now closing in on the high end of my US$50­–60 forecast range for 2019.

While I think crude is nearing a top, more bad news from some of OPEC’s, erm, less stable members could prove me wrong. At least in the short term.

From Bloomberg:

Five OPEC countries — Angola, Iran, Libya, Nigeria and Venezuela — are already experiencing unplanned production declines as a result of under-investment to offset natural declines, civil unrest, or sanctions. An escalation of tensions in Algeria that translate into widespread strikes, or violent unrest, could make it a sixth.’

If there are a series of new unexpected production cuts, it could send crude significantly higher. If that does happen, I’ll be keeping a close eye on events for the right time to short oil.

Because if the price of WTI goes much higher, we’ll once again see US producers open all the taps to reap the rewards. Which will of course drive the price back down…

Turning to gold, the yellow metal is trading for US$1,309.66 (AU$1,847.72) per troy ounce. Silver is US$15.45 (AU$21.80) per troy ounce.

(More on gold below…)

One bitcoin is worth US$3,848.63.

And the Aussie dollar is worth 70.88 US cents.

Buying into strength

Getting back to gold, the yellow metal enjoyed another US$8.00 per ounce gain overnight.

While that’s still below the US$1340.94 reached on 19 February this year, the trend for gold remains solidly higher. Just have a look at the six month price chart (in US dollars) below:

chart image

Source: Bloomberg
Click to enlarge

Now I’m no expert in technical analysis. Far from it. But you don’t need to be an expert to see that the series of higher lows and higher highs on the chart above tell a bullish story. Indeed, gold is now up 9.1% since 14 September last year.

Resources analyst Jason Stevenson thinks this is only just the beginning. In fact, he forecasts that gold could hit US$1,550 per ounce as early as June.

At his premium investment service, Gold & Commodities Stock Trader, Jason has lined up a series of gold stocks he believes will enjoy the highest share price gains if gold continues to trend higher.

If you think you might like to go prospecting with Jason for the next big gold stock winners, you can do so here.

Before logging off, don’t forget to check out the latest in politics from The Australian Tribune:

‘Are Ecowarriors Setting Their Sights on Your Pets?’

Australia’s ecowarriors love to tell you how to live your life. The list of dos and don’ts is extensive.

These days it goes beyond telling you what kind of transport you should use or the low energy lighting fixtures you should install. Now it even covers the kind of food you should eat, as...’

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

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