I Found Jesus in the Strangest of Places...
I know everyone still has questions about investing in marijuana...
I have answers.
That's why it was a pleasure to sit down with Alexandra Perry of Investing After Hours to discuss the questions readers have and what I've learned from my years of marijuana investing. I hope you enjoy our conversation...
Alexandra Perry: Hello, everyone. This is Alexandra Perry, and you're listening to Investing After Hours. Joining me today is Jimmy Mengel. Jimmy is the editor of two investment newsletters, The Crow's Nest and The Marijuana Manifesto. He just got back from the Cannabis Cup, so I think we're gonna start with that.
Jimmy, first off, how are you?
Jimmy Mengel: Doing great. Thanks for having me on.
Alexandra Perry: Thank you for coming on. So first, what is the Cannabis Cup, because I've never heard of it before.
Jimmy Mengel: It's interesting. So, a marijuana magazine called High Times that has been around forever, every year they put on this Bacchanalian festival of everything marijuana-related. So they have entrepreneurs and growers and consumers, and basically it's a contest, so they bring whatever products they have, whatever marijuana they have, and that you rate it just like you would a dog
show or something. It's just a lot of marijuana and a lot of I guess what you could say competition in the entire space.
Alexandra Perry: So is this event hosted in a specific state? Because I knew you traveled for it.
Jimmy Mengel: Yeah, so this was in San Bernardino, California, where marijuana is medically legal right now, but it's pretty much been decriminalized completely, so it was flying pretty loose in terms of the legality of things. But, technically you would have to have a medical marijuana card in order to take part in all of the festivities.
Alexandra Perry: So what are the benefits as an investor for going to this kind of an event?
Jimmy Mengel: I was there to do an investment presentation, because marijuana stocks have been so popular across the board recently that I think a couple of years ago there would not have an investment panel at the Cannabis Cup. But what we found was that our presentation was completely packed with people of all ages, and they were very, very interested in learning about how to invest in marijuana and coming along for the ride. They've heard the stories, they've seen the new "Green Rush," which is pretty much mainstream now, so more and more people are getting into it.
So for our purposes, it was great to just be able to teach people about what to do and what not to do, and just kind of educate like-minded folks about how indeed you go and invest and make money in marijuana.
As far as an investor, going to this event is really cool, too, because you get to see how the market is playing out. It's one thing to just read about it, but when you go to an event like this and see the fervor and amount of money that is just going into these products, it really does, I would say, justify the hype.
So we walked around and talked to entrepreneurs that had different products. It wasn't just a bunch of basement dwellers growing marijuana. These are legitimate companies with very interesting products. So it just kind of gives you a handle on how big this market is going to be once California legalizes marijuana recreationally, and then from state to state... The possibilities are endless, and it's going to be a massive market that I don't think people quite understand how important that is for an investor.
Alexandra Perry: Do you feel like the investing demographic you see is a little bit younger? Because I know you've been investing for a long time, and when you first came onto the podcast we talked about blue-chip stocks, which is more traditional investment for, I think, older people. They're more familiar with it. But in this space, you probably see a little bit different age interest than what you're used to.
Jimmy Mengel: Yeah, absolutely. It was funny, because we had a question-and-answer session after the panel. And again, the crowd was all over the place. We had 20-something-year-old kids and then 80-year-old guys equally interested in the investment angle of things. But one of the questions is probably a 25-year-old kid said, "I've been trying to get my dad to invest in marijuana stocks for like the last five years, and he thought I was crazy."
So I told him I did the same thing with my dad when I first started investing in marijuana, and he was just like, "That seems like the riskiest, craziest thing you could ever do. I'm not investing my money in that right now." So I said, "Okay, well, here are a couple of companies I would probably just stash some money in and see what happens."
And then years later, when I was kind of bragging about my stocks and one of them went up like 850%, I was like, "Don't you wish you got in on that when I was talking to you about it?"
And he's told me, "Well, to be honest, last year I did put some money into it and just didn't tell you."
So people are catching onto it and they're getting over that fear of it being an illegal substance or all of the stereotypes you hear about marijuana. Everyone's coming around to it. And in the end, if you're investing you really just want to make as much money as possible, and this space has just been brilliant for that over the last few years, and I think people are starting to recognize that.
Alexandra Perry: At this kind of event, is there any vendors or companies that caught your interest? I don't know if this is the kind of event where it's more smaller not necessarily companies but people that are mom-and-pop shops that are engaging with the cannabis base or if big companies do come out and showcase their wares, experience with legalization coming up.
Jimmy Mengel: There were both. It was all over the place. A lot of people were just selling bags of marijuana, which is fine, but I don't think that is really where the industry's going.
Just in terms of the prices, too, everything was very cheap, so I don't know if you're just gonna be able to grow marijuana and then sell it at margins like that, say $5 a gram, where you may make a dollar or two here or there. But the interesting stuff for me was the different array of products for different markets. For example, I ran into one guy who was selling THC toothpicks, so essentially it's just a discreet way of using marijuana in small doses that I think you could pay a premium for, like if you want to buy a case of toothpicks, you can see that for a lot more compared to a little bit of marijuana flower.
So that was an interesting product that I think had some serious potential. And the thing about the different markets, too, is there was another booth where a woman was selling marijuana vaporizer pens but that looked like mascara.
Alexandra Perry: Oh, that's clever.
Jimmy Mengel: Yeah, so you think about that and then you think of kind of your soccer mom who wants to be discreet about it but still wants to get a little buzz before they go about their daily business. So it was kind of those little ancillary products I think are gonna make up a large part of the market, and it'll be interesting to see how that develops.
Alexandra Perry: Do you have a favorite story? I imagine if you go to these kind of events there's just gotta be something that happens that sticks with you. You're probably meeting a very wide range of characters.
