Why Trump Will Soon Be Forced to Fully Legalize Cannabis

[bostonangler]

Chris Reilly, managing editor, Casey Daily Dispatch: Nick, today I want to talk about why President Trump could soon legalize cannabis across America. I’m talking about full legalization – both recreational and medical use – across all 50 states.

Now, most people aren’t hearing this story from the mainstream news at all. But you say there’s a real possibility this can happen – sooner rather than later.

What are some specific reasons that make you think this is going to happen?

Nick Giambruno, chief analyst, Crisis Investing: I think it's a no-brainer here for Trump. Let’s look at some facts.

There is overwhelming support from the majority of voters.

A recent Gallup poll showed that two out of three Americans support legalizing marijuana, including a majority of Republicans.

But voters aren’t the only group of Americans that support federal legalization. More and more prominent Republican politicians are saying, “Legalize it.”

Traditionally, Republicans have been anti-marijuana. But over the past few years, they’ve started to change their minds. Even former Speaker of the House John Boehner is now “all in” and has joined a cannabis company.

That is an indication of how the tide has turned. What you're looking at here is a unique situation where Trump has minimal downside and a lot of upside.

What I see him doing (and I've seen him doing this in other areas, too) is saving a couple of aces up his sleeve for the election.

For example, he is looking to end the war in Afghanistan, which would be a terrific thing. He's waiting to do that, however, until right before the election. And that'll be a potent card that he can play in the election, being the guy who ended the longest war in American history.

Similarly, I see him holding onto the cannabis card until around election time so that he can play it for the maximum political benefit. Because, as I just said, there's not a lot of downside, but there's a lot of upside.

If you look at what Trump has said in the past, he's very open to legalizing cannabis. It's crystal clear from his words and what he said in the past.

There is Anthony Scaramucci, who is a former Trump insider. He has fallen out of favor with Trump recently. Nonetheless, he was privy to some of Trump's thinking. And he has said that Trump plans to legalize marijuana sometime soon.

I think it's bound to happen. I don't think the market has digested this yet.

Chris: Yeah. I mean, for proof that he’s open to this… just look at what he did last December, when he legalized hemp. That was a huge milestone… one that many seem to be overlooking today.

Nick Giambruno: Exactly. For people who aren't familiar with the details on this, right before Christmas last year, Trump legalized hemp in the US, on a federal basis, for the first time since 1937. It's a huge deal. But, if you think about it, the fact hemp was illegal in the first place was absurd.

You can’t smoke enough hemp to get a psychoactive effect. In other words, you can't get high off of smoking hemp. It's impossible. Nonetheless, hemp has many industrial uses. It has many medicinal purposes because it’s rich in cannabidiol, otherwise known as CBD. A study by the US Congress found that the global market for hemp consists of over 25,000 products. So lumping hemp in the same category as marijuana was always a boneheaded thing – utterly ridiculous.

With the 2018 Farm Bill, Trump rectified that and legalized hemp on the federal level for the first time in 80 years.

That is just a stepping-stone on the path towards the overall legalization of the cannabis plant. It's a massive stepping-stone. Legalizing hemp was a no-brainer. I think the other aspects of cannabis legalization are also no-brainers from a political standpoint, as we just discussed. But also from an economic perspective. Money talks, and cannabis legalization is big money.

Chris: Great point. As we both know, Trump loves job creation. I can't imagine how many jobs legalizing marijuana at the federal level would open up. It would be massive…

Nick Giambruno: Well, many people have compared marijuana and cannabis legalization to the end of alcohol prohibition in the 1930s. It's not a fair comparison to cannabis, because alcohol was mainly just a recreational product.

Cannabis has many uses other than just merely as a recreational product. There's the dried flower, dozens of different edibles, and Big Alcohol is making cannabis-infused beverages. There are dozens and dozens of various recreational products. But it's not just recreational.

There is enormous medicinal value in cannabis as well. Studies have proven that cannabis, and in particular CBD, is effective at treating seizures and epilepsy. That is just one aspect of it. We are just scratching the surface on the medical potential of cannabis because government prohibition stopped the study of it for the past 80 years. We're only in the very early stages of learning about the medicinal potential of the cannabis plant.

Then, you have industrial uses. Hemp is a substitute for cotton. It can be useful in manufacturing other textiles and rope. It’s an ingredient in all sorts of cosmetics. As I mentioned, the global hemp market consists of over 25,000 products.

In short, cannabis is much bigger than just merely a recreational product like alcohol was.

Legal cannabis is going to be a profound shift and unlock a lot of economic value.

I view the legal cannabis megatrend from the perspective of a speculator. Remember, a speculator looks to profit from distortions in the market. Cannabis prohibition has been and is an enormous distortion.

Imagine what a free market for all the thousands of cannabis products would look like absent government interference. Imagine how all the various industries cannabis touches – medicinal, recreational, industrial, therapeutic, and others – would look like without 80 years of government prohibition. When you consider all of that, it amounts to an enormous distortion in the marketplace. The good news is, that distortion is going away.

That's why I think it helps to view the situation as a speculator. Cannabis prohibition is an enormous distortion that is melting away before our very eyes.

Chris: Wow. And how exactly would full legalization at the federal level look from an investing standpoint? How can readers take advantage of this?

Nick Giambruno: Well, we're no longer at the earliest days of this trend. We’re still relatively early, but it's not like the first days of cannabis legalization. There are now over 300 cannabis stocks, and there are new ones every week. Most cannabis stocks are garbage. They have terrible fundamentals. Few of them have a prayer of earning a profit ever, and nonetheless, some of their share prices are going up 10 times, 20 times, even 30 times. You have to be very careful. There are a lot of landmines out there. That’s the bad news.

Remember, legal cannabis is an immense, multi-year megatrend for the reasons I just described. We're nowhere near the point where all the distortions that 80 years of prohibition have pumped into the market have been flushed out yet. That’s the good news.

Nonetheless, this has turned into a mania, and like all manias, it brings out frauds, scams, bad investments, and unsustainable valuations.

You have to be very careful now, especially today, about the kind of cannabis companies you invest in. You want to only invest in companies that have a long-term, sustainable, competitive advantage. You can still make a lot of money, but only with the right companies.

Chris: That’s sound advice. Thanks for speaking with me today, Nick.

Nick Giambruno: My pleasure.

 

 

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