Cannabis Follies: Catalysts and Booby Traps on the Road to Billions
Unlike alcohol, marijuana use is not only limited to recreation. The real driving factor and secret to making bank off of cannabis lies in medical marijuana’s ability to help soothe and heal.
By James West
There are two principle schools of thought in the cannabis investing phenomenon that has minted more millionaires than Ali Baba and the 40 Thieves: 1) that this perpetually-giving gift has a long way to run before it even gets close to running out of steam, and 2) this is all going to end in tears à la Dot Com Bomb of March 2000.
Both are, to some degree, plausible, but more likely will be vortices of value explosion to the upside, followed by long periods of sideways price drifting after prolonged periods of absence of major industry catalysts.
For example, the long summer preceding Constellation Brands’ $5 billion investment into Canopy Growth Corp announced on August 15 this year was characterized by just such a sideways drift in all Canopy company valuations. Some even suggested it was ‘over’. How wrong were they?
There are a number of major value catalysts on the future timeline of this global cannabis revolution, and there are a couple of major potential deal wreckers. Let’s consider the upside first.
The one factor many doomsday-ers fail to take into consideration when making gloomy prophetic pronouncements on the imminent demise of the cannabis bull is that unlike the economic bounty that lies at the foundation of many of today’s billion-dollar fortunes as a result of alcohol de-prohibition, cannabis demand is not limited to recreational use.
Getting high and having fun is a rite of passage for a significant percentage of today’s youth, but the daily consumption of cannabis for recreational purposes tends to diminish with age.
Where the real, long term, likely permanent, and ever-expanding driver for cannabis consumption lies is in the categories of general wellness and medicine.
Cannabis and cannabinoids are slowly revealing themselves to have profound bio-symbiotic significance for human beings, and, as it turns out, all mammals. Thanks to the endocannabinoid system that exists within all such creatures’ bodies, there appears to exist a biological predisposition towards such a symbiosis. Besides being generally homeostatic, the naturally-occuring constituent of cannabis, cannabidiol (CBD) has remedial effects on human conditions ranging from arthritis to cancer. In the case of childhood epilepsy, CBD’s are proven to impart life-saving transformations.
The anecdotal evidence of quality-of-life enhancements due to cannabis consumption in some way, shape, or form are legion, and will gradually be replaced by clinical studies by universities and labs around the world who are now unencumbered by the stigma and legal risk that helped keep cannabis in maligned purgatory for decades.
Theoretically, we could see a world within a few decades where cannabis and cannabinoids are present in a wide range of foods, beverages, and topicals. Imagine the global economic value if every man, woman, child, dog, and horse were daily recipients of a dose of CBD for one medical reason or another.
Consider the Recommended Daily Allowance for Omega 3 fatty acids that might soon exist, for which hemp provides one of the most abundant vegan sources.
So, that means the demand for cannabinoids will only continue to grow for generations as science funnels cannabinoids into an ever-broadening range of food, creams, balms, and baked goods.
I began dosing myself with 20 mg per day of full spectrum CBD oil about four weeks ago, and there were improvements to my sleep patterns, digestive processes, cognitive focus, and connective-tissue recovery after exercise.
I’ve experimented with cutting myself off too, to test for psychological dependence, and I learned that I generally forgot about and had to remind myself to continue the experiment after about a week. Not that that’s conclusive, but I don’t detect any recurring thoughts of CBD, nor did I think about increasing the dosage.
Me being me, however, I did ‘OD’ one day by drinking an entire 30 ml bottle containing a full dose of 1,000 mg of CBD, just because I wanted to see what the outcome was.
I found that volume had a really heavy mental effect, in that I felt a THC-esque high, though that might have been from the few milligrams of THC that were residual in the oil. But that was it.
Commoditization and Biosynthesis
As is the case with many medically-beneficial molecules in the human pharmacopeia, the life sciences industry has a habit of lowering the cost per unit of input of any valuable plant-derived ingredient to pennies or less.
They do this by “growing” the molecules they are interested in through biosynthetic processes, such as genetically modified yeasts that can be tinkered with to yield any one of the 113 CBDs identified so far.
By way of example, Hyasynth Bio is just such a producer of cannabinoids, and is owned 20% by Organigram, one of the original medically-oriented, licensed producers of cannabis.
In theory, the costs of producing cannabinoids in this way relative to growing and harvesting and extracting from plants is orders of magnitude smaller. One could surmise that this method of producing pharmaceutical and food-grade cannabinoids could easily be the default method for all medical applications and most food and beverage applications.
That would suggest that the scores of “ultra-high tech greenhouses” now littering the landscape are going to be used for nothing more than growing high-tech tomatoes in the near future.
I think this is the primary risk factor for investors in licensed cannabis producers. If the merde hits the rotating blades of the fan of misfortune as a result, there could indeed be a ‘dot com’ style meltdown of epic proportions on the horizon.
Offsetting this worst-case scenario are several developing unknowns. For example, when will the US federally allow cannabis? When will Europe? What about China? China could potentially energize the sector for years to come.
Then there are the cannabis applications that are not suited for a biosynthetic source. Hemp fibre promises to outperform trees for paper, cotton for clothing, and even plywood for sheathing.
According to Yoda, “difficult to see, the future is.” Nary a truer phrase was ever spoken. Stop-loss strategies across trading platforms is an absolute must for investors seeking long-term wealth generation from this once-in-a-lifetime financial opportunity.