The Virus is Breathing New Life Into This

One industry is witnessing a resurrection from the coronavirus. And it's not the one you think...

Written by Jimmy Mengel
Posted June 11, 2020

The law of unintended consequences is — as far as laws go — a pretty interesting one.

It‘s been used by famous philosophers and economists, from Adam Smith’s “invisible hand” to John Locke’s interest rate experiments, to explain away the problem of trying to predict things.

It boils down to this: the actions of people and governments always have effects that are unanticipated or unintended. Viruses, however, do not share the critical thinking of philosophers or economists. They don’t care about their impact, they simply exist. It’s up to the rest of us to try and make sense of their aftermath.

This has played out in many ways during the coronavirus. We’ve lived through quarantines, mass layoffs, stock market fluctuations, and historic Fed intervention. Of course, there is also the civil unrest, political posturing, the uprooting of traditional education, the horrors of a home haircut before an important Zoom call — I’m sure I needn't go on.

We’ve all lived it.

Investment-wise, we’ve seen some wild stuff in the past few months. But I just want to talk about one thing today.

If you told me at the end of last year that a global pandemic was just what the cannabis industry needed to start the second boom, I would have told you to stop getting high on your own supply.

But that is exactly what has happened...

Cannabis is flying off the shelves. Most states have deemed cannabis dispensaries “essential businesses.” Stock price gains have hit triple digits for some of the larger producers that had previously looked like dead men walking.

Since bottoming out in March, the Horizons Marijuana Life Sciences ETF (TSE: HMMJ) — which tracks all of the major global cannabis players — has gone up almost 70%.


That's because — as I've told readers in the past — cannabis is actually as close as you can get to a recession-proof industry. Much like ATF stocks (alcohol, tobacco, and firearms), consumers put their money into things that may seem strange when you call them “essential”, but are actually more important to people than most of us realize.

Cannabis stocks are going to continue their climb, especially once the virus subsides, but it's not for the reason you think. COVID-19 still has one more trick up its sleeve, and it could blow the doors for cannabis investing wide open...

Now, I've discussed before just how much cannabis people are buying during the lockdown. People are loading up on cannabis like they are with toilet paper, hand sanitizer, and canned goods. Recreational sales are up triple digits in some areas of the country. 

But there is another byproduct of the recent crisis that many people aren't really talking about. Once the virus has subsided, states will be left with millions of unemployed Americans, thousands of shuttered businesses, and massive amounts of debt.

Here’s what cannabis could bring to each and every state:

  • Billions of dollars in tax revenue (for years to come)
  • 1 million+ high-paying, disaster-proof jobs
  • An entirely new production chain that helps everyone — from depressed rural areas to urban city centers

What better time to slide in cannabis legalization to help ease the massive burden? With the stroke of a pen, states can legalize cannabis and create a brand-new stream of tax revenue — instantly.

This isn't just my theory...

DataTrek Research's Jessica Rabe just released a report detailing a similar thought process.

In the report, Rabe argues that cannabis legalization could help cover a significant portion of the revenue shortfalls that will be created by pandemic subsidies.

“Unlike the federal government, states can’t print unlimited amounts of money,” Rabe said.

It’s logical to expect that after the pandemic, state and local governments will face massive shortages in tax revenue brought by decreased commercial activity and a rise in unemployment.

For Rabe, the best solution for states is to legalize and tax cannabis sales in order to create a new stream of strong, reliable revenue.

Let's look at Colorado, which has fewer than 6 million citizens, but managed to raise more than $300 million last year in marijuana taxes and revenue from licenses and fees. Colorado is the perfect template for states like New York, where annual fiscal revenue is expected to fall $4 billion to $7 billion lower due to COVID-19.

More jobs, more commerce, and more tax revenue?

I'd say that is low-hanging fruit for all states trying to recover from this crisis. I wouldn't be surprised if every single state goes all-in on legal cannabis.

I have the single best way to play it...

One U.S. cannabis company has flown completely under the radar.

In the last six months, it's amassed an incredible quarter billion dollars of funding and is fixing to sweep up the cannabis companies that fit into the founder's mission plan.

Over the last year, it has been on an acquisitions tear, scooping up no less than 11 other U.S. cannabis companies.

It already has active clients in 17 different states and Puerto Rico. Internationally, the company provides services to clients in Australia, Canada, Germany, and South Africa. It's not only quietly taking over the U.S., it's going global.

Remember, I was the very first to visit and predict the rise of Canopy Growth — which has now become the largest cannabis company in the world. (That one prediction alone made me and my readers 3,220%). I'm completely convinced that, in the U.S., cannabis is like Canada years ago.

You will want to take a look at this company before you start reading about it months from now.

Everything you need to know is right here.


Jimmy Mengel

follow basic @mengeled on Twitter

Jimmy is a managing editor for Outsider Club and the investment director of several personal finance advisories, The Crow's Nest, and The Adventure Capitalist For more on Jimmy, check out his editor's page.

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