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Marijuana Index Plunges as Justice Department Repeals Obama’s Lax Marijuana Policies

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Cannabis investments took a nosedive Thursday after U.S. Attorney General Jeff Sessions repealed former President Barack Obama’s relaxation of marijuana prosecution. The decision ended nearly a year of speculation about whether the Trump era would continue extend the former administration’s lax marijuana policies.

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Sessions Reaches Decision

In a one-page letter, Sessions called the Obama-era guidance “unnecessary,” and said he would allow U.S. attorneys to enforce cannabis laws more aggressively. The renewed pledge to fight the cannabis industry extends to users as well as traffickers of the green plant.

According to The Wall Street Journal, the Attorney General was worried that the former administration’s guidance created “a safe harbor for the marijuana industry to operate” in certain states where the plant enjoyed more lax laws.

Sessions added the following in a statement:

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“It is the mission of the Department of Justice to enforce the laws of the United States, and the previous issuance of guidance undermines the rule of law and the ability of our local, state, tribal and federal law-enforcement partners to carry out this mission.”

Prior to Sessions’ decision, the Trump administration had been purposely opaque about the growing tension between federal and state laws. A slew of U.S. states voted to allow recreational cannabis during the 2016 election, with several others considering a referendum of their own on the matter.

California has vowed to fight the federal crackdown on marijuana, and have instead pledged to uphold its own version of the law. The state is expected to be one of the major bellwethers of the North American cannabis sector, which many argue can become a generational investment opportunity.

That being said, the decision made by Sessions gives U.S. attorneys, the top federal prosecutors in their districts, more power to pursue marijuana-related offences.

Marijuana Index Tanks

Investors were understandably shaken by Sessions’ remarks on Thursday, with cannabis stocks declining across the continent. The North American Marijuana Index, which tracks the industry’s top performers in both Canada and the United States, declined 11.2% to 304.78. The index has 35 constituents representing various sub-industries. Marijuana investments reached record highs earlier this week.

The U.S. version of the index suffered the biggest loss, with 15 constituents reporting a loss of 21.3%. The U.S. Marijuana Index closed at 83.19, its lowest in a week. Meanwhile, the Canadian Marijuana Index declined 6.4% to 889.85.

Canada’s marijuana sector faces a much more favorable outlook as the federal government prepares to legalize recreational cannabis this July.

Featured image courtesy of Shutterstock. 

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Jeff Sessions’ War on Marijuana Rattles Cannabis Stocks, but the Battle Is Far from Over

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North American marijuana stocks plunged for a second straight session Thursday, as investors continued to weigh the Trump administration’s policy U-turn on recreational cannabis.

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North America Marijuana Index

The Marijuana Index, which tracks 39 of the leading cannabis companies in November America, plunged 6.4% to 327.58. It was the index’s second consecutive decline and third major reversal since Jan. 4, the day Attorney General Jeff Sessions reversed the Obama-era guidance on cannabis laws. In a one-page letter, Sessions said the government would renew its commitment to tackling the cannabis industry.

Despite recent volatility, the has gained more than 73% over the past month.

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Canadian Marijuana Industry

Much of the decline on Thursday was concentrated on the Canadian side of the border. The Canadian Marijuana Index, which is capitalized at $28.4 billion, fell 9.8% to 908.27.

Canadian pot stocks started off the year with a bang as a number of major deals were announced. In the first week of January, Edmonton-based Aurora Cannabis Inc. (ACB) announced a $55 million acquisition of The Green Organic Dutchman Holdings, an Ontario-based licensed medical cannabis producer.

Emerald Health Therapeutics, another licensed medical marijuana producer, also announced an undisclosed Canadian investor agreed to buy a $25 million stake in the company.

Meanwhile, Aphira Inc. of Leamington, Ontario announced it had closed a $115 million bought-deal share offering.

Sessions Unlikely to Deter Cannabis Market

The Attorney General appears to have reignited Washington’s war on marijuana. The policy of overarching federal enforcement of cannabis laws will likely create some hesitation on the part of investors and entrepreneurs, but is unlikely to change the course of history following broad legalization campaigns in several states.

Democratic representatives from pro-marijuana states, such as California and Colorado, have criticized Sessions’ reversal on the Obama administration policy that allowed states to legalize weed without federal approval.

On Jan. 4, the Colorado State Democrats issued the following statement via Twitter:

“We’ll give Jeff Sessions our legal pot when he pries it from our warm, extremely interesting to look at hands.”

It’s not just Democrats who have raised objections to Sessions’ decision. Colorado Republican Senator Cory Gardner called the move “a trampling of Colorado’s rights.”

“Why is Donald Trump thinking differently than what he promised the people of Colorado in 2016?” Gardner said in a Jan. 4 Senate speech. “Thousands of jobs at risk, millions of dollars in revenue, and certainly the question of constitutional states rights — very much at the core of this discussion.”

The legalization of recreational weed has unleashed a multi-billion-dollar industry that will only grow over the next five years. Current valuations place legal pot sales in the U.S. at well over $6 billion. However, it has been estimated that the state of California alone generates more than $6 billion in sales.

Market participants are observing California closely for clues about how the industry will grow and evolve over time. The state may already represent some 70% of legal marijuana sales across the country, making it the single-most important jurisdiction in the fight for legalization.

