WASHINGTON. Stoners and marijuana investors waxed ecstatic Tuesday night. Or at least those fun-living cannabis enthusiasts currently residing in Canada. That’s because C-45, aka the Cannabis Act, is now the law of the land for our neighbors to the North. The Wall Street Journal explains the whys and wherefores.
“Recreational marijuana use in Canada will be legal in the coming months after legislation cleared its final hurdle Tuesday night, marking what officials here say is a “wholesale shift” in how the country approaches cannabis use.
“Canadian officials say other technical steps remain before they can unveil on what day the legislation, introduced over a year ago, comes into force.
“When the legislation kicks in, Canada will be the biggest national government to legalize cannabis. Drug-policy experts have said they expect countries in Europe and elsewhere to look to the Canadian experience for guidance on cannabis legalization.”
Already in a celebratory mood, the folks over at marijuana.com provide further details on the new Canadian law.
“The Cannabis Act in Canada has been one of the most instrumental pieces of legislation implemented in the cannabis industry since its inception. The bill known as C-45, or the “Cannabis Act” has been crucial in cementing Canada’s adult-use market nationwide. The bill was recently voted on and approved for the third time… [T]he industry is on its way to giving adults the ability to buy cannabis around the country.”
Reason.com provides further pertinent details.
“Yesterday the Canadian Senate approved a marijuana legalization bill that had already passed the House of Commons, which means Canada is about to become the second country and the 12th jurisdiction to officially allow recreational use of the plant. Prime Minister Justin Trudeau’s government, which had expected legal recreational sales to begin on July 1, now says late August or early September looks more likely because the provinces and territories will need eight to 12 weeks to prepare.
“Canada, with a population of about 37 million, is the second most populous jurisdiction (after California) to legalize marijuana so far. It is more than 10 times as populous as Uruguay, the only other country where the cultivation and sale of recreational marijuana has been legalized at the national level. (The Netherlands has a longstanding policy of tolerating marijuana use and retail sales, but the drug is still technically illegal there.) All told, more than 100 million people, including one in five Americans, live in the jurisdictions that have legalized marijuana for recreational use.”
Cheech and Chong will be happy. As Reason clearly implies, the Cannabis Act is sure to inspire Nice Dreams among American cannabis enthusiasts as well.
But the new legislation may cause heartburn among Federal law enforcement officials. Now they must confront an almost-certain increase the illegal importation of “Northern Lights.” (Gray market, anyone?)
On the purely business side of the equation, the Cannabis Act may finally help stabilize the often iffy current market for marijuana stocks and ETFs. The sometimes grammatically challenged marijuana.com writers drill down further.
“Many of the ETFs in the sector were benefitted quite positively because of this news such as Horizons Marijuana Life Sciences ETF (HMMJ). This ETF managed to raise by a staggering 6.2% which is not as large as the ETFMG Alternative Harvest ETF (MJ) which managed to raise itself by a slightly higher 6.6%. Other ETFs in the space also saw large gains after this large announcement came to light.”
“…The beginning of the year was a tough time for the cannabis industry as many stocks were responding speculatively to various bouts of news showing difficulties in legislation around the U.S. this has completely turned around with news of the U.S. becoming more friendly to weed from a federal level and this news from our Northern neighbors changing the space completely.”
Does the Cannabis Act make marijuana investing safer?
Current marijuana traders and investors find themselves largely limited to dicey, largely Canadian penny stocks in this new investing sector. (Check out our previous business columns on this topic via the links below.)*
For those who wish to gamble in relative safety, there’s an alternative. We refer to the newish, broadly based, NYSE-listed ETFMG Alternative Harvest ETF (trading symbol: MJ). MJ may, in fact, prove the best (or at least the safest) bet in this sector near-term.
MJ closed sharply to the upside Wednesday (2.35 percent), ending the trading day at $30.92 per share. The ETF has floundered in recent months. We can probably attribute at least part of today’s gain to the passage of Canada’s new marijuana law.
MJ tracks a market basket of these tiny stocks. Most focus on the growth and sale of medical marijuana, though that may change. However, this ETF gains some stability due to some surprising additional holdings. These include the common stock of select major international tobacco companies.
The sales of tobacco products find themselves constantly under attack by Western governments. That’s why some of these companies are actively exploring the new medical and recreational marijuana business. It could be one way for them to diversify before tobacco prohibitionists snuff out their product entirely.
Another unlikely MJ holding: Marysvill, Ohio-based Scott’s Miracle Grow Company (SMG). This favorite of American tomato-growing fans sells lighting and hydroponic equipment to commercial marijuana growers in the U.S. and Canada. Who knew?
We’ll continue to report new developments in this risky but increasingly interesting investment sector as they occur.
References, cautions and explanations
Also please note: These and our other columns are informational only. We do not recommend investments to our readers. All investments carry varying degrees of risk. If a topic interests you, consult with your investment advisor. Also, be sure to perform your own due diligence on any investment idea before you invest.
Above illustration. Our adaptation of an unofficial, unattributed Canadian “marijuana flag.” It substitutes a cannabis leaf for the familiar Canadian maple leaf. This and similar flags are sold in numerous stores and online by various vendors, including eBay. We do not currently know of any legally registered copyright held on this or similar designs.