There was a point last year when a person couldn’t check up on marijuana news without seeing something about how pot stocks were becoming the key to financial success. Sure, there were other reports that pointed out the average investor would have been out of his or her lunatic mind to get involved with this business sector while it is still considered illegal in the eyes of the federal government, but green eyes are often blind. Most of these maniacs have been hell-bent on getting their foot on the door of the cannabis trade because of what is happening to the north.
As of last October, marijuana is fully legal in Canada. This means all of the cannabis firms operating in that part of the world are doing so without any risk of crackdowns, shutdowns and other prosecutorial measures as a result of dabbling in an outlaw substance. Nope. All is well in the Canadian cannabis industry. So why haven’t cannabis stocks experienced an explosion as expected?
Pot stocks have been relatively flimsy this week since a report from Statistics Canada showed that cannabis consumption hasn’t changed much since the legal pot market was rolled out. The numbers (both consumers of legal and black market weed were counted) show that 4.6 million people are using marijuana, which is the exact same as what was reported in the last part of 2018. The report goes on to suggest that more Canadians may give the market a shot in the coming months, but there are no guarantees.
Cannabis stocks have started to swell again in the United States, mainly because a lot of investors are convinced that weed is about to go fully legal. Meanwhile, financial experts are warning that pot stocks are a “fad,” a veritable bubble similar to what happened in the Tech market back in the 1990s, which is destined to leave early, overly-ambitious investors broke by the time it’s all said and done.
“Cannabis stocks are a fad,” George Boyan, president of Leumi Investment Services, told CNN. “Who knows where the market will go? And the problem with speculative investments? They all have an expiration date.”
It’s not that the cannabis industry is destined for failure, it’s more about these companies not being worth the paper they’re print on. Most Canadian pot stocks are overpriced. In other words, this business sector has a long way to go before it matures. Still, that hasn’t stopped many American companies from moving north to participate in legal weed without receiving blowback.
But it is conceivable that the majority of these American cannabis operations are just going to come running back to the states full throttle, forgetting all about Canada, as soon as prohibition is no longer a factor in the United States. That’s when major consumer companies like Coke, Pepsi, and the alcohol companies, many of which are working on launching cannabis products in Canada, are more likely to become fully vested in legal weed. This is what the cannabis industry needs right now to play ball with the big kids—the support of larger business. This will help legitimize the sector. But that isn’t going to happen on the scale that is needed until prohibition in the U.S. is dead.
So buying up cannabis stocks right now is more of a risk than responsible financial planning. All major stocks like Apple and Amazon are still better buys.