Are cannabis stocks headed up? Or just up in smoke?

Are cannabis stocks headed up? Or just up in smoke?

VicesFebruary 13, 2017 By Reilly Capps

Is now a good time to buy stock in weed? A professional cannabis stock broker we talked to was generally optimistic, but not certain.

On the one hand, business is booming. Marijuana shops literally don't know what to do with all their cash. It could very well be a $40 billion industry by 2020, creating 100,000 new jobs. The plant was more popular among voters than any other issue in November. And cannabis stocks, which deal with marijuana-connected real estate, equipment or pharmaceuticals, are having multi-million dollar initial public offerings

On the other hand ... Donald J. Trump.

The new president could drive a stake into the heart of the recreational marijuana industry with one phone call to his Attorney General, Jeff Sessions, instructing him to enforce federal drug laws. Those are the ones that classify marijuana along with heroin as a Schedule I drug.

The vast majority of investors, business people and political scientists think business will keep booming, and Trump will leave everyone's stash alone. They also think Trump will stick to his campaign rhetoric about leaving medical marijuana up to the states. After all, Trump said he was "in favor of medical marijuana 100 percent," and that he knows people for whom marijuana "really does help." Plus, there's a law on the books, Rohrabacher-Farr, that prohibits the feds from spending money to interfere with state medical marijuana programs. Congressman Dana Rohrbacher himself says that he thinks Sessions won't mess with medical marijuana.

But not everyone is so sure about recreational pot. No law protects the recreational marijuana industry. And Trump said that recreational pot in Colorado is "causing a lot of problems out there" (which is a typical Trump oversimplification). 

Jodi Avergun, a former DEA agent, told Marijuana Business Daily that Trump probably won't move against marijuana at all, but that if an investor wanted to be safe, she should invest in medical-marijuana friendly stocks, as opposed to recreational. 

Our cannabis-bullish stockbroker, too, sounded a note of caution, since any small move from the feds could affect the recreational industry. 

"All he'd have to do is send a few letters to a few landlords telling them they were making money off an illegal substance, and that would put a real scare in the industry," said the stockbroker, who didn't want his name used in this article because he didn't want to be seen as giving investment advice. "If he arrested more than a few people, that would really send a message."

If Trump scares the recreational pot industry, investment money will head to Canada, where a liberal prime minister seems poised to help Canada fully legalize the herb. Already, some money is flowing north, as "investors in U.S.-based cannabis operations are growing nervous" about Trump and Sessions, the Financial Post reports.

What will happen here in the states with cannabis stocks? Only Trump knows, and let's be honest, he probably doesn't really know himself. Trump has never smoked a joint — Obama smoked a gang of 'em — and Sessions has said "good people don't smoke marijuana." So who knows? There's the small possibility that Trump will return to his position from 25 years ago, when he said all drugs should be legal. “We’re losing badly the war on drugs,” he said back then. Of course, he was right, which just proves that if you spend a few decades spouting whichever policy position comes into your head, you're bound to get a few things right.

Bottom line? There are hopeful signs. Senator Elizabeth Warren wants banks to help pot companies. Former U.S. Senators are making money off cannabis stocks. Publicly-traded lawn-care company Scotts Miracle-Gro, moving into hydroponics, is seeing its stock soar. Apple filed a patent for a vaporizer. Investors are flooding into California. And Snoop is giving stock tips.

As long as Trump doesn't re-launch the War on Cannabis, stocks should soar. But Trump's power of this industry is staggering, and it makes you wonder whether this current situation, in which the health and business interests of millions of Americans rests in the hands of one man isn't unnecessarily precarious.