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Jimmy Mengel: Yeah, it was ... I mean, it was ridiculous. Yeah, if you told me in high school I would be covering the Cannabis Cup as an investor my head would've exploded.
I guess the funniest thing that happened was we were going around with the camera crew just interviewing some people and talking to some businesses, and I turned around and ran smack dab into Jesus.
And full regalia, big beard, and he was just... He said, "Hello, my son. Are you here to take part in the sacrament?" I was like, "Well, no, I'm here for business, but it's nice to meet you, Jesus."
And he just gave me a big hug and a handshake, and I turned around and he was... I guess one of his disciples was rolling up huge blunts, which are marijuana cigar-type concoctions, and rolling them up like crucifixes and then passing them around to other people in the crowd, so...
Alexandra Perry: Are we talking like full-out Mel Gibson Jesus?
Jimmy Mengel: Oh, he was Jesus, and was playing the part, too. I guess I could say that I found Jesus at the Cannabis Cup. But there was all sorts of funny stuff going on, and it was more of a festival than my typical investment seminar. But, yeah, you can't get thousands of people together in the name of marijuana without some pretty funny things happening, so it was interesting, to say the least.
Alexandra Perry: Well I think it's interesting that it's happening San Bernardino, California, because we're moving into a big year for not just California but the rest of the cannabis industry as California plans to make marijuana recreationally legal on January 1st, isn't it?
Jimmy Mengel: It is, yeah. So it's coming up quick.
Alexandra Perry: I was wondering if you could kind of talk to us about that, because I know that at this stage, especially since we've entered a presidency where people might see more obstacles to marijuana being legalized in other states — California, I think, has always been a state that many people imagined would legalize marijuana first — do you foresee any major regulatory hurdles on a state level still?
Jimmy Mengel: I think it's gonna be interesting to see how it plays out. As you said, California has been allowing medical marijuana for over 20 years, so they have the infrastructure in place. And it's California. It's pretty chill, as they say. But just the sheer amount of money that's going into this, they're forecasting a $7-billion-a-year industry just coming out of the shadows. But that also means taxes and regulations, and there are plenty of things that are going to have to happen to make sure that that is a smooth transition. I'm sure they'll figure it out, but there'll be some growing pains.
But yeah, tax-wise, they project a billion dollars a year in taxes, so when you put that kind of money together in such a new and interesting industry, I guess one of people's concerns is the federal regulations more so than the state regulations
But federally it's still an issue, and I don't think that the federal government is even going to want to touch this when they see that kind of money coming in and they see those taxes coming and they see how popular it is with their constituents.
I guess you're alluding to kind of the Jeff Sessions thing where he's an anti-drug crusader and then can just swoop in and start raiding dispensaries and really just cracking heads. I just don't see that being a popular or reasonable decision, and despite whatever you might think about the administration, I think they're gonna be a bit more pragmatic about that, especially as more and more states leave it up to their voters to legalize. So you don't want to argue with the people too much. You don't want to crush a huge industry that's creating American jobs, and just don't... I don't see a federal crackdown on legal marijuana state-by-state.
Alexandra Perry: It seems like when you reach a point where a state has legalized recreationally... Like when Colorado did, it was kind of this example to the rest of the country that it can be done, that it can add this much tax dollars, and now when California does it, those states are now outside of federal... The federal government can no longer step in and destroy that infrastructure once it's already been put into place.
Jimmy Mengel: Well, they technically could, I just don't see the reason that they would.
Alexandra Perry: Because they still benefit from the tax dollars regardless of whether or not it's legal on a federal level.
Jimmy Mengel: Sure. So, no, I think every time one of the dominoes falls, with California really being the crown jewel of the entire country in terms of marijuana legalization, it just gets harder and harder to justify that kind of federal encroachment on people's livelihoods. You're really, if you're running in and crashing a marijuana distributor or any sort of entrepreneur, you're killing people's jobs. You're putting more people in jail that don't need to be in jail. I just think they have bigger fish to fry, and although I'd prefer Jeff Sessions not be the Attorney General, like as a marijuana investor, I just really don't think that's on their plate right now or something they're really concerned about.
Alexandra Perry: Do you think this legalization on California's part will affect companies inside of California and outside of it, or is this something that California will probably benefit from strictly because they're in the distributing state?
Jimmy Mengel: No, I think it's going to benefit everybody, especially if they have a smooth roll-out and are able to show that you can really do this on a large scale.
As they say, a rising tide lifts all boats. So if California can prove it and pull it off, then that sends a message to all the other states, especially smaller states being like, "We can absolutely do the same thing on a smaller scale. We've seen how it's done." You've seen it in Oregon and Colorado — and now even Nevada, which has been a really interesting case as well — that they are able to do this and pretty much everybody wins. There's really not many negative stories coming out. So yeah, I think once California gets rolling we're gonna see a lot more states continue to just start legalizing.
New Jersey is an especially interesting example. Their new governor that was just elected said, "We could probably get this going by next year." So if a state like New Jersey in such proximity to New York, when you start getting those kind of states, it is a domino and effect and I think we're gonna see more and more of it. And as an investor, that just opens up new markets everywhere, and I think that's gonna be interesting for California companies but for any companies that are working in the United States.
We'll have the rest of our conversation next week. Until then have a blessed Thanksgiving. If you want to get started on marijuana stocks, I humbly request that you sign up for my newsletter right here.
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Jimmy is a managing editor for Outsider Club and the investment director of the personal finance advisory, The Crow's Nest, and cannabis stocks advisory, The Marijuana Manifesto. You may also know him as the architect behind the wildly popular finance and investing website Wealth Wire, where he's brought readers the stories behind the mainstream financial news each and every day. For more on Jimmy, check out his editor's page.
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