The size and growth rate of the legal cannabis sector is subject to great speculation. Research by Ackrell Capital says a hands-off policy approach to cannabis could generate $120 billion in sales as early as 2020.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Legal U.S. Cannabis Sales Up 30% This Year, With Room to Grow

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America’s retail marijuana sales rose sharply this year, with signs that legislative reform is poised to boost the industry even further in 2018.

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U.S. Sales Surge in 2017

Legal U.S. pot sales rose 30% in 2017, according to the Marijuana Business Daily’s annual report. Based on the Daily’s previous projections, that’s equivalent to $5.1 billion to $6.1 billion in total revenue. Sales are projected to reach between $6.7 billion to $8.8 billion in 2018 for a gain of at least 31%. Projections show the industry could top $17 billion by 2021, with sales largely concentrated in recreational pot. These numbers are in line with previous forecasts conducted by Arcview Market Research, which showed legal cannabis sales could top $20 billion by 2021.

The following chart illustrates the industry’s projected growth over the next four years.

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Source: Marijuana Business Daily. Marijuana Business Factbook 2017.

Even with recreational sales surging, the medical sector is also expected to contribute to the expansion. The Daily has previously cited Maryland and Hawaii as positive contributors to the medical industry’s projected growth. At the same time, medical marijuana industries in Illinois, Nevada and New York appear poised for further gains as these markets mature.

Legalization Drive Boosting Sales

Marijuana sales are expected to rise significantly in the future now that several U.S. states have voted to legalize recreational pot. This likely explained the market’s robust expansion between 2016 and 2017, and why the industry is expected to surge well into the future.

Cannabis stocks have also been on a tear ahead of the planned legalization of recreational weed in the state of California. America’s most populous state was one of a handful of jurisdictions to vote in favor of recreational pot during the 2016 presidential election cycle.

California’s recreational cannabis market opens in January, with some analysts expecting wholesale weed to cost more than $500 a pound. Prices are expected to drop almost immediately because wholesale supplies will be limited. Only about 25-30% of the Golden State’s municipalities have agreed to support the industry.

Regulatory Hurdles

Though business may be booming, tension between state and federal regulation is expected to weigh on the market. Under existing legislation, recreational programs like those administered in California are in violation of federal laws.

The Trump administration in recent months has been silent on the subject of recreational marijuana, but its first public comment on the matter implied greater enforcement of federal regulations. Federal legislation limits marijuana businesses in their quest for financing. It also creates uncertainty, which could limit business expansion and investment.

In addition to regulatory bottlenecks, wholesale growers face stiff competition from a saturated market, especially in more established markets like Colorado and Washington. The Daily reports that production in these states has outpaced demand despite a steady rise in consumption. This will likely keep wholesale cannabis prices subdued, making it more difficult for businesses to enter the space.

That being said, recreational weed has been described as a generational opportunity. In addition to the seven states that legalized marijuana during the 2016 election, several others are holding public debates on the matter. These states include Delaware, Rhode Island, New Jersey, Vermont, New Mexico, Texas, Missouri and Kentucky.

Featured image courtesy of Shutterstock.

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Marijuana Stocks Continue to Grow Ahead of California’s Planned Legalization

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Marijuana stocks powered to new highs on Tuesday, as investors rallied behind the planned legalization of recreational cannabis in California next month.

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Marijuana Index Rises Again

The closely watched North American Marijuana Index rose 5.5% on Tuesday to close at 189.58, which was enough for a new all-time high. The index has been on an absolute tear the past six weeks, having gained nearly 70% since Oct. 26. For the year, the index has returned roughly 32%.

Despite all the optimism surrounding the U.S. industry, it was Canadian stocks that did much of the heavy lifting in the early part of the week. Currently, the North American index is comprised of 35 companies. This includes well capitalized companies such as CannTrust Holdings Inc. (TRST) and  Cronos Group Inc.  (MJN).

The more segmented Canadian Marijuana Index added 8.3% on Tuesday to finish at 504.97. By comparison, the U.S. Marijuana Index added just 1.5% to 65.53.

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In California, Full Legalization Nears

Beginning Jan. 1, Californians will be able to buy cannabis recreationally, a move that analysts say will kick start a multi-billion-dollar industry in the state. It’s a date that marijuana consumers and businesses have been waiting for since Proposition 64 was officially passed on election day 2016. After more than a year of speculation and anticipation, full-scale legalization is merely weeks away.

The green plant will be regulated by the state’s Bureau of Cannabis Control which, among other things, is responsible for licensing dispensaries and other cannabis-based businesses. In just a few weeks, any Californian aged 21 and over will be able to walk into a dispensary and purchase week, provided that the business has a temporary license from the state.

That being said, state-wide roll out is expected to be slow. Currently, only Oakland and a few Desert Hot Springs’ locales in the Coachella Valley have adopted formal rules governing the green plant. Others, such as Sacramento and San Jose, haven’t done much. Other regions, such as Kern County, have banned marijuana sales after voting against Proposition 64.

California has long been considered a major catalyst for the pot industry’s future growth. It is estimated that traditional marijuana buds (i.e. flowers) alone generated $375 million worth of sales in the second quarter alone. According to BDS Analytics, flower sales represent 55% of the state’s cannabis market. That means you are already looking at a multi-billion-dollar industry with plenty of room to grow.

When it comes to marijuana, “flower” isn’t a terribly descriptive term. In fact, the researchers at BDS say they track the sales of 13,000 unique strains that fall under the generic flower description.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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